The past and present of bancassurance…
The origins of bancassurance can be traced back to France and continental Europe. Today, European countries continue to dominate the $1.2bn global bancassurance market thanks largely to a favourable regulatory and tax environment (compared to, say, the US, where regulatory restrictions maintain a separation between banking and insurance).
Globally, the leading bancassurance markets are France, Germany, UK, Spain and Italy whilst in smaller European markets such as Portugal, up to 85% of all insurance premiums are through bancassurance channels. The global markets are dominated by European banking giants such as BNP Paribas, Credit Agricole, ING and ABN Amro. According to research from Finaccord, BNP Paribas Cardif is the insurance group holding the most bancassurance partnerships amongst the 500 largest retail banking groups globally.
Historically, the bancassurance market has been dominated by life insurance and long-term savings products, although in recent years the shift towards the distribution of non-life products through banks has become more attractive
…but what about the future of bancassurance
One of the secrets to success of bancassurance in Continental Europe is that the sale is heavily reliant on personal interaction. I know from first-hand experience in Spain what this is like. When I go to my local branch of my Spanish bank, I know the staff by name, they know me and there is always a discussion about family, weather and what we did last night. It is still very personal in a way that we haven’t seen in the UK since the last century.
Analysis by market data and research firm Timetric a couple of years ago predicted that “new technological innovations coupled with the challenges of the digital era are expected to put significant pressure in this (bancassurance) channel over the coming years”. The underlying reason for this prediction is that achieving scale on a human level is very difficult. It is also difficult to maintain competitive levels of pricing, coverage and features when new digital players are able to move more quickly.
This has largely come true with slowing rates of growth in the dominant European bancassurance markets. Whereas the growth areas are the emerging and less developed European markets, such as Turkey and Poland.
So, to delve a little deeper, I called up Tim Kunde, the co-founder and MD of German based Friendsurance. Many of you will know of Friendsurance as one of the pioneers in the P2P insurance space. This was a subject Tim and I discussed back in 2017 on this Digital Insurer webinar.
Digital Bancassurance; the Friendsurance way
You may not be aware that Friendsurance has been operating a digital bancassurance business since 2017. Called Friendsurance Business, this comprises the company’s digital bancassurance platform designed to meet the high demand from banks and insurance companies for digital insurance solutions.
Tim explained it to me, “The added value of digital bancassurance is beneficial to both our banking and insurance partners and to their customers. And we can do so much more than simply provide a technology platform. Because we have both a broker’s licence and an agent’s licence, we can cover a range of different cooperation models with our banking partners.”
The way it works is like this.
Friendsurance have built a bancassurance platform designed to integrate with a banking partner’s existing online and digital offerings and their own tech environment. The modular approach allows the banking partner to choose between different features of the Friendsurance bancassurance platform. For example, it is up to the banking partner to decide whether he wants to provide his customers with an app version, an online version or both.
“The research found that the majority of German customers wanted to oversee, manage and optimize their insurances through their online banking relationship.”
The key to success for the banking partner is that Friendsurance Business is not only a digital online broker but also the agent. Which means that insurance products from the entire insurance market, as well as tariffs, can be covered by an exclusive partner. This flexibility means that different co-operation models are possible, all enabled by the Friendsurance platform.
Embedding insurance into the banking experience
The Friendsurance platform is aimed at all companies that wish to offer their customers digital insurance solutions, especially banks but also insurance companies. The solutions are integrated modularly into the online offerings of the partners.
For the end customer, the Friendsurance platform offers a number of advantages. In addition to the claims-free bonus (that made Friendsurance famous), the bancassurance platform provides an analysis of a customer’s entire insurance coverage, plus the individual contracts. It also acts as a digital insurance folder, which simplifies the administration and optimisation of insurance policies for both customer and provider.
Tim explained, “We engaged YouGov to conduct a representative survey of the German market. The research found that the majority of German customers wanted to oversee, manage and optimise their insurances through their online banking relationship. We were not surprised by this. We already knew that on average German customers have 5-6 insurance contracts, which makes up a relevant share of their financial portfolio. Add to that the high user frequency of online banking, and it makes bancassurance an obvious answer for insurances.”
Making InsurTech enabled bancassurance a reality
In early 2018, Friendsurance Business announced its first bancassurance partnership with Deutsche Bank to integrate the platform into Deutsche Bank’s online portal. This was followed a few months ago with the announcement of a bancassurance partnership with R+V Versicherung. The partnership with VR-Versicherung’s manager enables customers of the cooperative Volks- und Raiffeisenbanken to manage and optimise their insurance policies online.
The Friendsurance platform has 5 key features for R+V Versicherung:
Cash Flow Analysis
Customers can hold all their insurance policies in a single place on the Friendsurance platform, even those from other insurers. To make it easy for customers, Friendsurance uses an API to scan a customer’s bank account and look for insurance contracts. From this, they can identify policy details and add them to the central folder. This is all enabled because of PSD2 and the finAPI, which has licence to scan customer data.
Recognition of Key Life Events
Friendsurance looks for signs of key life events, such as new child benefit payments or change of address. These events can trigger an insurance conversation between the customer and a personal advisor.
Rating and Comparing Tariffs
Friendsurance uses an independent external rating agency to supplement pricing data for customers looking for insurance. They also provide a simple coverage checker to ensure that the customer is making a like for like comparison when comparing insurance quotes. This is where being both a broker and an agent has its advantage for Friendsurance.
To support an active and engaged method of communication for customers that also meets regulatory requirements for transparency and audit, Friendsurance has developed Messenger to connect them to their personal advisor.
The Friendsurance digital bancassurance platform offers all advisors their own advisory interface using messenger. Through a tech enabled needs analysis, customers can simply ask for help and the advisor can use the platform to check all relevant information online and remove a lot of the overhead, burden and form filling from buying insurance.
The final word from Tim, “Through the cooperation with Deutsche Bank and R+V Versicherung, we can reach a customer base of around 35 million customers in Germany. The next partnership is already in the making and includes conversations in the German market as well as other European markets.”
The Digital Insurer recently held a free to attend webinar on the subject of bancassurance. The panel includes distribution and bancassurance senior execs from DBS Bank, AXA, FWD and KPMG.
To view a recording of the webinar and see supporting materials from the event click here.
The author, Rick Huckstep, is an InsurTech thought leader, advisor and speaker. He is the Chairman of The Digital Insurer.