Finacle Whiteboard

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.