BANCASSURANCE IN PAKISTAN
PROSPECTS FOR LIFE INSURANCE
Mohammed Ali Ahmed
General Manager, EFU Life Assurance Ltd
Karachi Insurance Institute – 23 February 2011
Definitions of bancassurance
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Introduction
Worldwide experience
Evolution and current scenario in Pakistan
Products
Sales models
Technology
Challenges
SECP’s role
The next 3 years
Introduction
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Collaboration between Bank and Insurer to distribute
insurer’s products
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Insurer – provider of products and services – insurance risk
taker
Bank – distributor
Level of collaboration can vary from “basic” level to
high level “integration”
Benefits to all parties
Banks
•Fee based income
•Low capital – high ROE
• Improved customer
service – Culture shift
• Market opportunity
• Customer expectation
• Success in markets
around the world
Insurance Companies
• New distribution channel
• A ‘warm’ customer base
• Better persistency
• Higher premiums
• Profitable Growth
• Competitive products
• Success in markets
around the world
Customers
•Changing attitudes &
awareness
• Want options
• One stop financial
service
• Trust banks
Depth of relationship
Distribution Agreement
“Playing the field”
This can be likened to the early days of youth
when it is normal to have a number of different
relationships.
Loyalty is pretty low and long term commitment
rarely a consideration.
Temptation to switch partners for a “prettier” one
Joint Venture
“Moving in”
Once “courting” has been going on for a while, it is
natural to settle down with one partner and start
enjoying an even closer relationship.
Both partners get to know each other intimately
and a relationship of mutual trust and respect
develops. Any problems or difficulties are resolved
jointly and amicably.
Strategic Alliance
“Going steady”
Having played the field for a while, it is likely that
one partner will demonstrate the best ‘fit” in
terms of commitment, attention, behaviour and
attitude.
The relationship develops to a point where each
understands the other a little better and both start
to consider the others’ needs and aspirations.
Loyalty sets in and plans for the longer term begin.
100% Fully Owned
Financial Services Group
“Go alone”
Marriage brings about a whole raft of new
responsibilities and a relationship that should be
built on a secure foundation.
Both partners look for ways to get more out of
each other and to contribute to a long and
prosperous relationship.
Depth of relationship
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“One to One” – Exclusive model
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“One to Many”
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“Many to Many” – Open architecture model
International experience
Bancassurance has been well established in Europe, Far East, and
growing in India and Middle East.
Sales via Bank Channels
International experience
Bancassurance share in European life insurance market
International experience
Bancassurance share in emerging markets, 2005
International experience
Bancassurance target markets, 2007
Evolution in Pakistan
1996
Depositor’s
Insurance
1999
2000
2003
2011
Credit Life
Mail Inserts
Bancassurance
Agreements
16 Banks active
Evolution has seen product offering move from “Simple” to “Sophisticated”
products over the last 15 years
Major thrust has been from 2007 onwards with business volumes increasing
exponentially
Banks active in Bancassurance
Life Bancassurance in Pakistan
New Business - 2010
Bancassurance
Total Industry
Bancassurance
Sales agents
Private sector only
Sales agents
Active life companies
EFU Life
NJI Life
ALICO
State Life is exploring to enter
Target Market
Target Market for Bancassurance
Existing Bank customers
Potential Bank customers
Target market is spread across all lines of bank business
Key to success in bancassurance is to identify the opportunities available
in the bank customer base and offer the right financial planning solution
Customer segmentation
Possible approaches
“Slicing” of Bank Database
Targeting Customer Life Stage
Event Trigger Approach
Which one is correct ? – depends on the bank, its target market and
strategy to banking and bancassurance
All or a combination of the above can be used
“Slicing” of bank database
“Preferred Banking” or “General Banking”
 Segmentation by worth to bank
Professionals
Self-employed
Segmentation by occupation / role
in society 
Government
Employees
Businessmen
Students
Targeting customer life stage
Student
Young, Single
Young, married with family
Wealth Accumulation stage
Wealth Management stage
Retirement
Event trigger approach
Birth
Admission to University
Wedding
New Job
Purchase of House
Career Change
Business Set-up
Loss of Property
Retirement
Grandchildren
Death
Customer life cycle and financial needs
Life Products
Simple
Sophisticated
Bundled with bank products
