Charting a sustainable growth path for the insurance industry through bancassurance

By Emmanuel DZIVOR

has emerged as a critical growth channel for the insurance industry in Ghana, offering banks an additional stream of non-banking income and transforming customer convenience. While some might question its impact on traditional insurance distribution, the consensus within the industry is that this partnership model is vital for increasing the country’s low insurance penetration rate.

What is Bancassurance? How is it different from the traditional Channels

Bancassurance is a partnership between an insurance company and a bank, where the bank sells insurance products directly to its customers. This arrangement, as a channel of distributing insurance differs from the traditional media like Brokers and Agents, and Corporate Agents.

With bancassurance, the purchase of insurance is limited to the account holders of the banks. Insurance premiums payable by these policy holders are paid through their bank accounts. In Ghana for instance, this arrangement is regulated by both the National Insurance Commission and the Bank of Ghana. With the other channels, any customer can purchase insurance policies through them.

A Confluence of Convenience and Trust

One of the primary advantages of bancassurance for the customer is the “one-stop-shop” experience. Traditionally, a client might visit their bank for financial transactions and then proceed to an insurance provider’s office for coverage. Bancassurance streamlines this process, allowing clients to handle both banking and insurance needs in a single location, often with the same trusted relationship manager (RM) they have known for years.

This established trust is a cornerstone of the model. The long-standing relationship between a customer and their bank fosters an environment of high assurance and confidence, making the client more comfortable purchasing insurance products through the banking channel.

Benefits for All Stakeholders

The benefits of this integrated approach extend across the entire value chain:

To the Bank:

• New Revenue Streams: Banks earn commission and fee income from selling insurance products without carrying underwriting risk. This diversifies income beyond interest margins.
• Deeper Customer Relationship and Improved Risk Management: By offering insurance products such as life, travel, home, motor, and credit protection, banks engage customers across key life stages while simultaneously reducing credit risk through loan protection solutions that safeguard repayments in the event of death, disability, or job loss.
• Better Customer Retention: Offering insurance alongside banking services makes the bank a one-stop financial partner, increasing stickiness and reducing customer churn

To the Insurance Company:

• Growth and Reach: Bancassurance provides an additional, non-traditional channel to generate premium income and boost volume. Banks provide access to a large, established customer base across branches, digital channels, and corporate clients. Traditional channels (brokers, agents, and direct sales) are supplemented by the bank’s extensive customer base.
• Significant Contribution: Although National Insurance Commission’s (NIC) 2023 annual report noted that this channel contributes around 2% of the total insurance business, this figure is highly significant, especially in capturing the vital retail segment of the market.
• Improved Persistency and Renewal Rates: Customers buying insurance through their bank are more likely to keep policies active, especially when premiums are linked to bank accounts.
• Stronger Trust Factor: Customers often trust their banks more than standalone insurers, helping insurers overcome scepticism and credibility barriers.

Not a Threat, But an Expansion

With Ghana’s insurance penetration currently standing at less than 2%, the market has immense opportunity for expansion. Bancassurance is not a threat to traditional distribution methods; rather, it is a necessary expansion of the distribution network. The market is large and largely undiscovered, capable of supporting all channels.

The more pressing disruptor is technology, AI and robotic systems that are rapidly changing how insurance is distributed globally. Instead of focusing on channel rivalry, industry stakeholders must collaborate to deepen the public’s understanding of insurance.

From Promise to Proof: Restoring Confidence in Insurance

Insurance is fundamentally a crucial tool for achieving financial stability and ensuring recovery after unforeseen events. Its value proposition is simple: peace of mind today for a secure tomorrow.

However, a persistent challenge in the industry has been the historical, low level of trust exhibited by some sections of the public. This scepticism often finds its roots in past unsporting conducts or negative experiences with some insurance providers.

To overcome this historical baggage and secure a sustainable future, the industry cannot afford to overlook the imperative of improving the service experience. The single most important value a policyholder demands from their insurer is reliability, which translates concretely into timeliness in claim payment.

For the insurance sector to thrive, it must prioritize the swift and transparent handling of claims, transforming what is often a moment of crisis for the policyholder into a moment of confirmed trust and financial security.

As once said by the famous founder of Alibaba, Jack Ma, “Buying insurance can’t change your life but it prevents your lifestyle from being changed, you will not turn bankrupt because of buying insurance, but you will cause your families to turn bankrupt if you don’t.”

In conclusion, this model creates a clear triple-win outcome for all stakeholders. Customers gain access to convenient and affordable protection, banks unlock new revenue streams while strengthening customer relationships, and insurers expand their reach and premium base. Ultimately, this strengthens the country’s Gross Written Premium (GWP), extending financial protection to more people and reinforcing overall financial resilience.

The writer, Emmanuel Dzivor, is a Senior Underwriter with the Retail Department at Hollard Insurance.

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