BANCASSURANCE

..……………THE JOURNEY………………

Winnie Njau-Mbugua

Group Head of Bancassurance - KCB

Scenario in Insurance Industry before Introduction of Bancassurance

Low penetration predominantly in middle and upper class consumers.

Low levels of consumer awareness.

Low levels of trust coupled with negative perception towards Insurance products and industry in general

Irrelevant products perceived to be of little or no value

Formal sector was main target market for most insurers

Informal sector to a great extent ignored

Insurance not accessible in remote and infrastructural deficient rural areas

Bancassurance Journey in Kenya2004: First Insurance Agency license issued to CBA Bank under CBA Insurance Agency

2007: Equity Bank acquires License to operate under a separate Equity Insurance Agency

2010: KCB acquires a License under KCB Insurance Agency

2011 to date: More than half of Kenyan Banks plunge into Bancassurance

Nov 2011: First IRA Guidelines on Bancassurance issued

May 2013: CBK issues prudential guidelines allowing Banks to distribute Insurance

Oct 2014: IRA drafts revised Bancassurance guidelines

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Agenda

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Effectiveness of Models at Play in Kenya

Impact of Technology on Bancassurance

Drivers of Bancassurance Market

Conclusion

Increasing Penetration by Enhancing Bancassurance

Effectiveness of Models at Play in KenyaKey Models used in Kenya

i)Partnerships between banks and insurance companies where the insurance company uses own staff to sell within Bank Branches

ii)Use of Bank’s own Insurance employees with an Insurance desk set across the bank’s branches

iii)Distribution through a broking partner who offers technical guidance and after sales service under a profit-sharing model

Increasing Penetration by Enhancing Bancassurance

Effectiveness of Models at Play in Kenya……

i)Partnerships between banks and insuranceFailed due to lack of ownership at the bank and

lack of clear partnership guidelinesEmployees of Insurer perceived as outsiders and

lack buy-in and support from bank staffLacked regulatory support/ basis as Banking act

does not support use of outsiders in banking hallsAmbiguous cost-sharing/ profit-sharing criteriaFailure to create a win-win situation for Customer,

Bank and Underwriter: Trust, Loyalty & Growth

Effectiveness of Models at Play in Kenya….ii)Use of Bank’s own Insurance employees

Model has been the most successful and ideal for most banks

However, it’s an expensive model and not sustainable in the absence of huge volumes

Is ineffective where insurance staff are expected to support several branches

Scalable only where bank is expanding/ growing

Increasing Penetration by Enhancing Bancassurance

Effectiveness of Models at Play in Kenya…

iii)Distribution through a broking partner

The model has been fairly successful especially for smaller banks where set-up of an independent Insurance unit proved unsustainable

Also worked well for foreign banks who lacked legislative support to set up Insurance agencies to carry out Bancassurance

Challenges of enough brokers with capacity to efficiently handle the volumes generated by banks

Increasing Penetration by Enhancing Bancassurance

DRIVERS OF BANCASSURANCE MARKET

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Drivers of Bancassurance MarketDesire by banks to offer a one stop shop for

financial services to their customers in order to improve efficiency, enhance loyalty and rein fence their customers.

Generally higher levels of trust in Banks vis-à-vis Insurance industry players

Convenience, easy access and ease of premium payment through Insurance premium finance

Strong distribution network and e-commerce capability; Bank branches, Mobile platform, POS, ATMs, Web, Bank Agents e.t.c

Increasing Penetration by Enhancing Bancassurance

Drivers of Bancassurance Market…Banks see an opportunity to effectively grow their

non-funded incomes in the face of compressed interest margins.

Due to huge insurance business volumes, banks generally enjoy a higher degree of bargaining leverage and relaxed underwriting restrictions backed by strong underwriter partnerships. The stringent Service Level Agreements enhance claim processing and settlement.

Ability to develop and sell simple, affordable and relevant white-labled products riding on their strong brands.

Increasing Penetration by Enhancing Bancassurance

Drivers of Bancassurance Market…Breadth of Insurance product lines due to diverse

customer segments and the ability to develop new relevant products and improve on existing products.

Banks enjoy massive customer base with customers straddling all economic sectors; opportunity to offer a diverse range of products

Ample financial resources to acquire reliable systems and develop high quality human capital.

Increasing Penetration by Enhancing Bancassurance

Drivers of Bancassurance Market…Expanding demand for insurance products to

meet broader range of customer needs with Insurance Industry growth in the recent years far outstripping growth in GDP.

Embedding of insurance products on existing banking products e.g. Credit Life and Mortgage protection on loans e.t.c

Increasing Penetration by Enhancing Bancassurance

IMPACT OF TECHNOLOGY ON BANCASSURANCE

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Impact of Technology on Bancassurance• Integration – enhance interoperability between

Insurance and Bank systems leading to ease of customer service across all service points of the Bank.

• Ability to develop standardized packages that can be easily distributed by Bankers.

• Provide integrated view of customer information across various products.

• Improve information-sharing practices and improve the sales cycle.

• Enhances cost-efficiency and scalability.• Enables integration to call centres enhancing the

capability of making outbound sales.

Increasing Penetration by Enhancing Bancassurance

Impact of Technology on Bancassurance• Facilitates distribution of high volumes of lower

premium products within a short amount of time.

• Help improve insurance renewal and business retention.

• E-commerce and mobile payment solutions act as efficient claims delivery service points for customers.

• Offers capability for online real-time creation of policy and downloading of scanned documents. Supported by self-service menus on after sales service.

• Opportunity for online connection for claim and complain filing to improve customer experience.

Impact of Technology on Bancassurance• Penetration of lower income segments: Traditional

channels are well suited to meeting the needs of upper middle class consumers, but are severely limited in reaching the emerging classes. Technology offers an opportunity to effectively and sustainably service this category of insurance consumers.

• Opportunity for using established Bank’s mobile payment solutions through a fully automated end to end onboarding process to distribute simple Insurance products.

Concluding Remarks

• There is urgent need to eliminate existing legal and regulatory impediments as well as create consistency and clarity in the regulatory environment to deal with the existing misconception and competitor hostility towards Bancassurance. This will create confidence for further investments in this channel by Banks.

• Bancassurance is still a fairly underdeveloped channel with very high potential and capability to enhance insurance penetration across the country and bring about the necessary fundamental economic transformation and prosperity to the people of Kenya.

Increasing Penetration by Enhancing Bancassurance