Oracle Insurance's director of marketing for EMEA, John Sinclair, attended the third annual Bancassurance Forum in Vienna last month. He reports that the outlook for bancassurance in EMEA remains positive, despite changing market conditions that have led a number of bancassurers to re-examine their business models.

Vienna is at the crossroads between mature Western European markets, where bancassurance is now an established best practice, and more recently tapped Eastern European markets that offer the greatest growth potential. Attendance at the Bancassurance Forum was good, with 87 bancassurance attendees, most in very senior positions in the industry. The conference provided the chance for a lively discussion among bancassurers looking to keep abreast of the latest trends in one of Europe's most successful distribution models for insurance.

Even under normal business conditions, there is a great demand for best practice sharing within the industry as there is no standard formula for success.  Each company has to chart its own course and choose the strategies for sales, products development and the structure of ownership that make sense for their business, and as soon as they get it right bancassurers need to adapt the mix to keep up with ever changing regulations, completion and economic conditions. 

To optimize the overall relationship between banking and insurance for mutual benefit, a balance needs to be struck between potentially conflicting interests. The banking side of the house is looking for greater wallet share from its customers and the ability to increase profitability by bundling insurance products with higher margins - especially in light of the recent economic crisis, where margins for traditional banking products are low and completion high. The insurance side of the house seeks access to new customers through a complementary distribution channel that is efficient and cost effective. To make the relationship work, it is important that both sides of the same house forge strategic and long term relationships - irrespective of whether the underlying business model is supported by a distribution agreement, cross-ownership or other forms of capital structure.

However, this third annual conference was not held under normal business conditions. The conference took place in challenging, yet interesting times. ING's forced spinoff of its insurance operations under pressure by the EU Commission and the troubling losses suffered by Allianz as a result of the Dresdner bank sale were fresh in everyone's mind. One year after markets crashed, there is now enough hindsight to better understand the implications for bancassurance and best practices that are emerging to deal with them. The loan-driven business that has been crucial to bancassurance up till now evaporated during the crisis, leaving bancassurers grappling with how to change their overall strategy from a loan-driven to a more diversified model.  Attendees came to the conference to learn what strategies were working - not only to cope with the market shift, but to take advantage of it as markets pick up.

Over the course of 14 customer case studies and numerous analyst presentations, topical issues ranging from getting the business model right to the impact on capital structuring of Solvency II were debated openly. Many speakers alluded to the need to specifically design insurance products with the banking distribution channel in mind, which brings with it specific requirements such as a high degree of standardization to achieve efficiency and reduce training costs. Moreover, products must be engineered to suit end consumers who consider banks a one-stop shop.
 
The importance of IT to the successful implementation of bancassurance strategies was a theme that surfaced regularly throughout the conference.  The cross-selling opportunity - that will ultimately determine the success or failure of any bancassurance model - can only be fully realized through a flexible IT architecture that enables banking and insurance processes to be integrated and presented to front-line staff through a common interface. However, the reality is that most bancassurers have legacy IT systems, which constrain the businesses' ability to implement new strategies to maintaining competitiveness in turbulent times.

My colleague Glenn Lottering, who chaired the conference, believes that the primary opportunities for bancassurers to extract value from their IT infrastructure investments lie in distribution management, risk management with the advent of Solvency II, and achieving operational excellence. "Oracle is ideally suited to meet the needs of bancassurance," Glenn noted, "supplying market-leading software for both banking and insurance. Oracle provides adaptive systems that let customers easily integrate hybrid business processes from both worlds while leveraging existing IT infrastructure."

Overall, the consensus at the conference was that the outlook for bancassurance in EMEA remains positive, despite changing market conditions that have led a number of bancassurers to re-examine their business models.

John Sinclair is marketing director for Oracle Insurance in EMEA. He has more than 20 years of experience in insurance and financial services.