Is Bancassurance flavour of the Season?

Bancassurance is growing in many Asian markets buoyed by deregulation of banking sector on one hand and Insurance companies intending to optimize distribution via banks on the other hand. On the local level, bancassurance business in Asia-Pacific countries has evolved in different ways. While different geographies are targeting different customer base and products, for instance countries like Malaysia, Indonesia, Thailand where Muslim population is high and growing, insurance companies are joining hands with banks to provide a wide range of Islamic finance and takaful insurance products. And in some other emerging economies with predominant agricultural countries like India banks are joining hands with co-operative societies and Regional Rural Banks to reach out to vast untapped population. Asia Pacific region is “Agent” dominated distribution in terms of both life and non life, however Bancassurance is growing quickly. Penetration of Bancassurance ranges from <10 percent in countries like Japan and Thailand to as high as 40 – 50 percent of new business in countries like South Korea and Malaysia The existing bank branches and other infrastructures like ATM, online, telephone, and mobile modes have triggered the insurance companies to come up with various innovative models in collaboration with banks to effectively use the already existing channels. Bancassurance is one of the growing models that insurance companies are targeting to reach various customer segments. Since bank customer are co-related to savings and insurance customers are co-related to retirement, pension etc, routing insurance products via bank branches will not only build long lasting relation with customers, but also act as one stop shop for all financial needs of customers.

Distribution strategy in China’s diverse market conditions

I talked with a reporter recently about Asia distribution channels. She asked me question about in emerging markets like China, what the challenges are, and issues facing by insurers to build up a cost effective distribution channel, and what being important for a successful distribution strategy in China’s diverse market conditions. China is a big and diverse market. Most places in China are emerging markets. It is not common for people to initiate the purchase of insurance products. This is due to the limited knowledge they have of life insurance. Insurance is mainly sold in a face-to-face setting with an individual agent of an insurance firm, where the agent would provide a detailed introduction of the product; hard selling may be involved as well. Hence, the main sales channel for life insurance in these emerging markets is individual agents. But in many big cities in China, insurance markets are maturing. People are more aware of insurance product; they’ll purchase insurance through banks, car dealers, travel agencies, telephone, and internet. Individual agents are still an important distribution channel in these big cities, but in the face of stiff competition with other distribution channels, as well as the increase in diversity of financial products, some insurance companies are investing in more training to equip agents to become financial advisers, and establishing online and mobile support system. The biggest challenge by insurers to build up a cost effective distribution channel in China is the market diversification. Multi-channel distribution is very important. Any single distribution channel, any single distribution strategy can’t meet all market conditions. The important thing for a successful distribution strategy in China’s diverse market conditions is the alignment of product and distribution channel. Design of product should be aligned with target customer and designated distribution channels.