Bringing bancassurance into the digital era Bringing bancassurance into the digital era

With consumers' financial needs growing more complex - the bancassurance model remains relevant to support customers holistic needs. However, the potential for banks and insurers to combine forces, expand their reach and cross-sell their services is sometimes stunted by siloed operations and cumbersome sales and compliance processes.

Now, with financial service customers embracing digital channels, banks and insurers must refine their partnerships to ensure they can jointly respond to consumer demands, and pool their customer, product and technology expertise, to transform the way they serve their shared client base.

Since bancassurance arose more than 20 years ago, it looked like a concept that could deliver mutual benefits to banks and their insurance partners. Many banks forged alliances with insurers or built insurance subsidiaries, where local regulations allowed. While many banks enlisted multiple insurance partners and created in-branch advisory structures, often focused on life insurance, many have faced challenges creating solid sales networks or gaining a competitive footing. Often, their insurance divisions have struggled to compete for attention, resources and support with the banks' established retail banking product lines.

From an advisory perspective, many banks grappled with limited insurance product expertise to effectively position insurance products for individual customers. As a result, the actual penetration of insurers' products on the bank's client base are below expectations and, in some cases, only marginally contributing to financial objectives.

Compliance obligations have been another obstacle to successful insurance sales by the banks. In many jurisdictions, stringent regulations imposed by banking and insurance regulators, including KYC and AML guidelines, have turned a typical in-branch sale of an insurance policy into a lengthy process, with extensive paperwork to on-board a customer and confirm their consent. In some markets, these requirements lead to onerous administrative steps in the policy issuing process as staff take a “safe” procedural route to ensure no risks of regulatory penalties.

Sharing of customer data between the banks and insurers has in many cases been restricted by tensions regarding customer data ownership, data privacy restrictions and lack of customer data consent procedures.

With many bancassurance deals focused on selling insurance through the banks physical locations, the banks enviable branch network has become less of an advantage now that customer preferences are shifting to digital channels and the banks themselves are reducing their network to control costs. Put simply, if banking customers visit their branch less often, the banks have fewer opportunities to promote insurance products among those clients. And, with an increasing percentage of customers only turning to their branch to resolve problems, these rare branch visits may not be the ideal time for a banker to initiate an insurance conversation.

Thus, while many insurers paid handsomely to establish multi-year deals with the banks to gain branch access, they may now rethink whether they are getting the expected value from these agreements. Unfortunately, the insurers' alternative is to invest heavily in their own digital offerings, which often lag behind the banks due to significant legacy system challenges.

To adapt to the new digital reality, the banks need to consider transforming the nature of their branch model to offer the required online to offline experience, offering more in depth advisory services around wealth management and focusing on specific customer segments. Insurance should be part of this broader offering, with the bank and insurer providing more modular, personalized offerings, based on a deep understanding of the customer informed by shared customer analytics.

One key to resolving these `kinks' in the bancassurance sales and service pipeline is better collaboration between bank and insurance partners. For example, to construct an optimal omnichannel strategy for insurance, banks need to work much more closely with their insurance partner to design and implement effective digital transformation of existing processes.

The banks have the advantage of rich customer insights based on their interactions with customers. These insights can be enhanced by developing omnichannel platforms to supplement their customer needs, enabling the insurance partner to provide personalized insurance offerings.

Banks and insurers must collaborate to create integrated, open standard digital platforms that enable seamless customer referrals and smoother data collection and analysis. This is crucial, since customers don't want to be `bounced' from one department to another or forced to provide the same personal information twice to complete an insurance transaction.

To tackle the regulatory process burden, banks must work more closely with their insurance providers. Both parties have comparative advantages and insights, which if shared could better support a data informed, tailored, and seamless offering to the customer, avoiding common misconduct issues that arise today.

Sorting these complex questions, and building clear, strong partnerships between organizations, may require the banks to focus on fewer partnerships with a smaller number of insurers to which they concentrate their resources and efforts.

We have seen bancassurance practices that demonstrate success to serve the modern digital customer requirements. For example, Indian banks provide insurance products online with call center support to their customers, converting a large percentage of term life and travel insurance products via these channels. Further innovations with claims handling via photos taken with mobile phones and real time AI enabled assessment can provide fast resolutions to customers.

• Design or enhance the customer journey by focusing on the broader financial objectives of target customer segments, e.g. wealth management, retirement planning, family financial planning.
• Integrate regulatory requirements into a seamless omnichannel customer process to support the focus on the value-adding advisory role of the branch staff.
• Establish a holistic and broad-based customer data set with the required custodian management to allow joint customer analytics by the bank and insurer to achieve customized and personal offerings.
• Achieve a digital open standards platform with the bank and insurer applications to support the customer omnichannel access and potential to include other third parties for optimal customer propositions (e.g. for health).

Lee-Han Tjioe, Digital Insurance Partner, KPMG China, based in Hong Kong. Lee-Han has worked with insurers on defining and realizing market growth, distribution and business process transformation programs in Asia and Europe.

Darren Pigg, Insurance, Customer and Analytics Partner, KPMG China, based in Hong Kong. Darren's interests lie in human centered design, behavioral economics and customer data analytics, bringing them together to develop digitally enabled omnichannel experiences.