Bancassurance – The Impact of Re-Bundling in Finance

October 25, 2018


The great unbundling of finance has been a big theme for a number of years as ~12,000 FinTech startups emerged to offer standalone solutions for every bank service. Superior UX/CX, standalone solutions, however, do not necessarily resonate with the needs of consumers. Unbundling touched a range of industries – television, insurance, education – but finance appears to be the industry that will make a full circle back to re-bundling – in a new form – despite a greater specialization than other industries.

The re-bundling in finance

Re-bundling in the form of integrations or partnerships is believed to have a multitude of benefits for businesses involved. A global survey of business executives conducted by The Economist Intelligence Unit three years ago asked business executives about the ROI or areas of improvement that their organizations have seen from their most significant digital partnerships. Here are some of the responses:

  • 26% said their businesses were able to develop new products/services

  • 26% – increased profitability

  • 26% – acquired new customers/products/services

  • 24% – enhanced their capabilities

  • 23% – improved customer satisfaction

  • 23% – entered a new market

  • 18% – adopted new technology

Modern – digital – partnerships represent a transition in the approach to innovation and growth. About 23% of business executives predicted that the best innovations in their industry are likely to originate from networks or partnerships of multiple players from multiple industries. The evolution of relationships in the world of finance from competition to collaboration, the concept of open banking, and the changing consumer behavior & demand expanded opportunities for parties across industries to form cross-vertical partnerships and gain the sharpest competitive advantage: knowledge.

The traditional alliances are always about the complementarity of assets: shipping firms pooling container ships to make a new route. Digital partnerships, however, are all about knowledge. This is because firms are so specialized, and knowledge is really difficult to get. – Henrich Greve, Professor of Entrepreneurship at INSEAD, Connecting Companies – Strategic Partnerships or the Digital Age

Telstra, Australia’s largest telecommunications company, and The Economist *explain in a collaborative paper called *Connecting Companies – Strategic Partnerships for the Digital Age: A high level of specialization, especially in the financial services industry, reached by the sheer scale and diversity of FinTech startups operating in hot markets around the world, made digital partnerships both possible and necessary.

We’re seeing the decline of large vertically integrated organizations and the emergence now of smaller, more interdependent units of production, which give rise to smart specialization by micro-multinationals in global markets and value chains. Being able to do one thing brilliantly and having the depth of capability required to do that better than anyone else starts differentiating you in the market. But it also means that you have more specialized organizations, which will require a lot more collaboration. – Roy Green, Special Advisor and Chair for UTS Innovation Council, University of Technology Sydney (UTS), Connecting Companies – Strategic Partnerships or the Digital Age

Banking + insurance

Banking + insurance is a particularly interesting tandem among other cross-industry tie-ups. While bancassurance has been around for some time, in 2018, there is an increasing interest from institutions on both sides to take action in exploring the advantages of cross-vertical partnerships.

Oracle estimates that bancassurance can account for more than 70% of the entire premium volume in some markets. In Brazil, for example, 15% to 30% of banks’ net income is estimated to be the result of their participation in the insurance business.

Bank-insurer collaboration has a number of important positive implications for all parties involved. In a paper called Insurance Company and Bank Partnership as a Distribution Channel of Insurance Products, authors Hanna Oliynyk and Amina Sabirova emphasize the potential for market share growth achieved by combining the efforts of partner companies to build a joint business, merging their customer bases, new financial products creation, expansion of the product range, and a lot more.

Integrated financial products are a critical competitive advantage of the banking and insurance associations. Geographic diversification (which not only allows to increase significantly its customer base in a lot of regions but also to avoid the accumulation of risks in the same area) and diversification of risks (as a result of vertical integration there is risk sharing between insurance and banking business) significantly reduces the probability of financial distress for companies as a result of problems in the banking and insurance sectors, the authors emphasize.

Moreover, bank-insurer tie-ups enable economies of scale by reducing costs in the following areas:

  • Joint advertising of financial intermediaries

  • The distribution of fixed costs between the insurer and the bank

  • Attracting highly skilled staff, experienced in both the banking and the insurance sectors

  • The use of new technologies and the introduction of automation of financial services

  • Any type of research and the creation of new competitive products


Source: The Bancassurance Model: Analysis of the Intesa – Generali case

A fully digital bank Revolut, for example, brings subscription-like model and insurance into banking by offering three-tiered pricing for various bundles. With varying monthly fee for three types of bundles, the company throws in an overseas medical insurance, and delayed flight and delayed baggage insurance into two of its bundles among the other more traditional services.

Deutsche Bank is another bank stepping into cross-industry bundling. In January 2018, Deutsche Bank announced that it will integrate Friendsurance’s digital products into its online banking portal to allow the bank’s clients to use the insurance manager function to manage and optimize insurance policies and take out new ones quickly and securely. Given that premiums for property and casualty insurance totaled €66 billion in Germany in 2016, with more than a quarter (27%) of these negotiated by insurance brokers, Deutsche Bank, and Friendsurance expect clients will increasingly turn to digital brokers for their insurance needs in the coming years.

