as a sales channelBancassurance has seen ups and downs for a variety of insurance products in recent years. In the second quarter of 2018, McKinsey hosted its annual Bancassurance Global Forum in Rome, where new research and data from a comprehensive benchmarking study conducted by Finalta were presented.1includes banks based in 27 countries.2Overall, the bancassurance industry has seen strong premium growth around the world. From 2011 to 2017, the growth of the bancassurance channel outpaced the other life and non-life channels (chart). In recent years, however, growth in non-life appears to have slowed.
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The results also highlight digitization as a core component of growth. Our assessment identified a cadre of European “growth champions” generating double the median annual digital sales of non-life products compared to their European peers. From 2016 to 2017, when much of Europe was experiencing stagnant growth, new business revenue from these growth champions increased by 17%. In other words, customers have taken notice and many are now expecting the kind of bancassurance experience that only digital products can deliver.
However, banks have been slow to digitize their bancassurance products. Complex sales processes for insurance products and competing priorities with other banking products could be to blame. Still, with interest rates at record highs, many banks see the potential for noninterest income that bancassurance can offer and have given serious thought to their bancassurance strategies. Enabled by digital processes and analytics, three essential components:personalization, superior customer experience and omnichannel engagement will shape the winning formula for sustainable growth in bancassurance.
The current state of bancassurance
Banks in many markets, particularly Asia Pacific and Latin America, have clearly focused their sales on the bancassurance channellife insurance products, which tend to have higher average selling prices and margins than most non-life products. In fact, life products fit particularly well into the bancassurance framework. relate to financial products; For example, credit life insurance products exploded with the credit boom of the 2000s, and when banks have access to their customers' personal financial assets, they often work to promote life insurance with embedded cash value as an alternative investment, citing tax benefits.
On the other hand, many banks have been discouraged from putting too much effort into marketing non-life insurance products, which have lower average selling prices and commissions. Few banks significantly increased auto and commercial penetration, although many banks managed to combine home insurance with mortgage products reasonably well. More recently, in response to historically low interest rates, banks have sought new sources of noninterest income. As a result, they began to see the independent sales potential of non-life products.
Overall, global bancassurance revenues grew in all regions between 2011 and 2017, led by Latin America, where premiums grew by 12%. Asia-Pacific sales rose 9.2%, with China accounting for two-thirds of the growth. In both regions, growth can be explained by banks' motivation to increase earnings in the face of falling net interest margins. In addition, rapid increases in per capita GDP and living standards across much of Latin America in the 2000s led to higher disposable income and, generally, more people buying insurance products. In terms of penetration, the Asia-Pacific market is split in two: bancassurance now accounts for 30% of all new life insurance business. On the other hand, the bancassurance share of banks' total customer base remains low, often ranging between 1 and 4 percent. The relatively low European penetration rates of 37 percent for life insurance products and 8 percent for non-life insurance products suggest that there is plenty of room for growth in bancassurance revenue. When banks want to increase sales of life or non-life products, the use of digital tools is crucial. Regardless of whether banks want to increase sales of life or non-life products,the use of digital toolswill be the key.
Banks are slow to sell bancassurance digitally
Finalta's survey of 118 banks worldwide found that digital bancassurance channels accounted for 19% of non-life bancassurance sales (up from 12% in 2015). Meanwhile, digital bancassurance channels account for just 2% of life insurance sales, while brick-and-mortar agencies and advisors continue to dominate (85% of sales in 2017).3This discrepancy may exist simply because, with rare exceptions, banks do not offer these products digitally. Banks are slow to go digital as complex insurance distribution processes can complicate the transition to digital channels. Finally, some banks may not see life insurance as a primary investment solution as regulatory treaties (such as MiFID II) and dilution of tax benefits increase in some markets.
While each bank charts its own path to creating a successful multichannel model, few have mastered the game and excelled digitally. Most banks are constantly evolving their digital strategies and revising the “core” of their digital offering. However, banks often deal with bancassurance products more tactically than strategically. As a result, banks tend to build these products into other offerings rather than making them a standalone part of their digital channel strategy.
In short, fewer customers are visiting banks' physical locations, and banks are slow to recoup lost branch sales by implementing an all-encompassing digital model for bancassurance. The lack of such a model becomes even more relevant when you consider that many banks are refocusing on selling credit products. The combination of fewer visits and a greater emphasis on credit products reduces opportunities to sell non-credit related products such as bancassurance. Therefore, it is crucial that banks find smart ways to sell bancassurance digitally.
Growth champions show the way forward
The data makes it clear that digitization is a core component of growth. Our assessment of digital evolution and bancassurance growth has identified a cadre of digital growth champions in Europe who are generating above average annual non-life digital sales (40% of total premium sales) as well as higher digital sales of other banking products (e.g. 30% of total personal loan sales).
From 2016 to 2017, when much of Europe was experiencing stagnant growth, new business revenue from these growth champions grew by 17%, significantly outpacing revenue growth from all other players. In 2017, digital sales accounted for two-thirds of champions' sales growth, while traditional producers showed a steady shift in the contribution of digital sales. Based in nine countries in southern, central and western Europe, these players prove that success can buck regional trends. However, this group comprises only 27 percent of the sample. The other 73% of European banks saw moderate growth or a complete decline in non-life sales between 2016 and 2017.
