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Mohammed Ali Ahmed General Manager, EFU Life Assurance Ltd Karachi Insurance Institute – 23 February 2011. Bancassurance in Pakistan Prospects for life insurance. Introduction Worldwide experience Evolution and current scenario in Pakistan Products Sales models Technology

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Presentation Transcript
slide1
Mohammed Ali Ahmed

General Manager, EFU Life Assurance Ltd

Karachi Insurance Institute – 23 February 2011

Bancassurance in PakistanProspects for life insurance

slide2

Introduction

Worldwide experience

Evolution and current scenario in Pakistan

Products

Sales models

Technology

Challenges

SECP’s role

The next 3 years

Definitions of bancassurance

slide3

Collaboration between Bank and Insurer to distribute insurer’s products

    • Insurer – provider of products and services – insurance risk taker
    • Bank – distributor
  • Level of collaboration can vary from “basic” level to high level “integration”

Introduction

slide4

Benefits to all parties

Banks

Insurance Companies

Customers

  • Fee based income
  • Low capital – high ROE
  • Improved customer
  • service – Culture shift
  • Market opportunity
  • Customer expectation
  • Success in markets
  • around the world
  • New distribution channel
  • A ‘warm’ customer base
  • Better persistency
  • Higher premiums
  • Profitable Growth
  • Competitive products
  • Success in markets
  • around the world
  • Changing attitudes & awareness
  • Want options
  • One stop financial service
  • Trust banks
slide5

Depth of relationship

Distribution Agreement

“Playing the field”

This can be likened to the early days of youth when it is normal to have a number of different relationships.

Loyalty is pretty low and long term commitment rarely a consideration.

Temptation to switch partners for a “prettier” one

Strategic Alliance

“Going steady”

Having played the field for a while, it is likely that one partner will demonstrate the best ‘fit” in terms of commitment, attention, behaviour and attitude.

The relationship develops to a point where each understands the other a little better and both start to consider the others’ needs and aspirations.

Loyalty sets in and plans for the longer term begin.

Joint Venture

“Moving in”

Once “courting” has been going on for a while, it is natural to settle down with one partner and start enjoying an even closer relationship.

Both partners get to know each other intimately and a relationship of mutual trust and respect develops. Any problems or difficulties are resolved jointly and amicably.

100% Fully Owned

Financial Services Group

“Go alone”

Marriage brings about a whole raft of new responsibilities and a relationship that should be built on a secure foundation.

Both partners look for ways to get more out of each other and to contribute to a long and prosperous relationship.

slide6

“One to One” – Exclusive model

“One to Many”

“Many to Many” – Open architecture model

Depth of relationship

slide7

International experience

Bancassurance has been well established in Europe, Far East, and growing in India and Middle East.

Sales via Bank Channels

slide8

International experience

Bancassurance share in European life insurance market

slide9

International experience

Bancassurance share in emerging markets, 2005

slide10

International experience

Bancassurance target markets, 2007

slide11

1996

1999

2000

2003

Credit Life

Mail Inserts

Bancassurance Agreements

Depositor’s Insurance

Evolution in Pakistan

2011

16 Banks active

Evolution has seen product offering move from “Simple” to “Sophisticated” products over the last 15 years

Major thrust has been from 2007 onwards with business volumes increasing exponentially

slide13

Life Bancassurance in Pakistan

New Business - 2010

Bancassurance

Total Industry

Bancassurance

Sales agents

Private sector only

Sales agents

slide14

Active life companies

EFU Life

NJI Life

ALICO

State Life is exploring to enter

slide15

Target Market

  • Target Market for Bancassurance
    • Existing Bank customers
    • Potential Bank customers
  • Target market is spread across all lines of bank business
  • Key to success in bancassurance is to identify the opportunities available in the bank customer base and offer the right financial planning solution
slide16

Customer segmentation

  • Possible approaches
    • “Slicing” of Bank Database
    • Targeting Customer Life Stage
    • Event Trigger Approach
  • Which one is correct ? – depends on the bank, its target market and strategy to banking and bancassurance
  • All or a combination of the above can be used
slide17

