How can banks and insurers effectively partner in the digital era?

Bancassurance, the selling of banking and insurance products through the same channel, traditionally the bank branch network services, saw banks acting as a major distribution channel for insurers, and insurance sales a significant source of profits for banks.  Nowadays banks have reduced their branch networks both as a cost cutting exercise and because many customers no longer wanted to physically visit the bank to carry out their banking. The age of digital has arrived and with it a need for banks and insurers, who are often operating on legacy technology systems, to rethink their partnership approach to the customer and embrace the opportunities presented by the digital environment.

As customers’ financial needs become ever more complex the bancassurance model has a distinct advantage in that it has a wealth of insights derived from customer interaction.  However, this advantage can only be realised if the bank and insurer partnership is able to tap into that combined knowledge base and use it to deliver a modern day, integrated customer experience.

The challenge faced by the bancassurance model and particularly banks and insurers who are limited by legacy technology systems, is changing customer preferences and expectations in a digital world.  Today’s customers demand simplicity, flexibility and ease of use, a brief that many banks and insurers have struggled to fulfil. Innovation is required to sell insurance in a more integrated way which can give the customer the service they expect from instant cover to highly personalised policies and anything in between.

Banks and insurers will need to build more effective partnerships in order to compete in the digital era.  The ability to cross sell and grow their relationship with the customer by offering tailored products and services based on a deep customer understanding can be further informed by shared customer analytics and advanced customer profiling.  Banks and insurers must collaborate to create integrated, open standard digital platforms that enable seamless customer referrals and smoother data collection and analysis. The application and buying process needs to be swift and simple, with data used in the most effective way possible to prepopulate forms, simplify and speed up the customer journey.  Customers do not expect to be required to provide the same personal information more than once to complete an insurance transaction. An integrated open standard digital platform will also help in validating information and using data enrichment sources to check claims history in order to assess and accurately price the risk in real time.

In considering the digital environment it is also important to recognise open banking which it is predicted will bring about a fundamental change in how consumers manage their money.  Some insurtechs are already building APIs that allow easy integration into an open banking proposition for insurers. Open banking requires banks, under law, to open up their customers’ data to third parties and let those third parties execute transactions on the customer’s behalf.  As well as having the customer’s specific consent, any business that wants to access bank data must be authorised by the Financial Conduct Authority as an account information service provider.

The market is undoubtedly changing and at a rapid rate.  In order to remain relevant the bancassurance model must embrace a seamless omnichannel customer process and establish a holistic and broad-based customer data set to allow joint customer analytics and advanced profiling by the bank and the insurer to achieve customised and personal offerings.

***Article for CRIF, October 2019