In the past, the partnering of insurers and financial organisations has sometimes received bad press. On the surface, it seems like a win-win situation, with banks earning additional revenues by selling the products of insurance companies, and insurance companies easily expanding their customer base. However, Aviva’s former CEO, Mark Wilson, was vocal about the ‘high cost’ of the distribution channel, and EU consumers have revolted against packaged deals, which failed to deliver them perfectly tailored insurance deals.
Despite this, the global market is huge, valued at US$1,103 billion, and it's set to grow. According to a recent survey by Bizwit Research and Consulting, its value will increase by 6.42 per cent during the period 2018 to 2025, with the Asia-Pacific region gaining more market share, especially in China, India and Southeast Asia. Behind the growth, driving factors are said to be banks wanting to enhance their product portfolios, higher global economic growth and an increasing middle-class population.
Consolidation in the financial services marketplace means bancassurance deals are more important than ever. They are known to lead to increased profitability through integration – an alignment of bank and insurers’ aims, and an increased footprint. Costs are lowered because of shared marketing and administrations, shared sales strategies, training, underwriting and information reporting, and perhaps most importantly, shared technology.
One insurer that has recently celebrated the one-year anniversary of a successful bancassurance partnership with DBS Bank (the Development Bank of Singapore) is Chubb. The company says it joined forces with DBS bank as they shared ‘similar ambitions in digital transformations’.
Chubb has revealed that bancassurance is a key distribution channel globally, and the new Asia partnership has been a particular success. Since the partnership, it has launched, in key markets Singapore and Hong Kong, more than 20 business insurance products and 15 consumer products. “Our collaborative efforts to serve our customers better have borne fruit,” reveals Glen Browne, Deputy Regional President of Chubb Asia Pacific. “One example is instant claims payment for travel insurance using DBS IDEAL RAPID – an application programme interface where corporate clients can plug
In matured markets, travel insurance is very popular because customers trust their bank to find good-quality products for them
in to pay their retail customers. This has reduced the claims payment process from five-to-seven days to a matter of minutes,” he told ITIJ. Travel insurance is now being distributed across DBS Bank’s various platforms, including the popular Paylah! app – a ‘personal mobile wallet’.
“Banks have a large customer base and many customer touchpoints. For the same amount of work and time, Chubb can access a wider base of customers,” said Browne. “With a large database, we are also able to perform data analytics to derive customer insights so that a travel cover offer can be made at the right time, at the right price and with the most applicable benefits.”
Browne also acknowledges: “In matured markets, travel insurance is very popular because customers trust their bank to find good-quality products for them. In the emerging markets within Asia and Latin America, it is gaining popularity as purchasing power has increased and more people are catching the travel bug.”
The digital driver
Traditional financial institutions are having to work in new ways to keep the competitive edge over fintech (financial technology), and partnerships with insurance companies help them provide a new extension of their offering. Sources from Spanish insurer Mapfre have said that all the recent developments in digital segmentation and joined-up work identifying different clients’ needs are helping to transform a challenge into a market advantage. When asked, a spokesperson said that it is the ‘opportunity to be part of the faster, leaner client experience that is one of the key benefits to Mapfre of offering travel cover via banks’. “That, as well as having the obvious automatic access to the bank’s client database and taking advantage of banks’ fintech, best practices and daily innovation,” they said.
On a global scale, Mapfre reveals that packaged accounts are still the most popular way of offering travel insurance through banks. “But taking the opportunity to cross-sell to those clients is important too – for example, selling special destinations such as ski trips, the inclusion of family members to the coverage and additional coverage. This is why the development of a savvy digital process of the bank to facilitate this upsell or cross sell is of vital importance to us.
A new direction
Wholly confident of the growth of annual insurance premiums managed via digital bancassurance channels is Tim Kunde, Co-Founder and CEO of German peer-to-peer insurance company Friendsurance. The company has recently launched its new bancassurance brand, Friendsurance Business.
A recent market analysis undertaken by the company revealed that digital bancassurance in Germany will reach a market volume of some €8 billion in five years. “We expect a yearly premium income for insurance companies of almost €23 billion by 2028, in the online service channels of banks,” Kunde said.
The analysis revealed that France is expected to lead the digital bancassurance market in Europe, with insurance contributions of just under €9 billion by 2023, and over €24 billion by 2028. In Italy, Spain and Portugal, there is a billion-Euro market volume for insurance managed in online banking, too.
