The evolution of bancassurance has been considered as one of the most remarkable changes in the financial service sector over the last few decades. In fact, the distribution of insurance services through banks is gradually becoming common in many parts of the world. This article aims to explain how InsurTech can be a big game changer in bancassurance as an emerging distribution channel in Bangladesh. It is evident that it provides clear benefits for insurers, banks and customers and the economy at large and is expected to continue to grow. Prominent in Europe and some parts of Asia, bancassurance is defined as a relationship between banks and insurers, where banks receive a commission for opening an avenue for selling insurance policies while insurers gain access to a massive network of clients through banking channels.
Bangladesh is the newest member in the world of bancassurance. Although the decision to introduce a bancassurance system in this country is new, it has been practiced or appeared many years ago in the developed countries in the world. It was introduced in the 1860s. The first insurance products were sold through banks in the 1860s, when Belgium’s CGER savings bank began selling mortgage-linked insurance. Later, formal bancassurance systems were first introduced in France in the 1970s.
The largest bancassurance market in the world is Western European countries, especially France, Spain, Italy, the UK and Germany. The bancassurance market is increasing day by day in the developed and developing countries since it is an effective medium for insurance companies to sell insurance, especially life insurance products. Recently, it is gaining popularity and growing rapidly in the Asia-Pacific region. The socio-economic structures of these countries are almost the same as Bangladesh. So, it will be viable for the economy of Bangladesh if we use this business idea as the catalyst for the same.
Today, Bangladesh has one of the highest population densities, and is also the 7th most populous country in the world. This huge number of population needs health and life insurance. In one sense, it can be called one of the basic needs for them. Some research information is important in this regard. Research and consulting firm IMARC Group commented that the global bancassurance market reached 1,428 billion in 2023. IMARC also projects that it will grow at an annual rate of about six percent to reach $ 2,255 billion by 2032. They believe that the growing aging population will soon require more health and life insurance as well as more retirement plans in all countries, which will surely expand the bancassurance market.
Bancassurance can be generally defined as the joint effort of banks and insurers to provide insurance products and services to the bank’s customer base. Bancassurance system will be improved through the incorporation of new information technology and adaptation to new banking models! Certainly, the challenges of the current digital age will put significant pressure on traditional bancassurance. When new marketing platforms such as InsurTech will come into force, it will be difficult for some banks as well as insurers to provide competitive pricing, coverage and unique service directly with the help of humans. To adapt to the new digital reality, banks and insurers need to transform their branch model and service model respectively into a “physital” one – a combination of online and offline customer experiences.
Bancassurance, as an important part of this new experience, is essential to research into what can be more innovative new insurance products and relevant offers based on customer needs and preferences. In Bangladesh, following three key catalysts will transform the ‘analog’ infant bancassurance to become more digitally mature:
1. For a number of reasons, it has become important for banks to increase their income source as soon as possible.
2. Customers, now, prefer to have all the information at their fingertips and they also expect to have their assurance through hassle-free financial transactions to save their valuable time.
3. Banks need to take maximum benefits from their nationwide vast customer database.
Digital Bancassurance for example, a banking mobile application will have various information about the insurance products of an insurance company through a dashboard so that the customer can easily avail insurance services.
In nutshell, bancassurance is beneficial for all banks, insurance companies and customers. About 45 per cent of life insurance policyholders in Bangladesh don’t pay premiums after the first year owing to a number of factors as per data disclosed by IDRA. A digital bancassurance system will help banks to attract new customers, it will also drastically reduce the insurance policy discontinuation problem and create a new revenue stream for banks.
The big challenge in this case will be to integrate the old technology of providing customer service including policy issues of an insurer with a bank’s digital platform; which will be a time-consuming process. InsurTech will help to overcome this problem.
On the other hand, a digital bancassurance distribution system will help insurers to sell their insurance products to more customers. This will lead to innovation of customer friendly new insurance products that will lead to better insurance risk selection, mitigation and prevention.
Additionally, technology-driven bancassurance solutions will provide customers an experience of advanced digital technologies; it will simplify the purchase process and provide the necessary protection.
Customers can purchase the right coverage at the right time at the click of a button and they believe that they will get insurance claims easily in the same easy way for what they buy the insurance policy.In the context of Bangladesh, the second one is the biggest obstacle of benefiting banks, insurance companies and customers as well as the overall economy from the bancassurance system.
Therefore, if the policy is not made considering the concerned bank as a ‘guarantor’ in getting insurance claims, the desired results from the bancassurance system will never be achieved.
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