Bancassurance

Bancassurance is the sale of insurance products through a bank's branches, staff and digital channels, rather than through independent agents. The bank may simply refer customers to a partner insurer, or the arrangement may run deeper, up to a joint venture or a bank-owned insurer.

In a bancassurance arrangement, a bank sells or refers insurance policies to its own customers, using its branch network, call centers, online banking or a sales team embedded in its retail operations. The insurer named on the policy underwrites the risk and pays claims; the bank earns a commission or fee for originating the business and, in more integrated models, shares in the underwriting profit through part ownership of the insurer or a joint-venture structure.

The arrangement exists because banks already hold a trusted relationship with customers who need insurance anyway - a mortgage buyer needs home cover, a car-loan borrower needs motor cover, a savings customer may want life or health protection - and reaching them through a bank's existing channel is cheaper for an insurer than building its own sales force. A common misunderstanding is that the product is the bank's own; it is not. The insurer behind it carries the risk and owes the claim.

In insurance technology, bancassurance is what gets built when an insurer's quote-and-bind flow is embedded directly inside a bank's mobile app or online banking portal, instead of sending the customer to a separate insurer website. The work is mostly integration: connecting a bank's core banking and customer-data systems to an insurer's underwriting and policy-administration APIs, so a policy can be quoted, bound and serviced without the customer leaving the banking experience.

Written by Insurtech Daily.