Venue:Villa Rosa Kempinski /Nairobi/
Kenya
Presentation By: Elias Fakhoury
BANCASSURANCE CONFRENCE
The Presentation Includes :
1) The Nigerian Journey on Bancassurance
2) Key Success Factors
3) What it takes to define a winning strategy with
banks?
”
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Bancassurance: Opportunities and Challenges
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Bancassurance: Opportunities and Challenges
According to NAICOM and CBN:
Bancassurance has been defined as “theprocess of using bank’s branches, salesnetwork, and customer relationships to developsales of insurance products”.
Bancassurance is a strategy for entrenching
insurance culture in the country.
Bancassurance is neither an insurance
product nor a means for banks to do
underwriting business. It is a channel for
distribution of insurance products.
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Banking and Insurance
BOFI Act
CBN Act
Deposits
Withdrawals
Negotiable
instruments
Insurance Act
NAICOM Act
Premiums
Risk Underwriting
Claims
Proposal Forms
Certificate
Debtor Creditor
relationship
Principal Agent Bailee
Bailor
Rights and duties of
bank & Customer –use
of deposit, notice,
statements, privacy.
Provide finance charge
interest
Utmost Good Faith
Indemnity
Insurable Interest
Subrogation
Contribution
Proximate Cause
Distribution Channel
Added
Customer Value
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Bancassurance: Opportunities and Challenges
2010
• Universal Banking ceased
2010 – 2014
• Uncertainty about Bancassurance
July 2014
• CBN Circular disbanding Bancassurance
• NAICOM/CBN discussed
October 2014
• CBN set up Committee to examine Bancassurance
• NAICOM submits position paper on Bancassurance
December 2014
• National Insurance Summit where Bancassurance was discussed
January 2015
• CBN exposed Bancassurance guidelines
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Bancassurance: Opportunities and Challenges
Features of CBN Bancassurance Guidelines Referral model only- Banks can focus on core banking business.
Disclose commission in annual accounts report.
Referral to insurer as the partner of the Bank
Banks cannot pay premium on behalf of a customer.
Must state the name of the underwriter
Must exclude all liability of Bank .
Do due diligence/periodic assessment (in its inspection).
Use only two (2) insurance companies.
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Bancassurance: Opportunities and Challenges
Features of CBN Bancassurance Guidelines Products must be approved by NAICOM.
List of items needed to get CBN approval.
Bank name must not appear at the product.
Insurance staff can occupy banking hall.
Bank can collect premium “as collecting agent” and pay to insurer’s
account with bank.
Not share premium with insurer.
Cannot compel a customer to use particular insurer.
Don't charge customers any service charge or administration fee.
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Bancassurance: Opportunities and Challenges
Key Success factors according to NAICOM & CBN
Success of Bancassurance would largelydepend on how well regulatoryresponsibilities are apportioned, products arepackaged, premiums are remitted andcustomers changing needs are met.
There is a huge untapped market in Nigeria,and with Bancassurance insurance sector isset to increase insurance penetration level.
