Deepti Bhaskaran, MAY 04,2014
The chief executive of Apollo Munich talks about how bancassurance will help distribution. The Insurance Regulatory and Development Authority (Irda) allowed stand-alone health insurers to tap corporate agents of life as well as non-life companies in February 2013.
Now health insurers are actively seeking tie-ups with banks. Apollo Munich Health Insurance Co. Ltd tied up with Canara Bank late last year, and with Citibank India in March. In conversation with Mint Money, Antony Jacob, chief executive officer, Apollo Munich, talks about how bancassurance will help distribution and what the new channels of distribution mean for the health insurance industry.
You first tied up with Canara Bank and then Citibank. The experience of bancassurance seems to be going well.
What percentage of your business comes from banks?
Yes, it’s been a good and diverse experience. The product demand for each of these banks is quite different. Canara Bank sells largely small or medium sum insured policies ranging between Rs.1 lakh and Rs.5 lakh, and follows a branch driven approach wherein it approaches walk-in customers. Its customers have shown more interest towards the basic Easy Health plan, which is easy to understand. We propose to cover all of their 5,000 branches in phases.
Citibank, on the other hand, sells high-ticket policies of up to Rs.50 lakh sum insured. It has greater involvement with technology. For instance, sale happens through their call centre. If a customer is interested, we take over from the bank. Considering our greater involvement in the process of selling and the profile of Citibank’s clientele, we offer Optima Restore, a slightly more evolved health insurance plan.
These tie-ups are recent. At the moment, the percentage of business coming from banassurance model is not significant.
Bancassurance is tricky. Many cases of mis-selling in life insurance through banks have surfaced.
The idea of tying up with bancassurance partners is to get a solid introduction to clients. We try to take the burden of sale on ourselves. Our agents will always have an edge as we do this business 24X7. That’s why we try and handhold the bancassurance channel as much as we can. Even through bancassurance, we ensure that most of the workload is on us because we actually want to be doing the selling.
Non-life products are very different from life products because the incentives in these are not front-loaded but spread evenly. Every year, the agent gets 15% of the premium as commission. In fact, this commission increases because the premium increases as the policyholder grows older. There is very little incentive for an agent to churn policies, and more incentive in servicing customers for the long-term. I tell our bancassurance partners that they are getting into a long-term business of over 60-70 years.
These tie-ups are at a time when regulators are working towards making banks brokers instead of agents. As brokers they will be able to sell policies of multiple insurers.
Yes, but stand-alone health insurers earlier didn’t have much scope because a bank could be an agent for only one non-life company, and since stand-alone companies were clubbed under non-life companies, we found it hard to tie-up as most banks were already taken up. But there is clarity now and we didn’t want to wait. We will, in fact, be ready when the rules change.
Do you think the proposed distribution channel of insurance marketing firms will help?
Insurance marketing firms will help companies expand in geographies where they don’t have brick and mortar offices. Insurers can help individuals set up shop instead of investing capital in setting up offices.
For serious agents, this is a very good deal because under the tied agency model they are restricted to selling products of only insurance companies in life, non-life and health segments. And customers, too, get more choice. These firms can’t be compared with insurance brokers because insurance brokers have always stayed in the corporate space. But this is a new model and needs to be tested.
Does a multi-distribution approach influence your underwriting practices?
At banks, we look at the profiles of millions of customers and we insure them as a group. We take into account their age, profile, geographies, and more, so a lot goes into underwriting these customers. For instance, Citibank has a lot of high net worth customers and we may choose to relax medical checkups to 50-year age group instaed of 45 years based on the risk profiles. But all this is done only on actuarial evaluation. We prefer strong underwriting to having a conversation later at the time of claims.
We have agreed on the same underwriting guidelines with all our distribution partners.
What about products? You launched a disease specific product called Energy. These are complex products and may need better skill sets to distribute.
We introduced Energy in December through a limited number of agents. We have sold about 300 plans since then, as expected. We will refrain from selling complex products like Energy through our bancassurance partners because they need a more layered explanation to customers.