November 25, 2022

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After decades of success, the bancassurance model is coming under pressure

As explained by Florian Giraud, Chief of Staff at European home insurtech Luko , “For years, traditional banks have been facing a low interest rate environment on credit, a strong disintermediation trend on payment, and increasing challenges from fintech players on everyday banking services. This sparked interest in insurance products, which banks could cross-sell to their networks when offline distribution mattered - at the expense of insurance agents and brokers - to increase margins and retention.”

However, the competitive landscape for insurance and bancassurance is now changing, in large part due to technological disruption and shifting customer behaviors. The market share of bancassurance is in decline in some countries due to shrinking branch networks making it more difficult to cross-sell insurance products to banking clients, and the arrival of insurtechs and digital players in the insurance industry. 

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Should bancassurance operators rely on their strengths or focus on innovation?

For the less mature bancassurance operators, it can be tempting to boost multi-equipment rates, as there is room to grow the market share in non-life personal and commercial lines, and B2B2C partnership opportunities are multiplying. 

For more mature players, leveraging innovation to embrace digital distribution channels and advanced data analytics may be a more appropriate path to making informed decisions across alll operational areas – from marketing through to underwriting, pricing, and claims management. 

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Pricing sophistication can enable bancassurance operators to address head-on market changes and competition

Advanced analytics can help bancassurance players to make better use of the data synergies within their model, enter new markets and segments, and gain agility and accuracy to compete against insurtechs. 

According to Gabriel Fauchet, Senior P&C Pricing Consultant at Milliman, the leading actuarial consulting firm, “There are many challenges having a steep impact on P&C tariffs, including but not limited to the increase in climate costs, the rising of inflation or the arrival of new players. Pricing sophistication is part of the solution: the right price for each risk, thanks in particular to innovative algorithms, new data sources and leaner IT infrastructure. Reactivity is also key but often hindered by a lack of automation in the pricing process. Akur8 removes some of the burden by offering automated modeling backed by cloud computing scalability, while improving the transparency of models built and allowing more time for the actuary to bring more value to the pricing process”. 

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