Banks bring to the table customer connectivity by virtue of the frequency and quality of the customer data they manage. Insurers, on the other hand, bring specialized skills in areas such as insurance design, manufacturing and distribution.
Not surprisingly, the number of bancassurance agreements in place around the world has grown dramatically since inception and adoption is only expected to increase as new and emerging markets start to focus on improving access to insurance and banking services. Bancassurance already attracts some of the biggest players in the marketplace, largely because of the allure of a strategic win-win, faster growth and scale economies.
There is no single winning formula for successful bancassurance relationships and the nature of these alliances often varies significantly. Much like relationships in our personal lives, the degree of commitment between the parties often depends on the strength of the relationship and the perceived benefits. Having alignment of goals and objectives is critical.
One of the biggest reasons bancassurance partnerships fail comes down to a lack of recognition of the needs of the other party. While banks and insurance have similarities – each party also has very different, and often conflicting, objectives. Insurers are primarily focused on value-creation by monetizing risk management over time, while banks are focused on driving value-creation through selling short-term products. Regulation is also changing the dynamic, with banks becoming responsible for the sale of insurance products and therefore liable for potential mis-selling exposure.
A review of the more successful bancassurance agreements shows that it takes more than goodwill and an alignment of objectives to build a healthy relationship. It also takes clear rules of engagement; in other words, a transparent, practical and mutually-beneficial operating model.