Star Union Dai-ichi Life Insurance is looking to tie-up with more banks to strengthen its bancassurance distribution channel, while at the same time increasing productivity of distribution through its promoter banks — Union Bank of India and Bank of India.
“Most insurers have found that the bancassurance channel offers the best productivity and cost-to-income ratios. Through bancassurance, you can target captive and untapped customer segments that you would not have been able to otherwise,” MD and CEO Abhay Tewari said.
In addition to the promoter banks, Star Union Dai-ichi Life has tied up with three regional rural banks, and is also looking at more commercial banks after the insurance regulator allowed banks to tie up with more than three insurance companies each, Tewari said.
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“Looking at the current insurance penetration figures, there’s huge scope for us to grow in this area,” he said, adding that the bancassurance channel will continue to be the mainstay of the insurer’s distribution strategy.
The two promoter banks have a network of 14,000 branches, of which Bank of India has about 5,000 branches and Union Bank around 9,000 branches. Bancassurance contributes 95 per cent to Star Union Dai-ichi’s distribution mix, as against the aggregate industry level of 56-57 per cent.
The push is also driven by the fact that the promoter banks are looking to double their fee income from sale of policies, which crossed Rs 100 crore in FY22, according to Ganesh Muruga, EVP and Head of Sales.
In turn, Star Union Dai-ichi has taken measures such as setting up differentiated sales verticals for Bank of India and Union Bank, geo-tagging of field sales officers to push productivity, and launched a pilot project to generate leads from the promoter banks.
Branch activation, or the number of bank branches that sell insurance policies, increased to 50 per cent for Bank of India in FY23 from 34-35 per cent before the pandemic, whereas for Union Bank it improved to 40-41 per cent from 24-28 per cent pre-pandemic. Branch level productivity currently stands at about Rs 2 lakh worth of policy sales per month.
Despite this focus on bancassurance, its share is expected to come down to 80 per cent of the distribution mix over the next few years, as other channels such as agency and digital also pick-up.
The agency channel, which was started in FY23, brought in Rs 20 crore revenue during the year. The insurer has also tied up with six-seven insuretechs, where distribution will be rolled out in a phased manner by the end of June.
“Digital will create revolutionary growth. By word of mouth, it will catch up like anything. So we are waiting for that break point and a lot of thinking is going on about this. We’re quite confident that this year digital and agency will grow,” Muruga said.
The life insurer is also aiming to put in place its in-house website and digital infrastructure by Q2 and hopes to see 50 per cent of the digital business come through in-house channels and digital partners, each by the third quarter of this fiscal year.