Banking on bancassurance in the new normal

The jury is still out on the net impact of the coronavirus disease 2019 (COVID-19) pandemic on bancassurance firms following a rough year of extended quarantines and economic recession.

Still, if there’s a silver lining for these firms, it is that it has led to increased awareness towards insurance products.

“We have received more inquiries on our products than usual this year, which is an indication of increased awareness for insurance protection among the population at this particular time,” BPI-Philam Life Assurance Corp. Chief Executive Officer Surendra Menon said in an e-mail.

Mr. Menon added that the uncertainty that comes with COVID-19 has led more people to seek out security through insurance. “Customers actually come to us on our digital channels to learn more,” Mr. Menon said.

“Product sales have been hugely skewed to insurance protection products with smaller ticket sizes but with more stable margins,” he said.

Allianz PNB Life Insurance, Inc. Senior Vice-President and Chief Marketing Officer Gino Riola shared this assessment: “There is heightened insurance awareness in fact across various market segments brought about by the pandemic especially for health insurance coverage. We see this in the increased take-up of our new Eazy Health proposition, which is an affordable insurance solution that will help Filipino families future-proof their health,” he said.

This preference towards insurance products runs consistent with a survey released by market research firm GlobalWebIndex in July. Asked on whether they have delayed purchases on insurance, only 12% of Filipino respondents said they have done so — the lowest among other goods which include other expenses such as vacations or clothes where responses were as high as 63% and 52%, respectively.

Mr. Riola also noted that Filipinos continue to look for alternative financial investments given the low interest rate environment, citing for instance the sales of their single premium unit-linked policies which are at an “all-time high.”

BPI-Philam Life and Allianz PNB Life are only some of the bancassurance arrangements in the country. Considered a relatively nonexistent practice in the country’s insurance industry around two decades ago, bancassurance is now widely regarded as an essential business among local financial services firms.

Bancassurance is a partnership between a bank and an insurance firm that allows the former to sell within its premises the products of the latter. Under this arrangement, banks earn through fees while insurance companies gain access to the lenders’ customers via the referral process.

Bigger banks have already partnered with insurance for bancassurance deals. Among these partnerships include that of the Bank of the Philippine Islands and the Philippine American Life and General Insurance Co. (BPI-Philam Life), the Philippine National Bank and Allianz SE (Allianz PNB Life), and the UnionBank of the Philippines, Inc. and Insular Life Assurance Co. Ltd. (UnionforLife).

But even these partnerships were put to the test when strict lockdowns were put in place in late March to combat the spread of the virus.

“The height of ECQ (enhanced community quarantine) during the second quarter delivered the worst- case scenario so far during this pandemic: the Insurance Commission temporarily suspended agency examinations, branches were closed or had limited operations, and Filipino consumers postponed their purchase decisions,” Allianz PNB Life’s Mr. Riola said.

Since then, bancassurance sales agents have migrated online to peddle their goods and services.

“We have responded with our bank partners by enhancing the efficiency and effectiveness of our online sales processes and tools, so that purchasing an insurance policy are not hindered by quarantine restrictions,” Mr. Riola said.

UnionBank of the Philippines, Inc. Head of Bancassurance Sales Dinesh M. Sahijwani said they “have been always prepared” for “black swan events” such as COVID-19, noting that their relationship managers were still able to connect with their clients through their Digital Relationship Manager MAX 5.0 and Automatic Underwriting System, both aimed towards providing service to their clients remotely using web and app-based systems.

“Even to open an account, we can do it remotely. You need not visit the branch anymore and soon our customers will be able to avail an insurance package through our convergent banking app,” Mr. Sahijwani said.

“The realistic worst-case scenario is not being able to connect with your customers…,” he added.

BPI-Philam Life’s Mr. Menon said that while individually, people are spending less on insurance, there are still more people willing to spend for it.

“So, to adapt, we have pivoted to selling our products online to allow customers to secure their lives even while doing social distancing,” Mr. Menon said.

For Mr. Menon, sales via digital channels and digital tools such as virtual meetings have become a significant part of their sales and premium payments and thus, is confident that they will be able to maintain sales even in cases of extended quarantines. However, he noted that they continue to experience “telecommunication infrastructure issues” in the more remote parts of the country even as it represent less than 10% of their overall sales.

“[E]ven at 50% of our current scale, the economics of our business is still viable albeit with lower levels of profit (but nonetheless profitable),” he said.

OUTLOOK
Moving forward, bancassurance still has miles to go in addressing the concerns surrounding the industry.

“[T]he country needs to invest on stable and reliable internet connection if we must work remotely for us to connect to our customers [as well as] [e]ducating the customers that a vaccine may not be available soon, but a life insurance is readily available…,” said UnionBank’s Mr. Sahijwani.

Another concern is the country’s low insurance penetration rate, or total premiums as a percent of economic output. Data by the Insurance Commission show that as of 2018, penetration rate stands at 1.63% based on current prices.

“The industry, in general, needs to address the still huge protection gap in the Philippines well into 2021 and even post-pandemic — gearing their offerings and services to a population that will become more variable income dependent (as apart from fixed income-salaries),” BPI-Philam Life’s Mr. Menon said.

“In the same way, this serves as an opportunity for us to protect more and more people and help improve their quality of life. If anything, COVID-19 has made the idea of protection more tangible and real, which helped more people appreciate the value of insurance as a necessity rather than just an option in modern life.”

Allianz PNB Life’s Mr. Riola share the same sentiments: “The protection gap in the Philippines remains in the trillions of pesos and COVID-19 has only increased our resolve in terms of insuring more Filipinos. We aim to do our part in filling this gap by targeting the very young demographic in the country…” — Jobo E. Hernandez