BANCASSURANCE

Bancassurance gaining ground in Central & Eastern Europe

November 5, 2009

In Central & Eastern Europe (CEE) banks have become the channel of choice for sales of both risk-life and general insurance products. As the demographics of the region evolve to resemble more mature markets, bancassurance is set to remain firmly at the fore of the growing insurance sector.

During the years running up to the credit crunch, growth in the global insurance industry was driven primarily through the uptake of retirement products by ageing populations in the industrialized world. Their preferred investment vehicles include unit-linked savings plans and group pension arrangements.

The other major industry growth area has been in providing insurance services for people in emerging markets. Here, a burgeoning middle class with increasing disposable income is driving demand for both life and general insurance products.

Emerging market, ageing population
In the Central & Eastern Europe region, both of the above dynamics are in play: while dependency ratios are increasing, so too is people’s spending power and their desire to safeguard both their possessions and newfound wealth.

The result is that the CEE region is seeing growing demand for both life and non-life insurance services, with banks as the distribution channel of choice. Selling insurance services is a natural add-on for banks, which can easily assimilate such vehicles into their broader portfolio of investment instruments. According to statistics from the Polish Chamber of Insurance, today approximately one third of individual policies and half of group policies in Poland are sold through banks.

Growth in investment vehicles
While risk covers such as loan protection or disability insurance are important bancassurance revenue drivers, the real future growth in the CEE lies in banks offering investment products such as unit-linked savings plans. As dependency ratios in CEE countries rise, it is reasonable to presume that we will see regulatory changes encouraging this type of individual pension saving. At least this has been the case in the Nordic region, where reforms aimed at resolving the state pension deficit problem have typically sought to encourage individual private pension savings by offering beneficial tax treatment for such plans. It is likely that the CEE will follow suit.

Experience counts
Bancassurance gained significant ground in Profit Software’s home market of Finland during the late 1990s, and since then we have been working with both banks and insurance companies on implementing the model. This long experience has brought us extensive knowledge of the challenges associated with large scale bancassurance implementations, and we have developed our production architecture accordingly. Additionally, the web based nature of our software products makes it easy for bank and insurance personnel to interact with one another and interface with insurance purchasers.

Contact us to discuss your particular bancassurance challenge.