- deposits
- credit cards
- mortgages
- personal loans
Active selling:
- Personal accident
- Term life
Advice products:
- Savings, Investments
- High risk cover
Life Cycle  Financial Needs  Product Solution
Life cycle segment
Financial Needs
Product Solutions
Young singles
Discretionary Income for Consumption
Cash access
Regular savings
Car purchase
Current account / ATM
Debit / credit card
Savings facility
Car insurance
Couples (no children)
As above +
High level savings & investment
House purchase
As above +
Investment linked plans
Deposit savings account
Mortgage
Travel , Mortgage Insurance
Families (young children)
Family protection
Mortgage Protection
Access to cash
Education Planning
Health insurance
Disability Income insurance
Families (older children)
As above +
School / College expenses
As above +
Investment Products
Pre-retirees (empty-nest)
Maximize savings for retirement
Additional pension fund
contributions
Investment Products
Retirees
Regular income in retirement
Annuities
Technology
Key initiatives which can assist in distribution:
Point of Sale (POS) system
Website
Mobile phone
Product complexity and distribution channels
Sales models – Branch distribution
Referral model:
Bank only generates leads and passes to insurer
Trained insurance company’s consultants convert lead to sales
Bank’s role is limited with little or no involvement in sales matters
Direct Sales model:
Bank generates leads and converts to sales
Bank has robust sales management setup with it’s own sales team
Sales numbers are driven to quite an extent by bank
Referral model
Sales management
Product
management
Bancassurance
management
Marketing
Operations
Involvement from bank’s side
High
Medium
Low
Direct Sales model
Sales management
Product
management
Bancassurance
management
Marketing
Operations
Involvement from bank’s side
High
Medium
Low
Challenges
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Alignment of vision
Management structure in banks
Banks’ expectations
Product value
Persistency
System /Operations constraints
Change of personnel
Conflict with other sales channels
Alignment of vision
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“Short term” vs “Long term” vision
Executive level commitment
Financial sustainability of model
Acceptance of “insurance” as a product – cultural
shift
Bancassurance management structure
Ownership and accountability for the business model
HOCB
Dedicated Bancassurance
Management Team
Product
management
Operations
Branches
Sales team
Banks’ expectations
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Financial
Focus mainly on first year remuneration margins
Bargaining tool
TAT and client servicing aspects
Strong ownership of client
Product value
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Cost saving to be reflected in better product value
Banks willing to reduce policyholder value in return for
higher commission???
Persistency
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Limited focus of banks on persistency
Persistency is key for life insurance company
Insurer has to make significant efforts to make the
bank realize the importance of this KPI
Good persistency can result in repeat sales and flow
of renewal income
Systems / Operations constraints
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Direct debit systems do not always work efficiently
Weaknesses in operations setup
No or limited MIS setup – reliance on insurer
Conflicts with other sales channels
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Conflicts with insurers’ other distribution channels
Sales agency channel
Banks approach an existing client of sales agency
Sales agents approach an existing client of bank
Insurer has to maintain delicate balance
Give preference to customer choice of channel
Change of personnel
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Business model usually driven by personnel rather
than institution – not the ideal setup
Only some banks have a strategic executive level
focus on bancassurance
Change of bancassurance team in bank can lead to
disruptions in business
New team may have different strategy and vision
Also may have preference for another insurer!
Insurer has to build relationships once again
Role of SECP
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SECP has played a very positive role in promoting
bancassurance
Pakistan is one of very few countries to have
guidelines from regulator
Guidelines will bring discipline in the market
All important areas are now streamlined and under
regulatory supervision
Next 3 years
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Channel will continue to grow and gain prominence
For private sector will contribute major part of new
business
State Life will also make an entry
Technology will be key – Point of Sale systems will be
common
New business expected to double from Rs. 2.8 billion in
2010 to Rs. 5.6 billion in 2013 from private sector
companies
Thank you!