Banks go big on partnerships with insurance companies

Experts said banks are focusing on insurance partnerships due to the overall growth in the sector after the pandemic as more people bought life and health cover for themselves and their families.

Some banks have tied up with insurance companies to boost product sales for their mutual benefit, buoyed by attractive growth prospects of the sector after the pandemic.

UCO Bank, AU Small Finance Bank, South Indian Bank, DCB Bank and Capital Small Finance Bank have partnered with insurance companies over the past few months.

Most partnerships are with life insurance companies. AU Small Finance Bank and South Indian Bank partnered with Bajaj Allianz Life Insurance in September. Mumbai-based DCB Bank and Capital Small Finance Bank partnered with Max Life Insurance in July. State-owned UCO Bank tied up with Aditya Birla Health Insurance in March.

The Insurance Regulatory and Development Authority of India (IRDAI) is targeting ‘Insurance for All’ by 2047. The objective is to ensure that every citizen has life, health and property cover and every enterprise is supported by insurance solutions, apart from making the insurance sector globally attractive.

Experts said banks are focusing on insurance partnerships due to the overall growth in the sector after the pandemic as more people bought life and health cover for themselves and their families.

Kiran Boosam, vice president and head of global insurance strategy and portfolio at Capgemini had earlier said to Moneycontrol: "After the pandemic, the insurance industry witnessed changes due to the pandemic. But companies did not transfer the pressure on the policyholders. Post this, demand from policyholders has increased which helped insurance companies.”

As of 2020, life insurance penetration in India was 3.2 percent and non-life insurance penetration was 1 percent, according to the government's Economic Survey 2021-22.

While India’ s life insurance penetration was at par with the international average, it lagged behind in terms of non-life insurance. Globally, insurance penetration was 3.3 percent for the life segment and 4.1 percent for the non-life segment in 2020.

Also read: Growth of life insurance sector remains intact despite headwinds: Deepak Parekh

Latest data from the General Insurance Council, a representative body of general insurers, showed that premiums of non-life insurance companies rose 29 percent in September from a year earlier.

Standalone health insurers’ premiums rose 22.9 percent in September and climbed 25.24 percent in the six months ended September 30.

IRDAI chairperson Debasish Panda said the next 10 years are of utmost importance for insurance.

"We'll see a radical change in the nature of insurance buyers. As the level of awareness is on the rise, we will see more and more customised products. This means we need more players, more distributors and more capital needs to be infused in the sector," Panda said at the Global Fintech Fest 2023 in September.

Emphasising that technology will be the binding factor for Insurance 2.0, Panda said a slew of insurance reforms and initiatives is creating an environment that fosters innovation, promotes ease of doing business, reduces compliance and facilitates avenues for growth.

"Today, an insurance company can launch almost all types of insurance products without waiting for regulatory approval. It can even tie up with multiple distribution partners," Panda said.

Also read: Insurance companies report double-digit profit growth in April-June quarter, but VNB margin dips

The growth prospects of India’s life insurance sector remain intact, aided by continuing low insurance coverage, favourable demographics, increasing life expectancy and growing consumer awareness, Deepak Parekh, then chairman of HDFC Ltd., said at the company's annual general meeting on July 21.

According to Vijay Gaur, lead analyst for BFSI at CareEdge, banks partnering with insurance companies will help both to work on diversifying their products.

“Banks can sell the insurance products to their wide network of customers. This can help banks and insurance companies to boost their product list,” Gaur said.