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Banking meets insurance


It is renewal season again and advertisements for insurance cover routinely occupy significant column inches of space in the print media. Amongst those peddling insurance wares are banks, a number of which now sell insurance in their banking halls under the Bank Insurance Model (BIM), also known as bancassurance.

Report by Omen Muza

Bancassurance is a partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank’s sales channel to sell insurance products. The insurance company underwrites the transactions, meaning that it assumes the underlying risk. So what could be behind this increasing adoption of the bancassurance model by banks?

Efforts to diversify revenue streams away from traditional sources would be the most logical explanation for the increasing relevance and prevalence of the bancassurance model, but this can also be attributed to the fact that some banking groups such as CBZ Holdings, FBC Holdings and ZB Holdings now have operating subsidiaries or associate companies in the insurance sector, hence the desire to exploit synergistic opportunities at group level.

ZB Financial Holdings Limited, for instance, bought into Cell Insurance in 2007 when short-term insurers were in dire need of recapitalisation. It now controls a notable portfolio of investments in the insurance industry through shareholding in ZB Life Assurance, ZB Reinsurance and Credsure, in which BancABC also has an equity stake. FBC Holdings Limited has a 95% equity interest in Eagle Insurance Company Limited, which it acquired in order to increase traction in the primary insurance market, having previously been exposed only to the secondary insurance market through FBC Reinsurance.

CBZ Holdings Limited owns CBZ Insurance Company (Private) Limited, which was established in 2005 and licensed to transact short term insurance business in June 2006. THI Insurance, a subsidiary of Tetrad Holdings, is the leading provider of tobacco hail and windstorm insurance cover although it has expanded its product offering to include general short-term insurance.

Another motive for banks to adopt the bancassurance model is the recent regulatory pressure for them to reduce charges and lending rates, making it increasingly necessary for them to be on the lookout for new avenues of revenue diversification.

According to statistics from the Insurance and Pensions Commission (IPEC) the total short term insurance market closed at US$141 million for the nine months to September 30, 2012 and was expected to reach US$220 million for the full year ended 2012. Motor insurance is the dominant class with a contribution of 40% to gross premium written for the same period. Naturally, banks would want to partake in this growth, especially in motor vehicle insurance which is mandatory, according to Zimbabwean traffic laws, hence can be an assured and consistent source of brokerage income.

In pursuit of the one-stop concept, some banks such as CBZ Bank Limited, Metbank and ZABG have gone one better than just selling motor vehicle insurance and have signed agency agreements with the Zimbabwe National Road Authority (ZINARA) to also provide vehicle licensing services. Evidently, banks are increasingly seeking to bundle products and services in order to enhance customer convenience.

As they seek to imbed themselves in consumers’ lifestyles and monetise spending habits by providing means of payment from which they derive fee and commission income, competition amongst banks will bring added convenience to consumers of banking and insurance services. Currently, most banks emphasise the convenience of co-delivery of banking and insurance services under one roof, leveraging on their extensive distribution networks. ZB Bank, for instance, boasts of over 50 branches deployed to sell insurance while Agribank has over 40 branches countrywide.

ZB Banksure, Kingsure, NMBSURE, MBCAInsure and Agri-insure are some of the branded insurance offerings while other banks simply refer to their offerings under the generic name of bancassurance. Common products include Motor Insurance, Business Insurance, Personal Insurance, Household Insurance and Agricultural Insurance.

Of the 13 banks surveyed for this article, 31% have “in-house” underwriting capacity within their group networks while the remaining 69% outsource such capacity mainly to the two-horse race of RM Insurance Company (Pvt) Ltd and NicozDiamond Insurance Company (Pvt) Ltd. RM Insurance has the lion’s share of the outsourced market at 56%, probably because of its perceived strength and stability as a member of the Old Mutual Group, while NicozDiamond comes a close second at 44%.

Feedback: omen.muza@gmail.com
Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory, research and training company with interests in banking, technology and agriculture as well as the convergence area among them.

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