The Kenyan insurance market has remained cryptic for some time, hence there was an assumption that majority of insurance providers are fraudsters. This, however, can be attributed to a lack of understanding of insurance products by customers due to limited information. The low penetration of insurance products in Kenya has been a concern to industry regulators for some time.
One of the common customer complaints is insurance brokers selling them the wrong insurance products at really high premiums. This is caused by a proliferation of non-educated insurance brokers in the market, whose only concern is racking up more commissions. The result is they end up tainting the insurance sector.
However, Kenya is now creating solutions to this challenge by introducing Bancassurance.
What is Bancassurance?
Bancassurance is simply the distribution of insurance products by Banks and SACCOs (Savings and Credit Cooperative Society) through their branch networks.
Most Bancassurance models entail the selling of simplified insurance policies over the counter to clients who make prompt decisions on the spot. The insurance products being sold are complementary to the existing banks products, hence diversifying their product range.
How Does It Work?
The success of this new form of insurance has been limited to life policies mainly due to the matching of individual financial requirements to the banking products.
Bancassurance operates on a system that takes into account customer lifestyle changes. For instance, once a client has initiated or completed, a bank transaction pointing to a lifestyle change, she/he is referred to a Bancassurance expert. The expert will then handle the sale of the product to the consumer.
Types of Bancassurance Arrangements
Here is a list of various arrangements between banks and insurance providers.
- Strategic Alliance: Under this arrangement, the bank only markets the insurer’s products to the customer. They do not carry out any other insurance functions apart from marketing.
- Mixed Models: Under this system, the bank generates leads only, while the insurer is responsible for the marketing activities. In other words the bank sells its database of potential customers to the insurance provider.
- Full Integration: This approach consists of a full integration of insurance and banking services. The bank handles the sales and underwriters service level agreements, such as the claims process. In essence, the bank makes the insurance product one of its core operations.
Benefits of Bancassurance to Kenyan Consumers
Bancassurance has proved beneficial to various stakeholders, specifically the Kenyan consumers. From the perspective of consumers, bancassurance is beneficial because:
- It is a very convenient way of accessing insurance products, free from the hassle of going through a broker.
- Consumers can have all their banking and insurance needs addressed, in one central location.
- The insurance product range offers more in terms of innovation and creativity.
- Bancassurance consultants are able to come up with credible solutions to exactly fit a consumer’s financial needs.
- The lowering in distributions costs due to use of bank branches results in lower consumer premiums
Bancassurance Options in Kenya
The recent introduction of bancassurance policies by the CBK (Central Bank of Kenya) has led to more banks rolling out insurance products. Examples are:
In conclusion, Bancassurance has greatly benefited Kenyan customers as they are able to access insurance products through bank networks with ease and without the worry of being misled.
Banks on the other hand have been able to increase their product range and tap into new market segments. For regulators bancassurance has been an improvement as it has led to increased penetration of insurance services country wide.
Have you tried to buy insurance through your bank? How was your experience? Please comment below and let us know what you think.
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