While several trends will play out in the near term in the Indian insurance sector, one that will make a noteworthy impact on the industry is the recent easing in distribution norms. With a vision of ‘Insurance For All by 2047,’ the regulator recently announced a score of measures, including raising of the maximum limit of tie-ups with insurers for corporate agents from the existing three to nine. This move will alter the bancassurance landscape, heralding a new era of customer centricity in the sector. Here are some noteworthy changes we are likely to see:
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Support growth in the banking sector
While this move will significantly improve the distribution width of insurance companies, it will also accelerate growth of the banking sector. Not only will their insurance earnings balloon, but they will be able to effectively cater to varied customers as per their evolving needs. They will also be able to deep dive into the needs of niche customer segments like digital banking customers or credit customers, etc., to find newer avenues for improving business.
Promote competitiveness
With a larger number of partnerships now possible, the bancassurance space become more competitive. The relatively younger insurance companies, particularly those not currently promoted by banks, will gain ground. These firms have been at the forefront of product innovation, which will prove to be an advantage for them when seeking new partnerships.
Customer is the king
Reach has been among the chief challenges facing the sector. Banks, by virtue of their expansive distribution infrastructure, offer a great tool to reach customer present in pockets that may not be easily accessible to insurers. With tie-ups with a higher number of insurers now permissible, banks will be able to leverage multiple partners, build stronger product competencies and give their customers access to innovative product offerings that are flexible and versatile. This diversity of partners will force insurers to look at their product proposition more holistically to offer a wholesome experience to customers.
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Overhaul the advisory approach in banks
Every customer has unique requirements based on their educational, social, or financial background. Their context typically determines their financial priorities and therefore their protection requirements. For instance, some customer segments may need micro-insurance products. Banks will be able to leverage the expertise of specific partners that are proficient in certain product categories to meet varied needs.
The proof is in the pudding
The mutual fund industry is a great example of how an open architecture can become a power engine for a sector that is heavily dependent on advisory. Not only has the awareness and reach of mutual funds improved over the years, banks also have found a lucrative value proposition to mobilise customer savings.
India’s protection story is at an inflection point today. As insurance companies look to improve their distribution width, these recent measures will come as a welcome relief to improve customer access.
