New LIMRA Study Identifies Best Practices in Bancassurance

WINDSOR, Connecticut, Jan. 8 -- LIMRA issued the following news release:

LIMRA recently released results from a new multi-regional survey of 124 life insurers to identify the best practices of successful bancassurance lines of business.

Bancassurance is the practice of selling insurance products through banks. Usually a bank (or banks) and an insurance company establish a relationship in which the bank sells products manufactured by one or more insurers.

"Bancassurance is a very effective way to reach lower- and middle-income consumers, who may not have a relationship with an insurance agent," said Larry Hartshorn, corporate vice president, LIMRA International Research. "We conducted this study to get a better understanding of the factors that lead to a successful bancassurance practice and whether there are consistent trends across the world."

The study found that 74 percent of life insurers with a bancassurance program in Europe/Africa, Asia, and Latin America describe their program as successful. The most likely measure of success was revenue growth. For example, 77 percent of insurers in Europe and Africa with successful bancassurance programs cite revenue growth. LIMRA analysis of these results found three consistent themes for successful programs: the type of relationship with the bank, specific products designed for bank clients and robust training program.

Relationship matters

There are three primary relationship types between banks and insurers: joint venture (the bank and insurer establish a jointly owned insurance company or distributor), strategic alliance (the bank sells their own banking products, and sells the individual insurance products of only one insurer) and pure distributor (the bank acts as an intermediary offering products of more than one insurance company). LIMRA found the more mature bancassurance markets in Europe/Africa and Asia favored joint venture relationship; while life insurers in the dynamic bancassurance market in Latin America were most likely to rely on a pure distribution relationship with a bank. This model allows the banks to offer new product lines to their customer bases without significant upfront investments, and it works well in environments where customers value advisor independence.

"Consistent with prior studies, we found that insurers that have strategic and joint venture relationships with banks are more likely to be successful," noted Hartshorn. "These relationships allow banks and insurers to leverage each other's strengths and minimize the upfront investment needed to establish a program."

Training is a priority

The study finds that there is a strong correlation between successful bancassurance practices and sales people trained to sell insurance products in banks. More successful bancassurance programs rely on insurance professionals to train bank staff on product design and sales tactics. In Europe/Africa as well as in Asia, eight in 10 insurers leverage their internal staff to provide training to bank personnel. In Latin America, seven in 10 insurers rely on insurance professionals to train bank personnel.

Simple Products Are More Successful

In Europe/Africa and Asia, products that focus on a simple needs-based story are more successful than complex products that require more advanced sales skills. The top five products sold by successful European/African bancassurers focus on four types of protection: health, life, accident, and property. The top five insurance products sold in Asia through banks include life, health and retirement products.

In comparison, the Latin American market is quite different. Accident, home and auto insurance products are more popular than health and life products (chart).

"It is important to note that overall life insurance penetration is considerably lower in Latin America than in other regions of the world," Hartshorn said. "Recent growth of the middle market in Latin America has expanded opportunities for life insurers. LIMRA expects this will also occur in the bancassurance market."

Methodology: LIMRA surveyed 124 insurance companies in 31 markets during the fourth quarter of 2016 and in September 2017. LIMRA members can learn more about the results by visiting: Bancassurance 2017.