Bancassurance - the way to go

Much has been said about various channels for Insurance selling in various forums. If the discussions at the Bancassurance summit held recently at Mumbai is to be believed, Bancassurance would be the next big wave that would storm through the industry.

For beginners, Bancassurance is selling of Insurance products, both life and Non life by Banks.

But Why Banks ?

1) Since Banks already have the infrastrucutre - more than 17000 branches across the country for all banks put together
2) Need for additional fee based revenue from selling Insurance Policies
3) Being a "One Stop Shop" for the customer for all their financial needs.
(Above not in any specific order of importance)

What does the Insurance Company get from this though ?

1) Ready customer base with loads of information about their personal selves (thanks to KYC Norms) and financial data based on the transactions done with the bank
2) Ready Financial Advisors who now have another product to sell - Insurance
3) Ability to cross sell products - package them with Banking products (Motor Insurance with Car Loans, Home Insurance with Home Loans etc.)

Open Architecture Regulations & IRDA

Whereas to begin on this it is important and imperative to note the key distinction between the two sets of companies
1) Insurance Companies with a cohesive Banking Partner (SBI, ICICI, HDFC etc.)
2) Insurance Comapnies without a cohesive Banking Partner (Reliance, Max New York etc.)

Like we have seen the first set of insurance companies have a ready infrastructure, ready partner to start the process of selling, the next set has to work hard on building this ground up.

Both Insurance Companies and Banks are waiting in anticipation for the nod from the regulators to move towards open architcture which would essentially mean

a) Ability of Banks to sell products of more than one insurance company - currently banks can sell one Life and one Non Life Insurance Companies products

b) Abilily of Banks to package products from different Insurance Companies and create value for the customer viz. Motor from Company A + Home Insurance from Company B + Life Insurance from Company C

For the above, collaboration between the product managers at both Bank and Insurance Companies side need to come together and rake out an arena of products which are specialized for the segment. The regular retail /commercial products of Insurance Companies cannot be as-is sold through this channel.

Technology would play a major enabler in the process to ensure seamless flow of information from Banks to Insurance Companies and vice versa. With the regulator nod to Banks to deal with multiple manufacturers in anticipation - it is strongly felt that Banks will have to invest into software systems that aid in such communications with multiple manufacturers whereas still maintain a single source of truth within the organization.

The software should be capable of integration with the CBS used by the bank for accessing the customer base already available. Segregation of customers based on their profiles would also help banks to market products relevant to the segment.

Lots of Opportunities - Lots of Hopes : Looking forward to the rise of Bancassurance