Press Release: Bancassurance to generate more than 35% of private insurers’ premium income by 2008: Watson Wyatt Study
Chennai, December 12, 2007: Bancassurance is likely to generate approximately 35% of private insurers’ premium income by 2008, according to an analysis of India’s bancassurance sector by Watson Wyatt Worldwide, a leading global insurance consulting firm. ‘India Bancassurance Benchmarking Study- 2006/7’ is the first of its kind survey in the Indian market, and part of an Asia-wide analysis focused on bancassurance distribution. It sets out to define bancassurance performance standards and benchmarks against a cross section of industry practices, processes and productivity indicators. Watson Wyatt has analysed the bancassurance channel from the perspective of banks, life insurers and non-life insurers separately in the report. Mr. Graham Morris, Director, Watson Wyatt Worldwide said: “the purpose of the survey was to focus and understand how banks and insurers develop strategies for selling life and non-life insurance products through the vast network of bank branches in India and the practical issues they face in implementing the sales process”. Watson Wyatt had chosen India as the first country in Asia to do the Benchmarking Survey considering the vibrant growth of this alternative channel in the country compared to the other Asian markets. A total of 25 banks covering PSU, Private, and Foreign banks had participated in the Survey, along with almost all private life and general insurers licensed in the country. Nearly 90% of interviewed life insurers are expecting an increase of over 75% in new business premium income for the current financial year from the bancassurance channel, despite the fact that they consider lack of sales culture on the part of bank’s branch staff as a key issue in the success of bancassurance. The lack of a clear bancassurance vision on the part of the bank partner is the most visible reason for the slow progress in cross selling of insurance, despite the bank partners having impressive branch networks or large customer bases. The quality of bank customer data is frequently poor and the absence of simple CRM tools in most banks makes it difficult to launch specific initiatives to cross sell insurance products. Public sector banks in the country, which control more than 90% of the total customers, are seen to be inefficient in recording basic data about customers and managing available information. “Growth in bancassurance in India will fall short of its potential unless the perceived lack of sales culture and vision begin to get addressed by the banks. An understanding of theses differences will facilitate the mutual goal of increasing bancassurance as the leading channel in insurance distribution in India,” said Mr. R.Krishnamurthy, Managing Director, Distribution Practice, Watson Wyatt Insurance Consulting of the India office. Banks’ have overwhelmingly expressed a leaning towards insurers with bancassurance expertise and showing evidence of their commitment. On product design and development, they seem to demand more attention from insurers to involve the bank management team.
The brand image of the bank partner, its willingness to bring about a cultural change and involving the entire branch network are the vital factors that life insurers consider when entering into a bancassurance tie-up. While developing their bancassurance strategy, general insurers consider increasing new business and tapping new markets as the key factors. 100% of respondents ranked gaining support and commitment from the bank’s management as the critical factor in building successful bancassurance operations. Both bankers and insurers are bullish about the future outlook of bancassurance with nearly a quarter of respondents predicting that the overall share of bancassurance would be about 50% or more in the life segment in the year 2010. In the case of non life insurance, bankers are less bullish with less than 10% predicting the bancassurance share to be 50% or more by 2010, and the bulk settling at around a 30% share. Both life and general insurers are bullish about the prospects of insurance penetration in the rural markets. About 30% of the life insurers have indicated that by the year 2010, rural insurance business would constitute between 16-20% of their total bancassurance new business premium. Life and general insurers have also expressed overwhelming support to innovative changes in the bancassurance channel, such as banks having multiple insurer relationships, exclusive bancassurance products for deepening insurance penetration and simpler training requirements for the bank staff to qualify as insurance salespersons. There is no doubt that bancassurance in India will play a major role as the insurance sector develops. India has the unique experience of drawing strong regulatory support for this channel. Coupled with the growing awareness of banks to leverage on their branch network and customer strengths, the insurance selling opportunities would get widely tapped at bank branches in the years ahead”, Mr Krishnamurthy said. About Watson Wyatt Worldwide Watson Wyatt is a over 100-year old leading financial services consulting firm with headquarters in UK, with 85 offices across all continents and professional staff of about 7000. The firm has presence in India since 1997 and has four offices in Kolkatta. Mumbai, Delhi and Bangalore. The Insurance consulting services of the firm in India is served by a team comprising more than 40 associates including actuaries (based in Mumbai and Delhi) who have been involved in over 200 assignments covering almost all life, non-life and health insurance companies, associating at times consultants from Hong Kong, Singapore and UK offices. The assignments in India cover a wide range from market entry advice to valuation of companies, product design and pricing, risk management, and distribution consulting. Watson Wyatt also provides powerful and versatile actuarial software solutions for life and general insurance companies. The firm’s global services include managing the cost and effectiveness of employee benefit programmes; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies. Please visit www.watsonwyatt.com. Issued on behalf of Watson Wyatt Worldwide by: Krishna Moorthy-9442191717/ David Francis-9884052528/Daniel-9884848370 Sampark Public Relations Pvt. Ltd., Chennai.