Bancassurance is a ‘best of both worlds’ business model. It is an amalgamation of a bank and an insurance company to cater to a wide customer base with a varied range of insurance products
The model allows banks to increase profitability by expanding their products portfolio, thereby offering comprehensive financial planning for clients, which includes insurance. On the flip side, insurance providers can leverage a bank’s extensive network of branches to reach out to prospective clients, which helps reduce the cost of establishing infrastructure.
Bancassurance, also known as the bank insurance model (BIM) has been gaining traction in Asia, with the Bancassurance Market in China projecting a CAGR of 15.91 percent from 2014-2018.
While the market is definitely projecting growth, there are a few concerns that seem to be holding it back from full-scale proliferation, namely the issue that bankers aren’t insurance salesmen.
The sale of insurance products is a whole new world for a lot of banks. According to TechNavio analyst “It requires a considerable amount of specialized training and retraining to understand the insurance products in depth and enable the bank staff to offer insurance products that meet the needs of their clients.”
“Without adequate training for bank staff, there could be a high probability of mis-selling a product, which could tarnish the brand image of both the bank and the insurance companies.”
A bank’s business is its image, and if the trust between a client and their bank is damaged it could mean disaster for the bank in question. Since banks act as corporate agents for insurance companies in the bancassurance model, they are held directly responsible for any problem regarding inefficient or delayed delivery of insurance services to the client, even though the problem may lie with the insurance company, and many banks aren’t necessarily willing to put their reputation on the line.
But these challenges aren’t exactly insurmountable hurdles for the BIM market in China. An aging population in the area is already driving an expanding insurance market (life insurance accounts for more than 33 percent of the market), and high penetration of banks means the bancassurance model will be considered very attractive by both insurance companies and banks.
According to TechNavio, foreign insurers are already seeing this as a potential growth opportunity and are entering China by collaborating with the domestic banks to help expand their portfolios and, ultimately, increase revenue. And when it comes down to it, banks are in the business of making money, which will continue driving the Bancassurance Market in China during the forecast period.
For more insights, view our Bancassurance Market in China 2014-2018 report.
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