If implemented properly Bancassurance can be a win-win situation for all participants': viz. banks, insurers and the customers with coordinated and collaborator regulatory monitoring.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
No Jargon, No Crap, No
Nonsense
Just Facts, Serious Analysis, and
Actual Experience
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Key Developments, Major Drivers, Product Development
Why Bancassurance
(Innovative) Bus Models (Strategic Alliance, Full Integration,
Mixed), Multichannel Approach
Digital Revolution in Bancassurance, Digital Thinking, Social Media
Strategy
Creating Positive Consumer Experience, Personalized Customer
Solution
Global Analysis: France, UK, Spain, Portugal, South Korea, USA,
Japan, Sub-Saharan Africa, Kenya
Bancassurance SWOT Analysis and Porter’s Five Forces Model
See Bancassurance - Laying the Foundation for Growth/The Insurance Survey 2014
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
SWOT Analysis
STRENGTHS
Huge pool of skilled professionals Established credibility of the banks Wide network of branches, even in the remotestareas
Understanding about the attitude and behaviourof the consumers
Market expansion for insurance companies Trained staff, brand name and reliability High untapped market potentials
WEAKNESSES
Rural branches not under banking system,and under-staffing issues
No ready availability of trained staff Lack of personalized service Differences in approaches between banksand insurance companies
Customers constrained by time Inflexibility of the products
OPPORTUNITIES
Huge untappedmarket Requirements of urban customers can be tapped Database can be used to find homogenous group Cross-selling of insurance products for bankingproducts
Corporate and salaried customers can betargeted for specific products claimingconvenience and ease of access
THREATS
Changes in work culture and attitudedifficult among bank employees
Non-response from targeted customers May affect the portfolio of banks ifinsurance is perceived as a substitute forbank savings
There may be loss of business confidence Competition between existing players Unsuitable marketing strategy andpersonnel may result in more harm thanbenefit
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
“Inability to articulate a strategy in a
single, incisive, natural – sounding
sentence is a sure sign that there is
something wrong in the strategy itself”
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
“ When you can measure what you are speaking
about, and express it in numbers, you know
something about it; but when you cannot measure it,
when you cannot express it in numbers, your
knowledge is of a meager and unsatisfactory kind.”
- William Thompson (Lord Kelvin), 1824- 1907
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Strategic planning, as the job of collecting and
analyzing the enormous amounts of data that
characterize the modern world and monitoring
changes in markets and the competitive environment,
provides the raw material and factual basis for
strategic thinking and opportunistic decision making.
Synthesize this raw material into an integrated set
of actions designed to create a sustainable advantage
over competitors.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
And Pragmatism to Strengthen and Sustain the Heart of Strategy
S/N COUNTRY %
2013
1. Taiwan 14.5
2. South Africa 12.7
3. Hong Kong 11.7
4. Japan 8.8
5. United Kingdom 8.8
6. Finland 8.7
7. South Korea 7.5
8. Denmark 6.9
9. Portugal 6.4
10. Ireland 6.0
11. Namibia 5.4
12. Mauritius 4.0
13 Kenya 1.2
14 Egypt 0.3
15 Nigeria 0.2
Insurance Penetration: Premium as a % of GDP for Life Business
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Bancassurance: Opportunities and Challenges
S/N COUNTRY USD
2013
1 Hong Kong 4445
2 Switzerland 4211
3 Finland 4109
4 Denmark 4093
5 United Kingdom 3474
6 Japan 3346
7 Sweden 3215
8 Taiwan 3204
9 Ireland 2869
10 France 2391
11 Singapore 2388
12 South Africa 844
13 Mauritius 382
14 Namibia 288
15 Kenya 12
16 Egypt 10
17 Nigeria 3
And Pragmatism to Strengthen and Sustain the Heart of Strategy
Insurance Density: Premium Per Capita for Life Business
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Bancassurance: Opportunities and Challenges
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Gap is Huge and the Harvest is
Plentiful, but the laborers are few;
therefore entreat the lord of the
harvest to send more laborers, actually
reapers, into his field.
Identify disconnect between needs/wants and
solutions - between crisis and customer
responses
Preparedness gap
Advice gap insufficient education and
guidance
Supply issue: the market is there
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And Pragmatism to Strengthen and Sustain the Heart of Strategy
Bancassurance: Opportunities and Challenges
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Market
General
Needs
Specific
Needs
Solutions Gap
CAPEX GROUP Competition Proposed Solutions
Offerings Distribution Offerings Distribution Offerings Distribution
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
MPD LINKAGE
And Pragmatism to Strengthen and Sustain the Heart of Strategy
China: Premiums From Online Business Grow by 200% p.a in 2011-2013
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Bancassurance: Opportunities and Challenges
Internet users aged 30-50 pay the most attention to
insurance at 58 percent, higher than the national
average of 18 percent. Male Internet users, are more
interested in insurance than female users.
High-school or lower education are most
interested in insurance online.
