How to revive the bancassurance market?



How to revive the bancassurance market?

The bancassurance market is noticeably dominated by first-tier insurance companies. According to the Bank of Russia, rating agencies and analysts, their share is constantly increasing. They are strengthening their positions, including in negotiations with banks, while small companies, on the contrary, are increasingly yielding to large ones.

In 2022, banks received almost 200 billion rubles in commissions from the sale of insurance products. The amount of insurance premiums received through the banking sales channel for 2022 amounted to RUB 545 billion, or 30% of total premiums. However, according to AIMA and the analytical center “BusinessDrom”, 45% of the contributions fell on the top 5 insurers in the bancassurance segment. According to our forecasts, in 2023 their share may increase up to 50%.

In response to such a high level of concentration, the Federal Antimonopoly Service (FAS) proposes to change the criteria for selecting insurance companies to cooperate with banks. There are two options: either to accept insurance products from companies with a rating of “A-” and above, or to present uniform requirements to insurers for creditworthiness if there is no rating or it is higher than the established level. At the same time, it is proposed to abandon the use of simple quantitative criteria, for example, the size of assets, equity or authorized capital of the company, the amount of premiums collected, and so on.

Thus, the FAS would like to support small companies in the bancassurance market and provoke an increase in competition, but in reality, these changes will not play such a role. Moreover, this may even lead to a decrease in marginality in bancassurance.

According to the calculations of “BusinessDrom” and AIMA, a number of potential customers are currently being missed – about 10%. There are several reasons for this. Firstly, this is an insufficient level of analytics of the bancassurance segment in the public domain. It is quite difficult for companies to build development strategies and make plans in this segment precisely for this reason.

The second reason is insufficient regulation of processes in the bancassurance market. The segment is regulated only pointwise. In addition, the object of insurance is not sent to all insurance companies. After the start of the FAS resolution, their number will decrease even more. A potential client sees a limited range of insurance products, among which it may well not be the most useful and suitable in terms of conditions. The low competition of insurance companies in a particular bank hinders the development of the insurance products themselves. In conditions of limited competition, insurers can take a rather formal approach to modernizing and changing the conditions of products sold in banks.

Despite the factors hindering the development of bancassurance, it remains the driver of the insurance market. Work needs to be done to fix these issues. One of the solutions that can support and give impetus to the further development of the market is the transition of banks to an integrated platform. The platform combines not only the sale of insurance products, but also the management of bancassurance, including payments. The transition to the platform will simplify the process of purchasing bancassurance products and receiving payments.

Graph 1. Structure of sales channels – distribution of insurance premium by sales channels for 2022 in %

Source: BusinessDrom and AIMA according to the Bank of Russia.

Chart 2. The structure of the distribution of remuneration to intermediaries for 2022 in %

Source: BusinessDrom and AIMA according to the Bank of Russia.

Chart 3. Share of top 5 insurers in bancassurance sales (+ forecast), %

Source: BusinessDrom and AIMA.

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