The first partner of Friendsurance Business is Deutsche Bank, for which it will integrate Friendsurance’s digital products – derived from 170 German insurers – into the bank’s online banking portal. As for the benefits that Friendsurance Business can offer over traditional insurance companies, Kunde says: “Banks and insurance companies not only want to digitise processes and retain customers, but also open up new distribution channels. By co-operating with Friendsurance, they can quickly and easily (and therefore comparatively cheaply) integrate digital bancassurance into their platforms. The customer benefits from increased added value and the company remains competitive. Friendsurance Business creates an information space for business customers through a separate internet presence.”
France is a key market for Europ Assistance, part of Generali Group, which provides travel services across all of continental Europe (including Russia but excluding the UK), and the US and Brazil. “In every one of these markets,” reveals Communication Manager Jonathan Heywood, “credit card distribution is the main way of integrating the service.”
He explains that it is not Europ Assistance that chooses which services are offered in which markets, but that it is up to the bank to pick and choose from their catalogue of products.
“We find that there is no distinction between the banks geographically on the services that they activate. It is more based on the model of the bank and their customers.”
Heywood does admit that digitisation of the industry is having a big impact: “In markets where neo-banks are emerging faster (France, US, Italy, Germany, Nordics) these banks tend to offer fewer services included within their card, but provide them á-la-carte, as an optional to activate.”
Despite the fact that the market is evolving quickly, familiar challenges are still apparent. Last year, Dutch banking group ING announced a partnership with French insurer AXA to create personalised insurance products and services for its customers in six countries – five European countries and Australia. For ING, the step was taken to offer more to its customers; for AXA it was ‘to combine the expertise of ING in digital banking and our expertise in insurance products to design personalised products and services accessible via the mobile living application’, said spokesperson Yves Masson, Managing Director AXA ING partnership.
However, the process has not been without its challenges. “It can be challenging to make a tailored offer since we don’t necessarily have all the pertinent information on the customer’s requirements, so the offer needs to be flexible and comprehensive on its own,” says Masson. “Distributing travel insurance solutions via bancassurance usually means that the sales process is not always linked to the travel situation or travel profile of the customer. If it is linked to a credit card transaction, the travel product may not always be adapted to the travel specificities, such as activities or geography.”
Masson explains that the way the insurance is offered varies from country to country, rather than region to region, and it depends on the type of bank. He says, depending upon market specificities and regulation, insurance can be sold in various ways: digitally or by the bank advisor; in an integrated way as a complement to a banking product or on a standalone basis; or over the counter, as part of credit card services or added-value accounts. He does specify that whatever the distribution channel, “it is important to make sure that the customer has all the information on his or her travel cover at the appropriate moment.”
The UK has witnessed problems related to travel cover provided via banks not being fit for purpose. And although regulation regarding the selling of insurance via new bancassurance channels is getting tighter, the number of complaints is still rising. In the calendar year 2018, the Financial Ombudsman Service took on over 10,000 new cases related to packaged bank accounts. It closed over 10,000 cases as well, and the customer complaint was upheld in 12 per cent of cases.
We have witnessed in all regions how banks are becoming more relevant as a distribution channel for travel insurance, as traditional channels are losing traction
A spokesperson for the Financial Ombudsman Service, advises: “Where travel insurance is packaged as a bank account benefit, it is important that the bank clearly explains any eligibility criteria, such as age or residency requirements. Banks should also ensure that the customer has a fair choice of accounts and that benefits included in the package are appropriate for the customer.”
Some financial institutions in the UK, such as Nationwide at the start of this year, have shrunk their travel insurance offering. Nationwide has lowered the maximum age of the traveller it will insure as part of its packaged bank account, from 75 to 70.
One insurer feeling positive about the future of packaged accounts is Mapfre, saying it is ‘very focussed on adapting the product to the clients’ needs’. The Spanish company is the largest multinational insurer in Latin America, present in 17 countries across the region, and it also has successful bancassurance partnerships in Mexico, Dominican Republic and Central America. In 2018, it managed more than 150 partnerships with financial institutions, but compared to the growth predicted in the Bizwit research, a spokesperson said: “Our growth target shows an expectation of a much higher market growth. We have witnessed in all regions how banks are becoming more relevant as a distribution channel for travel insurance, as traditional channels are losing traction. On top of this, you have all the new European legislation in payment services that enable better access to the client information. This will, for sure, boost their product offering and many opportunities for the industry.”
So, with tighter legislation and increasing digital opportunity, it seems all fingers point to the rise of the bancassurance market. Chubb’s Glen Browne concludes: “Chubb is committed to bancassurance as a key distribution channel. With the rise of fintech and insurtech, we are living in exciting times where we can steer changes and make a positive impact on individuals, families and businesses.”