Many-to-many works no more

Jump on board China’s bancassurance opportunity bandwagon

Insurers and banks in China must break away from the current industry structure and collaborate more closely if they hope to lift the country’s bancassurance industry to a higher level of performance and achieve both profitable and sustainable growth in the future. This is according to a white paper Bancassurance in China: Reaching the Next Level, which was released by Swiss Re and the Boston Consulting Group (BCG) through a conference with insurers and bankers in mid January in Beijing. 

At the conference in Beijing, experts from Swiss Re and BCG exchanged views with around 60 participants from insurance companies and banks in and out of China and also discussed best practices in bancassurance in other markets.

China’s bancassurance market appears to be locked in a paradox.

On one hand, it has been growing at breathtaking speed with the banks --  already the dominant sales channel for life insurance in China -  propelling the country’s rapid growth in premium volume. On the other hand, the breadth and sophistication of currently available products, as well the overall quality of customer service, still lag behind bancassurance activities in many other countries.As a result, Swiss Re expects a period of heavy investment in product development, marketing, customer service, and platform synergy. By doing so, the insurers and banks leading this push are hoping to build significant competitive advantage in the market. The prerequisite for success, however, will be the forming of exclusive partnerships so that investments in capital and know-how can be protected and generate positive results.

Eric Schuh, Director of Business Development for Swiss Re in China and a key contributor to the report, believes, ”There are a lot of white spaces in the current product and service offering in China compared to more advanced bancassurance markets. This is a sign of the significant upward potential.”

Several factors have contributed to the present situation.  First, banks obviously have considerable marketing power in the financial services arena. They are also permitted to sell multiple brands of insurance - although until recently they were not allowed to own insurers outright. The resulting model is one in which banks often sell relatively unsophisticated savings-type products - offerings that carry a variety of brand names - in an untargeted way. The paper calls this structure ”many-to-many”.

There is also a growing recognition that the present market structure is not sustainable. Chinese regulators are already working on bancassurance reform in order to promote better integration of banks and insurers.

These new partnerships can take four basic forms: exclusive distribution partnerships; joint ventures; financial holding companies; and integrated lines of business.

Sharp execution of these partnerships is critical. In particular, partners will need to focus on initiatives that form the 10 building blocks of a successful bancassurance model:

  • develop products jointly
  • streamline the product offering
  • adopt a generalist sales model
  • create meaningful sales targets and incentives
  • bundle products for life events
  • train rigorously
  • upgrade IT systems
  • define organizational roles
  • bolster customer service and post-sale support
  • ensure capital and risk management

Companies that both make the right strategic choices and that excel in swift implementation of a more advanced and customer centric bancassurance model will find themselves wielding considerable power in China’s opportunity-rich financial services market.

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