Bancassurance to add 5% growth to insurance penetration
Bancassurance will add five percent growth to the insurance penetration in the country which is presently at a low end of eight to 10 percent, according to insurance and banking industry experts.
“Bancassurance is more an insurance product than a banking product. Presently as opposed to the low penetration, in the insurance industry, the banking industry has about 50 percent penetration in Sri Lanka. With bancassurance it is natural that the penetration levels will increase and we expect it to grow by about five percent with other institutions introducing bancassurance,” L. G. Perera, Managing Director/CEO DFCC Vardhana Bank told The Sunday Times FT.
DFCC introduced Vardhana Assurance on Monday by joining up with Sri Lanka Insurance Corp (SLIC). The product consists of life insurance, motor insurance and general insurance solutions covering marine, title and mortgage protection plans. “We will introduce this product to more retail customers in time to come,” Perera said.
On introducing such products under the prevailing economic situation, he said that this is the ‘ideal’ situation to launch such products. “Uncertainly and high risk factors are ideal situations to launch this product. People can be made to believe the benefits of such products in these situations,” he said, adding especially the life policy market should do well now.
He added that now DFCC will be proactively promoting SLIC products unlike before when they had a relationship with other insurance firms.
Both the companies are controlled by business baron Harry Jayawardene, directly and through connected parties.
Prasanna Vithanage, Head of Strategy and Planning, SLIC said the launch of the bancassurance products was in a bid to achieve more penetration and wider product range in the insurance industry. “In terms of quality for customers, banks have a better base than insurance companies,” he noted. He pointed out that the lapsation periods (the time duration that passes when customers do not pay their insurance premium on time) is as high as 40 percent in Sri Lanka, because of the ‘push product’ that insurance is. “The customers may just take it because it is a push product, but we hope that with DFCC’s intervention there is a better quality prospecting in marketing bancassurance,” he explained. He said that industry evidence has revealed that there is more credibility in insurance products for customers when a bank sells them. “Almost 60 percent of customers in the region say that they would rather buy insurance from a bank than an insurer,” he explained further.
He saw getting the commitment of the bank staff as the biggest challenge to commit to selling insurance products. “It is a regional study that has revealed this point. This is the main reason that we need to co- brand with a bank” he added.