A partnership that was announced in 2016 made Allianz the new insurance partner of HypoVereinsbank (UniCredit Bank AG) starting January 1, 2018, when the retail and corporate customers of HypoVereinsbank started benefiting from the broad range of products and services from Allianz. All customers’ needs are covered by Allianz products ranging from life, through the property, to health insurance solutions. Customers have access to advisers from HypoVereinsbank and Allianz for holistic and needs-oriented consultation.

In June 2018, ING and AXA announced an exclusive, long-term, multi-country bancassurance partnership to provide insurance products and related services through a central digital insurance platform. Under the partnership, ING will bring to bear its digital banking experience and AXA will bring its expertise in modular insurance products and services, offering property & casualty (P&C), health, and protection insurance solutions to ING customers in six markets: Germany, Australia, Italy, France, Czech Republic, and Austria. The ING and AXA teams will together develop personalized insurance products and relevant services, accessible via the ING mobile application.

At the same time, in June 2018, Citibanamex, a subsidiary of Citigroup, and Chubb Seguros México, an affiliate of Chubb, announced a long-term agreement whereby Chubb will offer a broad range of non-life insurance products to Citibanamex’s consumer bank clients in Mexico. Under the terms of the agreement, Citibanamex will distribute Chubb non-life insurance products through Citibanamex branches and a variety of digital and direct marketing channels.

Citibanamex and Chubb have also entered into a separate agreement covering surety, whereby Chubb will market surety products to Citibanamex commercial customers.

In 2015, DBS and Manulife have entered into a 15-year regional distribution agreement (for which Manulife paid $1.2 billion to DBS) covering four mutually significant markets: Singapore, Hong Kong, China, and Indonesia. In the four markets, DBS’ large and growing six million retail, wealth, and SME customer base gained access to Manulife’s suite of life & health insurance solutions through the bank’s network of over 200 branches and its sales force of over 2,000 professionals, as well as via its internet and mobile banking platforms.

The number of partnerships and integrations will grow as business banking steps far beyond lending marketplaces, and personal banking turns into much more than a checking and savings accounts in the digital-everything age.

A closer look (case study)

The impact of the Bancassurance model has been studied by professionals for decades with evidence to demonstrate a variety of implications depending on the areas of focus. One of the papers (based on a case study) on the impact of bancassurance on the performance of the parties involved was written by N.M.Leepsa and Ranjit Singh, called Contribution of Bancassurance on the Performance of Bank: A Case Study of Acquisition of Shares in Max New York Life Insurance by Axis Bank.

The study compared various parameters of the bank’s performance before and after the deal to demonstrate the impact of bancassurance.




Source: Contribution of Bancassurance on the Performance of Bank: A Case Study of Acquisition of Shares in Max New York Life Insurance by Axis Bank, by N. M. Leepsa and Ranjit Singh

There is a lot to study in those performance metrics before and after, but a few numbers on asset quality and management performance at Axis Bank are particularly interesting. The three-year average ROA difference after the deal went up, along with profit and business per employee.


Source: Contribution of Bancassurance on the Performance of Bank: A Case Study of Acquisition of Shares in Max New York Life Insurance by Axis Bank, by N. M. Leepsa and Ranjit Singh

The long-term and short-term performance indicators vary in results. The profit per employee increased in the first, the second as well as the third year after the deal by Axis bank, which – as the author concludes – indicates that the bank has been able to get its earnings by managing people in the environment of different work culture of bank and insurance companies. The business per employee had also enhanced over an average period of three and two years after the deal, indicating that the partners are working with common business vision and moving towards growing business through achieving future objectives.

The authors also found that the fee-based income as the percentage of total income had reduced.

The findings of the Axis case study somewhat correspond with another study on the effect of bancassurance on bank productivity by Paniz Haji Karimian, Economics Department, Tehran University, Iran.

The study found that there is a positive significant relationship between bank-issued insurance and the profitability of the bank and an increase by the unit in the amount of bank-issued insurance results to a 14.36 (coefficient) increase in profitability.

Moreover, there is also a positive significant relationship between bank-issued insurance and productivity that shows that an increase by the unit in the amount of bank-issued insurance results in an increase of 6.42 in productivity.

Another study on the impact of the bancassurance model was based on what happened between Intesa Sanpaolo and Assicurazioni Generali as described by Andrea Di Dio, The Libera Università Internazionale degli Studi Sociali Guido Carli, also known as LUISS, Italy. As a result of an empirical analysis, the author claims that under certain circumstances the model can be profitable. Moreover, the author claims that the merging banks and insurers do not significantly affect neither total nor systematic risk.

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