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Arthur D. Little

Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We enable our clients to build innovation capabilities and transform their organizations. ADL is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations. For further information, please visit www.adlittle.com

Bringing bancassurance into the digital era

Bank and insurance partners must collaborate better to digitally transform insurance delivery

With consumers’ financial needs growing more complex – the bancassurance model remains relevant to support customers holistic needs. However, the potential for banks and insurers to combine forces, expand their reach and cross-sell their services is sometimes stunted by siloed operations and cumbersome sales and compliance processes.

Now, with financial service customers embracing digital channels, banks and insurers must refine their partnerships to ensure they can jointly respond to consumer demands, and pool their customer, product and technology expertise, to transform the way they serve their shared client base.

A perfect marriage, on paper:

Since bancassurance arose more than 20 years ago, it looked like a concept that could deliver mutual benefits to banks and their insurance partners.  Many banks forged alliances with insurers or built insurance subsidiaries, where local regulations allowed. While many banks enlisted multiple insurance partners and created in-branch advisory structures, often focused on life insurance, many have faced challenges creating solid sales networks or gaining a competitive footing. Often, their insurance divisions have struggled to compete for attention, resources and support with the banks’ established retail banking product lines.

From an advisory perspective, many banks grappled with limited insurance product expertise to effectively position insurance products for individual customers. As a result, the actual penetration of insurers’ products on the bank’s client base are below expectations and, in some cases, only marginally contributing to financial objectives.

Compliance obligations have been another obstacle to successful insurance sales by the banks. In many jurisdictions, stringent regulations imposed by banking and insurance regulators, including KYC and AML guidelines, have turned a typical in-branch sale of an insurance policy into a lengthy process, with extensive paperwork to on-board a customer and confirm their consent. In some markets, these requirements lead to onerous administrative steps in the policy issuing process as staff take a ‘safe’ procedural route to ensure no risks of regulatory penalties.

Sharing of customer data between the banks and insurers has in many cases been restricted by tensions regarding customer data ownership, data privacy restrictions and lack of customer data consent procedures.

Changing customer preferences in a digital world

With many bancassurance deals focused on selling insurance through the banks’ physical locations, the banks’ enviable branch network has become less of an advantage now that customer preferences are shifting to digital channels and the banks themselves are reducing their network to control costs. Put simply, if banking customers visit their branch less often, the banks have fewer opportunities to promote insurance products among those clients. And, with an increasing percentage of customers only turning to their branch to resolve problems, these rare branch visits may not be the ideal time for a banker to initiate an insurance conversation.

Thus, while many insurers paid handsomely to establish multi-year deals with the banks to gain branch access, they may now rethink whether they are getting the expected value from these agreements. Unfortunately, the insurers’ alternative is to invest heavily in their own digital offerings, which often lag behind the banks due to significant legacy system challenges.

To adapt to the new digital reality, the banks need to consider transforming the nature of their branch model to offer the required online to offline experience, offering more in-depth advisory services around wealth management and focusing on specific customer segments. Insurance should be part of this broader offering, with the bank and insurer providing more modular, personalised offerings, based on a deep understanding of the customer informed by shared customer analytics.

Partnering to solve the challenges

One key to resolving these ‘kinks’ in the bancassurance sales and service pipeline is better collaboration between bank and insurance partners. For example, to construct an optimal omnichannel strategy for insurance, banks need to work much more closely with their insurance partners to design and implement effective digital transformation of existing processes.

The banks have the advantage of rich customer insights based on their interactions with customers. These insights can be enhanced by developing omnichannel platforms to supplement their customer needs, enabling their insurance partners to provide personalised insurance offerings.

Banks and insurers must collaborate to create integrated, open standard digital platforms that enable seamless customer referrals and smoother data collection and analysis. This is crucial, since customers don’t want to be ‘bounced’ from one department to another or forced to provide the same personal information twice to complete an insurance transaction.

To tackle the regulatory process burden, banks must work more closely with their insurance providers. Both parties have comparative advantages and insights, which if shared could better support a data informed, tailored, and seamless offering to the customer, avoiding common misconduct issues that arise today.

Sorting these complex questions, and building clear, strong partnerships between organisations, may require the banks to focus on fewer partnerships with a smaller number of insurers to which they concentrate their resources and efforts.

We have seen bancassurance practices that demonstrate success to serve the modern digital customer requirements. For example, Indian banks provide insurance products online with call center support to their customers, converting a large percentage of term life and travel insurance products via these channels. Further innovations with claims handling via photos taken with mobile phones and real time AI enabled assessment can provide fast resolutions to customers.

What can banks and insurers do now?

  • Design or enhance the customer journey by focusing on the broader financial objectives of target customer segments, e.g. wealth management, retirement planning, family financial planning.
  • Integrate regulatory requirements into a seamless omnichannel customer process to support the focus on the value-adding advisory role of the branch staff.
  • Establish a holistic and broad-based customer data set with the required custodian management to allow joint customer analytics by the bank and insurer to achieve customised and personal offerings.
  • Achieve a digital open standards platform with the bank and insurer applications to support the customer omnichannel access and potential to include other third parties for optimal customer propositions (e.g. for health).

For more insights and developments in insurance and InsurTech, please visit KPMG.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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