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BANCASSURANCE IN PAKISTANBANCASSURANCE IN PAKISTANPROSPECTS FOR LIFE INSURANCEPROSPECTS FOR LIFE INSURANCE
Mohammed Ali AhmedGeneral Manager, EFU Life Assurance LtdKarachi Insurance Institute – 23 February 2011
Introduction Worldwide experience Evolution and current scenario in Pakistan Products Sales models Technology Challenges SECP’s role The next 3 years
Definitions of bancassurance
Collaboration between Bank and Insurer to distribute insurer’s products Insurer – provider of products and services –
insurance risk taker Bank – distributor
Level of collaboration can vary from “basic” level to high level “integration”
Introduction
Benefits to all parties
•Fee based income•Low capital – high ROE• Improved customer service – Culture shift• Market opportunity• Customer expectation• Success in markets around the world
• New distribution channel• A ‘warm’ customer base• Better persistency• Higher premiums• Profitable Growth• Competitive products• Success in markets around the world
•Changing attitudes & awareness • Want options• One stop financial service• Trust banks
Banks Insurance Companies
Customers
Depth of relationshipDistribution Agreement
“Playing the field”This can be likened to the early days of youth when it is normal to have a number of different relationships.
Loyalty is pretty low and long term commitment rarely a consideration.
Temptation to switch partners for a “prettier” one
Strategic Alliance“Going steady”
Having played the field for a while, it is likely that one partner will demonstrate the best ‘fit” in terms of commitment, attention, behaviour and attitude.
The relationship develops to a point where each understands the other a little better and both start to consider the others’ needs and aspirations.
Loyalty sets in and plans for the longer term begin.
Joint Venture“Moving in”
Once “courting” has been going on for a while, it is natural to settle down with one partner and start enjoying an even closer relationship.
Both partners get to know each other intimately and a relationship of mutual trust and respect develops. Any problems or difficulties are resolved jointly and amicably.
100% Fully OwnedFinancial Services Group
“Go alone”Marriage brings about a whole raft of new responsibilities and a relationship that should be built on a secure foundation.
Both partners look for ways to get more out of each other and to contribute to a long and prosperous relationship.
“One to One” – Exclusive model
“One to Many”
“Many to Many” – Open architecture model
Depth of relationship
International experience
Sales via Bank Channels
BancassuranceBancassurance has been well established in Europe, Far East, and growing in India and Middle East.
International experience
Bancassurance share in European life insurance market
International experience
Bancassurance share in emerging markets, 2005
International experience
Bancassurance target markets, 2007
Evolution in Pakistan
Evolution has seen product offering move from “Simple” to “Sophisticated” products over the last 15 years
Major thrust has been from 2007 onwards with business volumes increasing exponentially
1996
1999
2000
2003
Depositor’s Insurance
Credit Life Mail Inserts Bancassurance Agreements
2011
16 Banks active
Banks active in Bancassurance
Life Bancassurance in Pakistan
Bancassurance
Sales agents
Bancassurance
Sales agents
New Business - 2010
Private sector only
Total Industry
Active life companies
EFU Life
NJI Life
ALICO
State Life is exploring to enter
Target Market
Target Market for Bancassurance
Existing Bank customers
Potential Bank customers
Target market is spread across all lines of bank business
Key to success in bancassurance is to identify the opportunities available in the bank customer base and offer the right financial planning solution
Customer segmentation
Possible approaches
“Slicing” of Bank Database
Targeting Customer Life Stage
Event Trigger Approach
Which one is correct ? – depends on the bank, its target market and strategy to banking and bancassurance
All or a combination of the above can be used
“Slicing” of bank database
Professionals
Self-employed
Government Employees
Businessmen
Students
Segmentation by worth to bank
Segmentation by occupation / role in society
“Preferred Banking” or “General Banking”
Targeting customer life stage
Student
Young, Single
Young, married with family
Wealth Accumulation stage
Wealth Management stage
Retirement
Event trigger approachBirth
Admission to University
Wedding
New Job
Purchase of House
Career Change
Business Set-up
Loss of Property
Retirement
Grandchildren
Death
Customer life cycle and financial needs
Life Products
