Digital Bancassurance Business Models

Abstract

Bancassurance was introduced as an additional channel for distributing insurance products through existing branch networks of banks. The idea was to ensure additional revenue generation for banks without the need to infuse capital in an era when margins were under pressure and credit off take was subdued. Insurance firms thus had the opportunity to increase the market penetration. However, digital interventions in banking system and the onset of bancassurance were almost concomitant. This presented a unique challenge. In the quest for achieving self sufficiency in digital banking, banks slowly started losing face to face connect with customers. This resulted in a slump in the growth of bancassurance. This paper has traced the benefits of bancassurance for banks as well as insurance firms as well as the challenges faced by bancassurance as a distribution channel. Additionally, targeting millennial customers to buy insurance products is essential for growing bancassurance though this strategy is beset with its own challenges like intrusion into customers’ private information. The behavioral characteristics of millennials need to be clearly understood while targeting them as prospective customers of insurance products. Insurance policies protect against future risk – the occurrence of which may be uncertain. The nature of insurance selling is markedly different from the selling of other bank products. These differences need to be understood to make bancassurance more effective. Bancassurance must be part of a bank’s core financial plan for its customers. The paper concludes by emphasizing the need for a customer-centric approach and identifying the strategies needed for giving a fillip to the bancassurance business model through innovations and strengthening of the digital infrastructure architecture. The recommendation is that rather than solely relying only on digital, bancassurance will benefit from the seamless integration of various channels (digital and physical) to reach out to customers.