For augmenting their non-interest income, banks have ventured into marketing of life insurance products on a very large scale. Almost all of them are now involved in the business of life insurance, either as corporate agents or as promoters of a life insurance company. Both banking and life insurance need to establish long-term relationship with customers for a sustainable and profitable growth.
Such a relationship, however, depends on the understanding of the customer?s needs and the competence to fulfill such needs in the most satisfying manner. It is, therefore, necessary for the bankers to understand that by agreeing to sell life insurance, the bank assumes certain responsibility and discharging them would determine the growth of their business.
The banks need to train their employees for marketing life insurance as a specialised activity. While a banking activity starts with the customer stepping into the bank?s premises, the business of life insurance starts with the banker reaching out to a customer who may be even outside his premises. This fundamental difference outlines the uniqueness of each business. This fact gives rise to the urgency of redefining customer centricity for the banking sector. Handing out a third-party product on the basis of existing relationship means greater sensitivity and responsibility.
There is always a high risk of spoiling the existing relationship through such transactions for which the bank alone is not responsible. Currently, banks are experiencing technological innovations at a very rapid rate. While upgrading technology, they need to explore all possible ways for integrating their system with that of the insurance company for seamless service to the customer.
A bank cannot continuously generate business on the basis of pressure and incentives. The system must generate business. The bank must take full responsibility of a corporate agent and offer right advice and product to its existing customers. The vulnerability of a borrower need not be seen as an opportunity for selling insurance. Insurance, being a subject matter of solicitation, needs initiation of discussions to identify needs of the customers and offering a product matching with the same.
The bank is required to project itself as a financial services hub and secure the trust and loyalty of its customers by meeting most of their needs, especially that of insurance, which is an essential component of anyone?s financial planning. The bank must have the capability to deliver such products with due credibility on its part and the delight of the customers.
The transaction should be a value-driven proposition and not a target-driven seasonal activity. The distributor of the insurance policy needs to nurture the relationship with policyholders till maturity or death claim, if it arises. With the current practice, however, there is a chance of banks facing exhaustion very soon. The insurer may also find itself at dead end. The leadership at all levels has to commit itself to a creative and productive synergy.
Being concerned about misselling and indifferent post-sales contact with policyholders under bancassurance, the Insurance Regulatory and Development Authority (Irda) has also been issuing several guidelines from time to time. But several such corporate agents are yet to take up the desired responsibility. If this is allowed to perpetuate, it may spell disaster for the channel. The guidelines make it mandatory for the bank?s specified persons to interface the customers themselves.
My personal experience of marketing life insurance through the bancassurance channel confirms the fact that the bankers sell through proxy; the insurance company?s employees do most of the jobs on their behalf. This method is severely flawed in the context of evaluation of moral hazard for which the agent is primarily responsible. I am afraid, by adopting a half-hearted approach to this channel, banks are running the risk of severely hurting their reputation as well as customer base.
Having stepped into this business, the top management of the banks need to engage themselves on a regular basis. Insurance is the best mobiliser of long-term funds and this business spells prosperity for all its stakeholders. Hence, bancassurance must offer to its present as well as future customers the experience of convenient shopping of financial products.
Close contact with the customers, monitoring their changing needs from time to time, providing personalised advice and service would introduce professionalism in the channel and would finally make it a highly profitable business component for banks.
Such a development, however, would require cultural change within the banks. The vision of the top management in this regard must be shared by each employee at all levels, the activity should be viewed as an integral part of banking activity and the key performance indicators of all functionaries must reflect performance in this area too. A strong urge to embrace disruptive change could be the key to success.
The author is former MD & CEO, Star Union Dai-ichi Life Insurance