Bancassurance is now a key product or distribution line in the insurance sector in recent times. Bancassurance commonly means selling insurance products under the roof of a bank. Though bancassurance had its roots in France in the 1980s and spread across different parts of Continental Europe, it has spread its wings in Africa too. It is worthy to mention that Francois Outrevillle, who pioneered the examination of the relationship between insurance development and economic growth for developing countries (UNCTAD, 1990), did indicate in his findings that both non-life and life insurers generate significant economic growth for a country and that a joint venture between insurance companies and banks could see both playing a significant role in the economic development of a country. Webb et. al (2001) also performed a cross-country empirical analysis and found that the development of the sectors of insurance and financial intermediation increases total productivity by facilitating the efficient allocation of capital.
Admittedly, Insurance has come a long way in Ghana. The entrance of insurance companies, the growth rate of existing ones, and the supply of innovative insurance products into our market attest to the fact that it is also contributing its quota to our beloved nation. Contrary to the perceived opportunities associated with insurance products, most individuals in Ghana who have signed some of these insurance policies cite various instances where their claims have been rejected by insurance companies when a loss is incurred for no apparent reason. Insurance companies can never repudiate your claim unless it is not covered or a condition or warranty was breached. But as a result of the bitter experiences of these people, the insurance industry was perceived as not living up to expectations and not trustworthy (Bennin, 2010). This gave individuals perception about the insurance products and services and it influenced most of them in their unwillingness to sign policies with these insurance companies. The concept of Bancassurance was introduced in 2007.
During the Launch of some bancassurance products on January 30th, 2009, Mr. Franklin Belnye, Deputy Head of Banking Supervision Department, Bank of Ghana said: “Developing the Insurance Industry is fundamental to the nation’s quest to build long-term funds which are critical for sustained economic growth. In offering a wider platform for delivering Insurance products, these Bancassurance product offerings will help in creating a larger pool of long-term funds to support the agenda for sustained private sector-led growth”.
A study of an insurance company employs the Pre-Bancassurance period from 2002 to 2006 and Post-Bancassurance ranging from 2007 to 2011, which are the periods before the introduction of Bancassurance and the period after. The profitability analysis was done by comparing the Return on Asset (ROA) and the Return on Equity (ROE) of the Pre-Bancassurance period and that of the Post-Bancassurance period using the averages of the; Net Income, Total Assets, and Total Equity. The ROA shows how much profit each asset is used to generate income from 2002 to 2011, meaning how efficient they used the assets to generate profit. It was observed from the analysis that in the Pre-Bancassurance period, 2002 to 2006, they generated 74.28% profit from the use of its assets while they were able to recoup just 67.12% between the periods 2007 to 2011, the Post-period. This implies that they were better at converting their investments into profit during the Pre-periods. The ROE is an indicator of profitability by measuring how much profit it generates with its shareholders’ money. From 2002 to 2006 it had a profit of 158.08% but had 220.27% in the periods of 2007 to 2011. Comparing the Pre-period to that of the Post- period, it can be deduced that it generated 62.19% more profit in the post-period than the pre-period.
The National Insurance Commission introduced the No Premium No Cover (NPNC). This means insurance policy can not be done on credit. That simply means a policyholder can not have cover and pay the premium at a later date. But, bancassurance brought some flexibility in insurance premium payment, especially the non-life insurance payment. Most non-life insurance policies are annual or anniversaries. Bancassurance made it possible for deductions to be made through the policyholders’ bank account monthly and used to grant them insurance cover. The advantage is that the policyholder does not pay the full premium at the inception of the policy but rather, pays every month whiles cover is granted for the same period.
The findings of this project tend to reveal that the responsiveness and success of bancassurance greatly hinge on the strong will exhibited by both the insurance companies and the banks. Below are other recommendations we can take some clues from to help build a stronger partnership in terms of bancassurance.
Compensation packages and incentive schemes are critical factors for the accomplishment of a successful Bancassurance sales performance. The way compensation is allocated encourages the distribution channels to act according to what is expected of them. A compensation program, therefore, should be tailored to the needs of the employees of the bank partners.
Excellence in customer service is another key factor that needs to be considered. This refers to every single activity that the company, its employees, and the distribution channels undertake for its customers. Superior service to customers is even more important because the bank refers its loyal, valuable existing customers to the insurance company. The bank’s relationship with the customer can be damaged by poor service from the insurers when it comes to payment of claims.
There should be constant training for bank staff. If banks see this venture as lucrative, then they should also employ insurance professionals who can train, advise and supervise all these activities. Training is a critical part of overall business performance. Even though the bank employees are usually trained, they still need routinely refresher training in the terms, conditions, exclusions, and the insuring clause of these policies.
The challenge of Bancassurance lies in innovation, therefore both partners must be creative in thinking. Banks need to think differently and analyze customers’ requirements and put a demand on the partner insurance company to reciprocate. The insurance company on its part must be able to manufacture products in tandem with the bank‟s requirements.
The mix of products should be continuously revised in the light of customers’ needs evolution and the growing complexity and competitiveness of financial markets. Bancassurance could turn out to be a norm in the future in the Ghanaian insurance industry. This means regulation needs to look deeper in this direction.
References
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- Barros, C. B., Barroso, N. and Borges, M. R. (2006).Measuring Efficiency in the Life Insurance Industry with a Stochastic Frontier Model. Paper presented at the 28th International Congress of Actuaries.
- Bashir, A. and Hassan M. (2004), „Determinants of Islamic Banking Profitability‟, ERF paper, 10th Conference
- Berger, P. G. and Ofek, E. (1995).Diversification’s EJamshaid, I. (2002). Why Bancassurance? ESA, Deputy General Manager (operations) and Actuary, EFU Life Assurance ltd.
- Klumpes, P. J. M. (2004.Consolidation and Efficiency in the Major European Insurance Markets. Journal of Business, 77 (2), 257‐273.
- Krishnamurthy, B. (2009). Bancassurance: New Market Product for the Banker.R.T.E.S. College, Ranebennur.
Justice is a Chartered Insurance Practitioner in the United States of America, United Kingdom, and Ghana (CPCU, ACII, ACIIG),
Araba is the Head of Business Development Unit at Ghana Communication Technology University, Accra. She has MBA in Finance from GIMPA and BSc. Chemistry from UCC.