Premiums collected through Internet sales still
amounted to less than 3 percent of the total
insurance premiums.
India: Mobiles are the new growth story for insurers
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Insurers are increasingly equipping agents with tablets and mobile phones loaded
with proprietary software to quicken the insurance sales process, prevent mis-selling,
reach out to customers in distant places and improve productivity.
Agents to adopt a digital sales process which takes the prospective consumer
through a series of steps that will help select a product.
Agents are Moving to sell through digital means (laptop or tablet)
With the adoption of technology, a new set of agents emerge.
Mobile technology has helped improving overall productivity of agents by 10-15%.
Mobile technology is helping life insurers reach out to distant areas by reducing the
need for physical infrastructure.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
F2F
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Bancassurance Contribution
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Bancassurance: Opportunities and Challenges
REFERRAL DISTRIBUTION INTEGRATED
Commission for dataInsurance Marketersdo the selling. Refer customers toinsurance deskPracticed in India,Indonesia, and SouthAfrica
Banks Staff promote and market Insurance
Bank Collects thePremium and Remits toInsurer.
Practiced in USA,Germany, UK, Japan, andSouth-Korea.
Insurance and Banking products are sold together as one.
The bank is directly involved in selling.
Practiced in France,Belgium, Spain, UK andIreland.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Banks – Added Income
Banks Customers –Added Value
Financial Inclusion : Increase Through Access To Finance
Insurers –Product
Distribution
Bancassurance Virtuous Cycle
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
To Banks – Revenue Growth:
Increased Revenue & Diversification - Risk
free non-interest income
Customs Retention, loyalty and greater
brand recognition
Staff of Branch productivity and so lower
operating expenses
Market Competition – spare decrease in
interest margins
Contain Changing Customer Preferences
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
To Customers – Customer Value:
Ease of access to financial services
Simplified insurance products
Competitive pricing
Simplified payment Method
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
To Insurers – Market growth :
Access to customers – deepening
Insurance penetration .
Access to established distribution
network.
Source of new business – Large
customer base.
New products
Leveraging banks brand.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Basics :The Right Partners
Clarified Expectations
Technical Competency
Trust & Brand (contamination)
Compensation: optimize compensation level
and structure keeping in mind customer
value and business viability
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Basics : Privacy Concerns
Products & Processes: bridge the gap and
strengthen partnership and compliance
(Lack of) Integration (Sales & Operations)
Multiple Data Management Platforms
(Lack of) Unified Commands
Contain Core Business Interference
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Products Sold Via Bancassurance Model
Credit life insurance /Personal loans.
Comprehensive Motor insurance/ Car loans.
Home property Insurance /Mortgage loans.
This insurance products offer protection to Banks against loan impairmentsdue to death of the borrower or loss or damage of the asset that the loanwas used to purchase.
This enhances the security of loans and improves the Banks risk profilethereby fostering long term financial sector confidence.
Insurance products most commonly sold through Bancassurancearrangements are insurance that are linked to banking products
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
Products Sold Via Bancassurance Model
Health/Medical insurance;
Accident & Disability;
Education insurance;
Third party motor vehicle insurance;
Other forms of property insurance;
Professional indemnity insurance etc.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
I
ALICO, NBK in Marketing Tie-Up news article that appeared in Kuwait / Gulf dailiesback in October 1998.
You will notice focus on segmented markets:
‘’…..a good fit, simple, flexible, low-touch, easy to understand product packaged anddelivered to segmented markets.”
“…Few institutions know their customers more intimately in a financial sensethan banks. Some customer segments”, Fakhoury added. “do not have adequateinsurance and are not presently targeted by insurers. Banks offer a way of that largemarket to be reached and as savvy insurers ALICO capitalize on this opportunity.With the right strategy bancassurance can be a significant avenue for growthespecially we know how much NBK focus on analyzing their customers’ financial needsthe value of life insurance as an efficient solution to their customers” incomereplacement and estate planning needs.”
