Finacle Blog

Bancassurance business has slowly and steadily gained acceptance worldwide. In pursuit of fee-based income avenues, banks across geographies have joined the Bancassurance bandwagon implementing various business models like setting up joint ventures, working as pure distributors, setting up new insurance businesses and acquiring existing insurance firms. In certain cases, a reverse flow has also been witnessed whereby insurance companies have set up or acquired banking businesses to compete with the serious Bancassurance players.

The pure distribution model, wherein a bank ties up with insurers to distribute insurance products to their customers, has been particularly popular due to low capital requirements, lesser time to market, simpler regulatory requirements and ability to generate considerable income streams without getting involved in core insurance processes like underwriting, risk management, claims and benefits processing, among others.

However, banks still have a long way to go to efficiently leverage the Bancassurance opportunity. In most cases, the current set of applications deployed either miss out on the essential features to manage Bancassurance operations or have serious issues on integration front especially with policy management systems and rest of the banking applications like CRM ,core banking, financial planning, Internet banking, among others. In certain cases, banks have taken extreme approaches by depending completely on insurers systems to manage operations without having any integration with their internal systems. You should also not be surprised if you come across bankers working on spreadsheet based systems to manage significant portions of the Bancassurance operations.

These half hearted operational set ups do not allow banks to leverage the advantage they had over other traditional insurance distributors in terms of customer trust and access to their financial status. Add to that factors like low automation, information residing in silos in various systems and reconciliation issues due to increased volumes have resulted into low productivity of staff, eventually leading to higher cost of operations. The situation becomes grimmer when we consider the loss to business due to poor customer service just because of the lack of desired system support.

In the face of these and other such operational, business and environmental drivers many banks are reassessing their Bancassurance strategy and streamlining the supporting IT infrastructure.

Banks have an advantage over traditional insurance distributors in terms of having greater trust of customer, knowing customer’s financial situation and managing customer’s other assets. Banks can leverage this proposition to position themselves as true financial planning advisors rather than behaving like regular insurance distributors. Enabling relationship managers to create and leverage this positioning require the support of an IT infrastructure with a single customer definition across banks applications, 360 degree view of customer holdings across products and securities including insurance and also tools to access the customer requirements that help in guiding them to select suitable products. These investments in technology are bound to yield far reaching benefits to banks in terms of higher productivity, better customer service, lower policy lapse rate, thus increasing overall profitability from Bancassurance business.

Posted by Puneet Chhahira at 11:29 AM | Permalink | Comments (3) | TrackBacks (0)

No-frills accounts, the beginning was modest. Encourage small savings and enable customers to perform basic cash transactions without imposing conditions of minimum balance maintenance. But banks soon realized that by maintaining such a narrow focus and seeking to enable only the most basic transactions such as account or deposit creation among the unbanked community they are losing out on perhaps a very lucrative market. While estimates differ, most put down India’s bank account penetration somewhere between 40 and 50 per cent.

The Indian government has reconfirmed its commitment to financial inclusion, saying that banks and post offices would be re-equipped to expand outreach, supplementing the efforts of business correspondents and technology providers and KYC norms and technology solutions have been scaled-down.

And progressive banks are rising to meet the challenge. They have decided to use the services of community service organisations and NGOs that were already active in far flung areas, to promote their offerings. Technologically, the smart card is emerging as a viable option to store data offline and double as an identification document. Biometric authentication too finds acceptance as it circumvents the illiteracy problem by enabling customers to identify themselves through a fingerprint rather than a signature or Personal Identification Number (PIN).

The end aim of financial inclusion is to heed to the specific needs of the audience, such as easy accessibility, simplicity, flexibility in terms of use and identity management. And with a market as profitable as this one, it is only natural that other banks, who till now were observers to the game, too jump into the fray. 

Posted by Kiran KSR at 9:08 AM | Permalink | Comments (1) | TrackBacks (0)