How to step up the output of bancassurance network

Your recent article on bancassurance interested me as I come from India, where this insurance distribution channel is working really well for several insurers.

Improving the productivity of distribution networks is key to increasing cover penetration. Do you agree?

— Suresh V. A., Nairobi

Well, Suresh, I could not agree more. The key to success in insurance is a strong distribution system, then doing all it takes to revamp the productivity of the networks.

Success stories of the bancassurance thrust in India makes one salivate, considering that we have more or less the same conditions compared to Kenya.

True, some of the insurance successes in India are joint ventures with banks, but we have similar institutions in Kenya, too. Two issues stand out concerning the remarkable performances: Leveraging the bank’s branch network and the ability to offer innovative products. Now that bancassurance is allowed in Kenya, our insurance and banking sub-sectors should develop this channel along the same lines.

Take, for a start, the issue of leveraging banks’ branch networks. Insurers with bancassurance partnerships could invest in developing the skills of the bank staff dealing with insurance.

Admittedly, because the banking and insurance cultures are different, it takes time before they can be harmonised for productivity to improve significantly. Insurers should take the initiative of focusing on how this can be done through training.

At the moment, banks are offering off-the-shelf insurance products. Also, many banks avail customers of insurance products covering the banks’ interests.

This is arguably a starting point in bancassurance but the service could be taken to the next level, where the bank gets actively involved in selling cover to as many of its customers as possible.

Once this level is achieved, the bank can seek to brand its products. Such a move builds synergistic value for both the bank’s core business and its insurance business. Insurers should take the cue in this respect by designing appropriate products in partnership with the respective bank so as to create a win-win situation.

An example, again from India, is of Fortis Life Insurance — a joint venture between Belgium’s Fortis Insurance Group and IDBI bank — that garnered record first year premiums in recent years and continues the success streak.

The insurer benefited from leveraging the promoting bank’s branch network, but ascribes greater success to its having two innovative products branded Wealthsurance and Incomesurance.

The first is a combination providing protected growth and designed to ensure that the savings invested are not susceptible to unforeseen circumstances.

The second product combines endowment with money-back policies, which gives customers transparency and competitive interest rates.

The most unique feature of this plan is that the customer gets to know about the increase in guaranteed income at the time of each premium payment, since the income is linked to the market benchmark interest rate. One does not have to wait until the maturity of the plan or declaration of bonus. The company has other products with better features than traditional ones at lower pricing.

In Kenya, all that is required is for insurers to realign their strategies to focus on improving the productivity of their existing distribution networks, especially, but not limited to, the bancassurance channel. Other channels also need close attention to ensure their achieving optimal productivity.

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