The Voice of Experience
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Voice of Experience
You will also see the stress placed on New Frontier, finite amount of Shelf Space andActuarial Capabilities:
“….We are proud of our strategic relation with NBK – the leading bank in Kuwait,” Mr.Fakhoury added. “We view this relation as a New Frontier – an exciting newopportunity for ALICO and NBK to mutually continue to build, grow and prosper.There is a finite amount of shelf space in the banking market and we plan tofill it with our products. As we wrap our resources around our customers’needs, we generate an on-going, dynamic stream of breakthrough market-responsive value packages. With our in-house actuaries we have a strongproduct portfolio (in excess of 200,000 packages) and we can develop more in areaslike: Education Protection, Wedding Plans, Health Insurance, ProfessionalDismemberment, Professional Liability, Employee Benefits, Personal Accident, DisabilityIncome, Mortgage life, Credit Life Annuities, Retirement Packages, Salary / IncomeContinuation Plans, Standard of Living Plan, etc.”
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Voice of Experience
Moreover the Financial Supermarket and Glocal Relationshipwere emphasized:
“….ALICO/NBK collaboration agreement offers a sort of “one-stop shopping” for consumers seeking financial security andindependence: Full financial services through one source – aFinancial Supermarket.” Fakhoury continued “Together withNBK we weave a Glocal relationship – a global coverage withlocal presence. International depth with national identity.A Tradition of Confidence a Future of Security.”
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Voice of Experience
II.
1. Risk transfer may help banks release some of their reserves to enhance their bottom-line accordingly.2. All commercial and retail banking clients are purchasers of insurance products.3. The expansion of consumer lending has made it imperative for
banks to “partner” with insurance companies to provide a comprehensive service for their customers.4. Banks need to diversify their revenue stream to become less of
interest margin-dependent organizations. The value proposition includes enhancing the profitability of banks through added source of fee/commission income. Tap another area of profitability.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Voice of Experience
5. Opportunities for greater customer lifecycle management.6. Drawing on above successes along with our Actuarial /
marketing expertise, we used to demonstrate our capabilities to research banks’ well-segmented database to tailor-make complementary products that could help banks differentiate their own products and so sell more.7. Diversify and grow revenue base from existing relationships.
And Pragmatism to Strengthen and Sustain the Heart of Strategy
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Bancassurance: Opportunities and Challenges
The Voice of Experience
III.Real life insurance products (not the simple ones) are sold not bought …etc Hence we put RLGS / capabilities at the bank’s disposal (our outstanding performance with SABB is a common knowledge in Saudi).
ChurchassuranceMosqueassuranceClubassurance
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Bancassurance: Opportunities and Challenges
The Voice of Experience
IV.
I also used to caution:
1. Patience is an important factor when it comes to revenue building.
Understanding differences in marketing style and culture is critical. For example, banks are used to a transactional environment; sales happen right away and in real time. In contrast, insurance sales can take longer.
2. We – both parties – need to weigh the investment we are making vs
expected return.3. Education on both sides of the table is an important ingredient. We
have researched and are learning how banks think and work; ditto for bank management
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Bancassurance: Opportunities and Challenges
The Voice of Experience
4. We – both parties – need to enter the
relationship with eyes wide open. Forging a successful relationship takes commitment, time and hard work.5. We may need to help the regulatory
authorities, both in the banking and insurance sectors, to facilitate strategic relationships.
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Bancassurance: Opportunities and Challenges
The Voice of Experience
Regulators are our Allies
Create Synergy making the whole
greater than the sum of its parts
(2+2 = 5 or more)
Share customers → boost revenues
Share resources → cut cost
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Bancassurance: Opportunities and Challenges
Just Keep In Mind
High FYC must be appropriately reserved for, and
annualization must be balanced through a claw back
provision where you need to reserved for sales team
turnover. Naturally, this could impact customer value on
the one hand and defeat the purpose on the other hand –
reflecting on business sustainability in most cases. Hence,
you must focus on customer value leveraging a persistency
provision and revenue therefrom towards proper
alignment to motivate all parties.
Thank You