ERM guru

Way forward…

There will inevitably be many failures in the bancassurance relationships in this market. Such failures would potentially cause a lot of troubles and volatility in terms of Banca productivities for different insurers. While insurers do have a problem in productivity, the bigger problem would be for bankers to the risk losing their customers. Therefore, these insurers are recommended for thinking the long-term game with a less aggressive approach to new business. Moreover, the bankers who embed the bancassurance business as a part of their retail strategy will be the ultimate winners. For example, suppose one has access to the monthly banca productivity report issued by the finance ministry. In that case, the risk I mentioned above will be readily apparent based on the volatility of the bancassurance productivity of different Banca arrangements. Following are some of the recommendations recommended by Banca experts from regional countries, which I thought are a good reflection based on personal observations as well.

#. For those players whose Banca productivity is not yet optimal, both parties should sit together and then have a plan on productivity improvement, looking at different elements of the overall strategy. Everyone should understand that the Insurance business is a long-term business, and pure short-term thinking would not be not in the best interest of the relationship to work; there needs to be a balance and alignment between short-term versus long-term goals.

#. Harnessing the power of data analytics, the banks may need to let the insurer take advantage of the customer data, obviously ensuring that the data does not leave the bank due to privacy concerns. One of the best things would be to design and implement a data analytics center of excellence within the bank, which could probably be run by a team of experts with banking and insurance experience. This data analytics capability could also be used to sell banking products.

#. Both parties are sitting together and considering monitoring the performance of the banker relationship, which will ensure that they do not have to point fingers at each other should there be productivity issues. This monitoring may need to happen at the start of the execution of the business plan, during the execution as well.

#. Insurers who are getting into new bank insurance relationships may need to open dialogue on how the different elements of compensation schemes work and the terms and conditions for those to work. That would potentially reduce the misunderstanding concerning the operational aspect of the relationship.

#. Typically the Banca assurance distribution agreement will be entered into for 10 to 15 years. During such an extended period, there may be many changes in the workforce of both insurers and bankers. Therefore, it is vital to put everything related to the agreement on paper as these transactions may run into disagreements in the future. It would also be best to get these agreements reviewed by a third party to ensure their enforceability should a disagreement occur.

Bancassurance channel would be a key distribution channel for insurers, and its importance of it would continue to grow in coming years. Therefore, it would be key to follow the right strategies to ensure the issues identified above are remedied sooner. To make it happen, there has to be attention and commitment from both the Banker and the insurers, in which case they would be able to boast about success in the future when they look back. Winners typically learn from others, and losers disregard the comments from others and continue to live in their bubble.

 

“LOSERS LIVE IN THE PAST, WINNERS LEARN FROM THE PAST.”