“Slicing” of bank database

“Preferred Banking” or “General Banking”

 Segmentation by worth to bank

Professionals

Self-employed

Government Employees

Businessmen

Students

Segmentation by occupation / role in society 

slide18

Targeting customer life stage

  • Student
  • Young, Single
  • Young, married with family
  • Wealth Accumulation stage
  • Wealth Management stage
  • Retirement
slide19

Event trigger approach

  • Birth
  • Admission to University
  • Wedding
  • New Job
  • Purchase of House
  • Career Change
  • Business Set-up
  • Loss of Property
  • Retirement
  • Grandchildren
  • Death
slide21

Life Products

Simple

Sophisticated

Bundled with bank products

- deposits

- credit cards

- mortgages

- personal loans

Active selling:

- Personal accident

- Term life

Advice products:

- Savings, Investments

- High risk cover

slide23

Technology

  • Key initiatives which can assist in distribution:
    • Point of Sale (POS) system
    • Website
    • Mobile phone
slide25

Sales models – Branch distribution

Referral model:

Bank only generates leads and passes to insurer

Trained insurance company’s consultants convert lead to sales

Bank’s role is limited with little or no involvement in sales matters

Direct Sales model:

Bank generates leads and converts to sales

Bank has robust sales management setup with it’s own sales team

Sales numbers are driven to quite an extent by bank

slide26

Referral model

Sales management

Product management

Bancassurance management

Marketing

Operations

Involvement from bank’s side

High

Medium

Low

slide27

Direct Sales model

Sales management

Product management

Bancassurance management

Marketing

Operations

Involvement from bank’s side

High

Medium

Low

slide28

Alignment of vision

Management structure in banks

Banks’ expectations

Product value

Persistency

System /Operations constraints

Change of personnel

Conflict with other sales channels

Challenges

slide29

“Short term” vs “Long term” vision

Executive level commitment

Financial sustainability of model

Acceptance of “insurance” as a product – cultural shift

Alignment of vision

slide30

Bancassurance management structure

Ownership and accountability for the business model

HOCB

Dedicated Bancassurance Management Team

Product management

Operations

Branches

Sales team

slide31

Financial

  • Focus mainly on first year remuneration margins
  • Bargaining tool
    • TAT and client servicing aspects
    • Strong ownership of client

Banks’ expectations

slide32

Cost saving to be reflected in better product value

    • Banks willing to reduce policyholder value in return for higher commission???

Product value

slide33

Limited focus of banks on persistency

Persistency is key for life insurance company

Insurer has to make significant efforts to make the bank realize the importance of this KPI

Good persistency can result in repeat sales and flow of renewal income

Persistency

slide34

Direct debit systems do not always work efficiently

Weaknesses in operations setup

No or limited MIS setup – reliance on insurer

Systems / Operations constraints

slide35

Conflicts with insurers’ other distribution channels

Sales agency channel

Banks approach an existing client of sales agency

Sales agents approach an existing client of bank

Insurer has to maintain delicate balance

Give preference to customer choice of channel

Conflicts with other sales channels

slide36

Business model usually driven by personnel rather than institution – not the ideal setup

Only some banks have a strategic executive level focus on bancassurance

Change of bancassurance team in bank can lead to disruptions in business

New team may have different strategy and vision

Also may have preference for another insurer!

Insurer has to build relationships once again

Change of personnel

slide37

SECP has played a very positive role in promoting bancassurance

Pakistan is one of very few countries to have guidelines from regulator

Guidelines will bring discipline in the market

All important areas are now streamlined and under regulatory supervision

Role of SECP

slide38

Channel will continue to grow and gain prominence

For private sector will contribute major part of new business

State Life will also make an entry

Technology will be key – Point of Sale systems will be common

New business expected to double from Rs. 2.8 billion in 2010 to Rs. 5.6 billion in 2013 from private sector companies

Next 3 years