Winning with digital and analytics in bancassurance
To drive growth, bancassurance executives around the world need to follow the lead of these European growth champions and review their own business models, particularly with regard to distribution. They need to focus on three elements: driving personalization by making the most of unique banking data and analytics, harnessing the power of digitization to deliver superior customer service, andMaster the omnichannel game. Banks and insurance companies that neglect to take these steps will fall further behind, and fast.
Customization that takes full advantage of unique banking data and analytics
Bancassurers need to harness the power of the rich banking data and sophisticated analytics at their disposal to develop more relevant and timely offerings for clients. Combining information about event triggers (e.g., change of address or birth of a child) and interaction data (e.g., information requested or connected call center) with propensity models can improve results by 20 to 40 percent. Additionally, banks can leverage contextual information and downstream insights when offering relevant insurance products to their customers. For example, targeted web or mobile messages following loyalty card transactions, money transfers, and geo-tagging can provide a simple travel insurance or timely assistance product.
The data makes it clear that digitization is a core component of growth.
These offers are most effective when delivered through “tailored conversations” for these triggers and interactions. Customization will require adjustments to both the look and feel of the materials, which may include pre-filled suggestions with data the bank already has, e.g. B. in the case of home insurance, residential address and value.
Adjustments can also mean different prices. Based on a more accurate risk assessment, tiered pricing can make offers more competitive.4For example, banks around the world can use credit scores to create customized, optimized offers for customers. In our experience, streamlined quoting can increase customer conversion rates by up to 30%, giving banks an advantage in competitive product lines like auto insurance over other channels like brokers.
Digitally enabled superior customer experience
Bancassurers need simple, fully automated, end-to-end processes that reduce barriers to selling in digital channels as well as barriers for account managers. Besides, they needimprove customer experienceand conversion throughout the sales funnel.
These processes should use real-time, digitally supported quotes and contracts that eliminate over-reliance on paper and minimize manual underwriting. Populating applications with data from the bank, insurance company, or other source can improve simplicity. For example, processes should also encourage engagement and transparency, including behavioral cues that encourage customer action, such as B. Peer reviews.
For example, a Western European bank reduced the time it took to sell car insurance to just a few minutes. This was achieved by seamlessly integrating automatic data retrieval from internal and external databases into the bank's front-end system, minimizing the amount of information requested by customers. Time was further reduced by emphasizing effective sales pitches.
Another Eastern European bank streamlined the entire sales process, from customer retention to closing the deal, in a tablet-based solution that is purpose-built for the customer, resulting in a better customer experience and lower selling barriers. The customer's needs were at the heart of this guided product selection: the data needed along the sales funnel was minimized and the information required for the subscription was collected during the sales process. In addition, customers had the same experience across all channels as the same sales platform was used for physical and remote channels such as branches and call centers, as well as on the web.
Bancassurers need simple, fully automated, end-to-end processes that reduce barriers to selling through digital channels.
These processes should also include upselling and cross-selling opportunities, for example when creating an accident quote after purchasing car insurance. In addition, processes should facilitate the creation of product packages and modular offers and support the decision-making of self-directed customers.
Omnichannel customer retention
As the experiences of growth champions have shown, bancassurers can increase sales by using all channels in a coordinated manner.
The first step is to make insurance sales available across all channels (secure website, public website and mobile app), typically in a sequential rollout. Banks have traditionally started with the secure website, but Finalta data shows that the public website can generate up to 50% of leads. Additionally, as many banks continue to expand their remote advisory teams, call centers will continue to be a key consideration in strengthening omnichannel offerings, particularly for products marketed to affluent customers who expect more personal human interactions.
Today's customers are also increasingly expecting quotes to be seamlessly transmitted across all channels - for example creating an online quote and completing it in-store - but banks and insurers have been slow to respond in connecting their data. Saving and retrieving offers is essential for cross-channel interaction to avoid the frustration of repetitive data entry. Proactive customer engagement requires both physical and digital channels, from initial contact to generate interest to following up on incomplete requests.
To improve their value proposition, leading bancassurance companies in various markets are focused on enhancing their service experience beyond sales. Examples include a digital wallet, a single point of entry to all customer service support policies, and an integrated application for submitting and tracking claims at different stages of their journey.
Building an omnichannel system usually requiresform a common teamby employees from banks and insurance companies who are trained to bring all the functions involved together quickly.5This new team needs to work on an objective model that both the bank and the insurer use to support bold moves and ensure full transparency. Additionally, the team needs to be able to constantly prioritize and adjust initiatives based on ongoing feedback collected along the way from functions like analytics, campaign design, and management.
There are incredible growth opportunities for bancassurance, but the key to capitalizing on them lies in the digital and analytical capabilities that enable personalization, superior customer experience and an omnichannel offering. As pro-growth advocates have shown, the rewards of pursuing digital bancassurance are substantial, and around the world, the spoils will go to those ahead of their competitors.