Bundled with bank products
- deposits- credit cards- mortgages- personal loans
Active selling:- Personal accident- Term life
Advice products:- Savings,
Investments- High risk cover
Simple Sophisticated
Life Cycle Financial Needs Product Solution
Life cycle segment
Financial Needs Product Solutions
Young singles Discretionary Income for ConsumptionCash accessRegular savingsCar purchase
Current account / ATMDebit / credit cardSavings facilityCar insurance
Couples (no children) As above +High level savings & investmentHouse purchase
As above +Investment linked plansDeposit savings accountMortgageTravel , Mortgage Insurance
Families (young children)
Family protectionMortgage ProtectionAccess to cash
Education PlanningHealth insuranceDisability Income insurance
Families (older children)
As above +School / College expenses
As above +Investment Products
Pre-retirees (empty-nest)
Maximize savings for retirement Additional pension fundcontributionsInvestment Products
Retirees Regular income in retirement Annuities
Technology
Key initiatives which can assist in distribution:
Point of Sale (POS) system
Website
Mobile phone
Product complexity and distribution channels
Sales models – Branch distribution
Referral model:
Bank only generates leads and passes to insurer
Trained insurance company’s consultants convert lead to sales
Bank’s role is limited with little or no involvement in sales mattersDirect Sales model:
Bank generates leads and converts to sales
Bank has robust sales management setup with it’s own sales team
Sales numbers are driven to quite an extent by bank
Referral model
Product managementProduct management
Sales managementSales management
Bancassurance managementBancassurance management
OperationsOperations MarketingMarketing
High Medium
Low
Involvement from bank’s side
Direct Sales model
Product managementProduct management
Sales managementSales management
Bancassurance managementBancassurance management
OperationsOperations MarketingMarketing
High Medium
Low
Involvement from bank’s side
Alignment of vision Management structure in banks Banks’ expectations Product value Persistency System /Operations constraints Change of personnel Conflict with other sales channels
Challenges
“Short term” vs “Long term” vision Executive level commitment Financial sustainability of model Acceptance of “insurance” as a product –
cultural shift
Alignment of vision
Bancassurance management structureOwnership and accountability for the
business modelHOCBHOCB
Dedicated Dedicated Bancassurance Bancassurance
Management TeamManagement Team
BranchesBranches
Sales teamSales team
OperationsOperations Product managementProduct management
Financial Focus mainly on first year remuneration
margins Bargaining tool TAT and client servicing aspects Strong ownership of client
Banks’ expectations
Cost saving to be reflected in better product value
Banks willing to reduce policyholder value in return for higher commission???
Product value
Limited focus of banks on persistency Persistency is key for life insurance company Insurer has to make significant efforts to
make the bank realize the importance of this KPI
Good persistency can result in repeat sales and flow of renewal income
Persistency
Direct debit systems do not always work efficiently
Weaknesses in operations setup No or limited MIS setup – reliance on insurer
Systems / Operations constraints
Conflicts with insurers’ other distribution channels
Sales agency channel Banks approach an existing client of sales
agency Sales agents approach an existing client of
bank Insurer has to maintain delicate balance Give preference to customer choice of channel
Conflicts with other sales channels
Business model usually driven by personnel rather than institution – not the ideal setup
Only some banks have a strategic executive level focus on bancassurance
Change of bancassurance team in bank can lead to disruptions in business
New team may have different strategy and vision
Also may have preference for another insurer! Insurer has to build relationships once again
Change of personnel
SECP has played a very positive role in promoting bancassurance
Pakistan is one of very few countries to have guidelines from regulator
Guidelines will bring discipline in the market All important areas are now streamlined and
under regulatory supervision
Role of SECP
Channel will continue to grow and gain prominence
For private sector will contribute major part of new business
State Life will also make an entry Technology will be key – Point of Sale systems
will be common New business expected to double from Rs. 2.8
billion in 2010 to Rs. 5.6 billion in 2013 from private sector companies
Next 3 years
Thank you!