Given banks’ privileged insight into the lives of their customers, are they leveraging bancassurance fast enough? Ingo Weber, Co-founder and CEO of Digital Insurance Group thinks not.
Years of record low interest rates and intensifying competition from the growing army of upstart challengers have forced many incumbent banks to look for other ways to bring in the cash. And one such road to revenue is to offer insurance.
Bancassurance, as it’s known, is already generating big business for those banks that have stolen a march in recent years. Leading the estimated $1.2billion bancassurance market are those in France, Germany, the UK, Spain and Italy. In some smaller European markets, such as Portugal, up to 85 per cent of all insurance premiums are through bancassurance channels. But McKinsey reports that ‘incredible opportunities’ still exist for growth, with one important caveat: more digitisation is needed.
In a review of the bancassurance market, McKinsey argues that digital tools are key to increasing market share. It recommends banks focus on:
- Boosting personalisation by making the most of unique banking data and analytics
- Tapping the potential of digital to offer superior customer service
- Mastering the omnichannel game
It’s a strategy that will surely find favour with Ingo Weber, CEO and co-founder of Digital Insurance Group (DIG), an industry leader in providing data-driven technology to insurers, brokers and banks, with whom it works on strategies for insurance distribution and customer engagement. Last October, for example, it helped a leading global bank to power a new digital life insurance business in Latin America and offer transparent, fast and personalised customer experience.
Weber argues that insurance is a perfect fit for banks – but they need to grab it fast.
“Large consumer brands, the original equipment manufacturers, the Teslas of this world, are integrating financial services – payments, then lending, and now insurance – into their proposition. They will become the gatekeepers for all kinds of financial services. Everyone, essentially, will become a fintech company. That’s why the banks have to act now. They are sitting on an enormous amount of data. So, just go get it!” he says.
McKinsey’s report similarly highlights the potential for banks to maximise insurance opportunities by combining the interactive data they are gathering continuously on customers with event triggers, such as moving house. And it pushes the case for banks to harness contextual information and insights, such as card transactions, money transfers and georeferencing, and then use internet or phone messaging to offer specific insurance products, such as travel cover.
New technology will bring even more sweeping opportunities, says Weber: “We’re now entering the second paradigm shift, around data, machine learning and artificial intelligence. We also see a convergence of technologies coming –Internet of Things, 5G and AI – that will have major implications for insurers.”
To help pave the way for those changes, DIG has developed a tech platform that can work with the wide variety of systems used by legacy institutions.
“The insurers are worse than the banks in having dozens of old systems. The issue is, how can you innovate very fast and build new digital tools on top of them?” continues Weber. “That’s where we come in. We have a powerful API platform that can speak to legacy and also aggregate any external data feed to provide real-time and contextual offers. It can work with the revised Payment Services Directive (PSD2) and connect to any third-party services. On top of that, we have a very flexible front-end suite, which means if an insurer wantsto launch a new digital business or customer portal, our platform can help with a very short time to market. That’s our sweet spot.”
Despite being an advocate of the automated model, Weber believes insurance will continue to need real-life advisors at least for the next 10 years.
“When it comes to distribution, let technology make the recommendations, use big data to come up with the best products, but add the human element on top,” he says. “As humans we still have a competitive advantage, especially when it comes to complex products and advisory. Our advantage is empathy, creativity, and finding a smart solution for the customer.”
This article was published in The Insurtech Magazine: Issue #3, Page 37.