A banking hall: Banks are eyeing the insurance sector where they want to sell products. Photo/FILE
Perhaps you have got a call from a banker asking you to consider taking up an insurance cover on offer by your bank even as you are aware that it only provides banking services.
While transacting, you have seen posters hanging on the walls advertising insurance products on offer by the bank.
Most commercial banks are already selling insurance products to customers willing to buy insurance products besides their banking products.
Some potential customers do get confused when they are approached by their bankers to buy insurance products within the banking hall.
Do they offer insurance products or are mere agents, some people ask.
With the evolving rate of financial needs of customers, many commercial banks have become a one-stop shop where both potential and existing customers can access and purchase related financial services, including insurance products on offer while undertaking their routine banking transactions.
Relative to banking services which has recorded high absorption rate, the penetration of other financial services, especially insurance has been dismal.
Subsequently, insurance companies in arrangement with commercial banks have rolled out a revolutionary concept: bancassurance.
Through this approach, banks form strategic alliances with insurance companies as distribution channels to cross-sell insurance products to their customers.
Through bancassurance concept, insurance companies have gotten the opportunity to leverage on the wide branch network and strong customer base of commercial banks, majority of whom are conversant with having financial plans to enhance the penetration of insurance coverage.
Conversely, to exploit their strong customer base, banks have created counters within their halls where they cross-sell insurance products besides other banking products to their customers who are devoid of such essential plans or are willing to set up their own insurance plans.
Occasionally, the bank would explore their customer database for potential prospects and approach them to buy insurance.
Alternatively, while undertaking their routine banking transactions, a potential customer would be contacted by the bank staff and taken through the benefits of insurance cover as part of personal financial plan.
Under this arrangement, whilst many customers have been able to purchase insurance covers, many still ponder whether it is preferable to buy insurance covers from the bank under the bancassurance concept than from an insurance broker or an independent agent.
The question: Is bancassurance the right channel for one to purchase a cover?
Bancassurance has a number of benefits that a customer can enjoy while purchasing an insurance cover over dealing with an insurance agent or broker.
First, banks usually have well trained staff that offer comprehensive financial advisory services under one roof, including insurance.
Buying a cover through the bank, the potential customer can be guided on an appropriate cover and size that will meet one’s financial situation.
For instance, a customer with huge outstanding debt or debt obligation perhaps a mortgage plan would be advised to take up a considerable cover to safeguard his estate from any risk.
The calculation of the size of the cover to purchase for protection against such risks would be quite easier as the bank would have all the necessary information on the outstanding debt, the remaining repayment period to decide on the appropriate premiums to sustain the cover.
Next, since life insurance products are long-term, customers would be willing to purchase insurance covers from channels where thy have complete confidence in terms of customer care such as follow ups of claims and other related issues.
In this, banks have a better image and are more trusted than insurance companies.
Again, bank advisers are quite familiar with financial matters and based on their personal relationship with existing clients they can use their knowledge of their customers’ finances to target their advice towards specific needs.
To the benefit of the potential customer, cases of misrepresentation where the sales agent or broker sells inapt insurance product either unconsciously or fraudulently are limited as the needs analysis would precede any sale of cover.
In addition, since the rate of employee turnover among brokers or sales agents in most insurance companies is high, it could be difficult for a customer to establish and maintain a strong relationship with a specific sales agent or broker for future customer care services.
Each time the customer would contact his former sales agent to make a follow up on issues related to the product signed, he or she would be met with a feedback that the agent left.
In such scenarios, the deserving customer would be assigned a new sales agent to contact for customer care services.
Conversely, in cases where the former sales agent has joined a rival insurer, the customer would be exposed to risk of churning where the agent influences the customer to cancel the existing policy.
Third, many prospects have been duped into taking up certain insurance covers in the pretext that they would use the same to secure loan facilities from commercial banks to augment their financial needs.
But, many have ended up buying inept covers which are later rejected or not recognised by banks as collateral.
However through bancassurance, any prospect seeking to purchase a cover to use as collateral will immediately ascertain the type of insurance covers that their bank recognises for use to secure a loan facility.
Since such bancassurance alliances are formed to cater for the mutual interest of the respective bank and the insurance company, tailored insurance products designed to suit potential borrowers with no collateral will automatically not miss in the product baskets on offer to customers.
Branch network
Fourth, customers who are undergoing some financial distress and cannot afford to pay premiums for their covers can easily ride on the strategic alliance of bancassurance to access premium financing from their banks to sustain the covers.
Customers with issues relating to claim settlement on covers purchased from the bank will be able to have their matters solved modestly since most banks are cautious about their image.
With the wide branch network of banks, any potential customer can easily access insurance products for sale as well as make their claims from any branch of the bank within their proximity.
There are many local commercial banks selling insurance products under the auspices of bancassurance concept.
