U.K. Lessons For Bancassurance.(Brief Article)

In a previous issue of National Underwriter (see NU, Sept. 11, 2000), we discussed lessons learned in Europe by banking-insurance practitioners we met during a recent fact-finding tour. The experience of those in the British bancassurance industry in particular proved most insightful and relevant, since its system follows the U.S closely.

For that reason, we asked Chris Hubbard, a consultant in Britain with our overseas affiliate, NMG Financial Services Consulting, about insights to be gained from the experiences of bancassurance specialists in the U.K. In a future issue of NU, we will address our conclusions about how to best apply lessons from other countries to the U.S. model.

Bancassurance has blossomed across Europe, with penetration rates ranging from 20 percent of pensions and life premiums in Germany to 73 percent in Spain, according to Datamonitor. In the U.K., around 10 percent of life insurance premium income is now generated regularly through the bancassurance channel.

Still, U.K. bancassurers have waged a continuing battle in pursuit of the right model that can work consistently and effectively. Here are a few reasons why:

* The strength of bancassurance has remained constant, and it may be the only face-to-face channel that has grown over the past five years.

* Bank brands have been damaged by adverse publicity over rising fees and branch closures.

* The Internet and direct marketing have started to move the emphasis away from pure face-to-face.

* Mergers, acquisitions and the conversion of building societies (like our S&Ls) into banks over the past decade have forced considerable changes of the sales process and the sales force.

* Favorable tax breaks on life assurance don't exist in the U.K. as they do in many European markets

Bancassurance, however, continues to play a key part in many banking operations.

Products offered are focused and built upon traditional banking products. For example, life assurance products are successfully sold alongside loans and mortgages, normally on a level or decreasing basis, depending on the loan.

U.K. bancassurance operations have come to recognize that keeping products simple is paramount, ensuring better customer understanding and keeping advisors confident in the products they are recommending.

U.K. bancassurers are constantly reviewing their value chain. Some have opted to outsource certain links of the chain, which has helped to cut both costs and complex administrative functions. Areas that have been outsourced include auditing and quality control to ensure compliance, application processing and underwriting, coordination of medical exams and doctors' reports, and product design.

In bancassurance's infancy, U.K. banks established insurance operations by forming alliances with insurance companies, with their sales forces effectively acting as agents. Now the trend has been toward the Allfinanz concept, where there is more ownership of the life company, including distribution and underwriting, permitting greater control over product design and pricing, sales compensation, the sales process and the customer relationship.

The Allfinanz concept has also led some U.K. banks to encourage bancassurance advisors, via rewards, to sell traditional banking products.

It's critical to ensure that the different facets of a business integrate and work closely with field sales management U.K. bancassurance sales managers today typically focus their time on improving sales activity, coaching and developing advisors, and managing overall sales with an emphasis on business mix and value, rather than volume.

U.K. bancassurers have seen that service delivered consistently and professionally can solidify long-term customer loyalty. It will also establish itself as an integral part of the bank's customer relationship management program. U.K. bancassurers also recognize that proper information technology is critical.

Banks are getting more information about their customers, such as insurance renewals, maturing products and loan end dates. U.K. bancassurers have discovered that this information can be used to establish a customer's propensity to buy specific products, and to enhance the bank's overall effectiveness in cross-selling. Information technology, done well, positions bancassurers to increase their share of customers' wallets, advancing customers from single products to multiple holdings and reducing the chances that customers will look elsewhere for alternative products or services.

In many cases, there is still a huge chasm between the culture of traditional bank personnel and those selling insurance and investment products. Organizations in the U.K. have tried to narrow this cultural difference in a number of ways:

External recruitment. U.K. banks widely use competency-based assessment centers and interviews to assess candidates' skills and attitudes before making an offer of employment. This provides the senior management of the bank with the opportunity to judge an individual's suitability to fit in as a key member of the branch sales team.

Internal recruitment. By designing career paths containing specific milestones (experience, qualifications, sales performance, and so on), many companies have been able to identify and develop bancassurance advisors from within.

U.K. bancassurers have come to recognize the need to integrate insurance into the bank. By ensuring that sales managers and advisors report through the banking chain of command, the bank can keep their objectives and priorities aligned.

Branch managers often have considerable power and influence over the success of the bancassurance operation, providing day-to-day focus and direction. Advisors now heavily rely on them for lead generation.

In the early days, U.K. bancassurance people relied considerably on sales leads from the front-line staff. But while this is still important, advisors are now using other approaches, including:

* Focused telephone sessions with potential and existing customers;

* Centralized outbound telephone contact seeking appointments; and

* A greater focus on reviewing existing customer relationships and self-generation of opportunities.

Overall, the U.K. bancassurance market has been growing steadily but, in the process, bas had to meet and overcome considerable challenges. U.S. banks and insurers should review insights gained from their experience so that they can tap the great potential for bancassurance success in the U.S.

MARIA THOMSON AND ALAN WADE ARE PRINCIPALS OF THOMSON MANAGEMENT SOLUTIONS INC., A NATIONWIDE CONSULTING FIRM BASED IN BRIMFIELD, MASS. EMAIL: MTHOMPSON@TMSOLUTIONSINC.COM.