Bancassurance: Coronation, Access Bank offer opportunities for industry expansion

By Zainab Iwayemi

• Analysts examine likely benefits to parties, industry
• Say move will shape Nigerian financial services industry significantly

In 2020 Access Bank, one of the leading deposit money banks in Nigeria announced it plans to restructure into a holding company with four subsidiaries: Access Bank Group, Payment Business, Consumer Lending and Agency Banking, after it received approval in principle from the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC). This has further spurred other interests within the financial services industry with the banking group revealing its proposed plan to venture into insurance brokerage and the strengthening of an existing relationship and partnership with Coronation Insurance that will help it deliver a Bancassurance suite of products and services. Coronation Insurance is one of the most capitalised insurers in the country.

Prior to this time, Access Bank has had a longstanding link with Wapic (now Coronation) Insurance, which has led analysts and experts to offer the view that the partnership would make some clear and noticeable contribution to the entire financial services industry when it begins to blend in.

They also opined that the bancassurance model will open opportunities for not only the insurance companies, but for banks, as well as customers. While the bank could earn profitable income, opportunities such as the ability to expand consumer base without investing in sales agents or incurring broker commissions; the use of banks as a distribution channel to improving financial product portfolio while offering a high return on equity amongst others have been highlighted as key benefits accruable on the part of the insurance company.

Herbert Wigwe, group managing director and CEO of Access Bank, while speaking on the partnership in a recent analysts’ call monitored by Business A.M., noted that the partnership was a pursuit directed at making customers have good claims experience which could be achieved through bancassurance. Hence, he described the deal as one that is of great significance to the ecosystem.

Highlighting the importance of risk management in the business operations of an insurance company, he explained that the bank chose Coronation Insurance because of its good standing amongst other insurance companies who are often challenged in meeting the various claims made by their customers.

Mutiu Sunmonu, chairman of Coronation Insurance, who holds a similar view with Wigwe, said the partnership will improve insurance and banking services to corporate customers, marking the level of growth recorded in the banking sector over the last two decades only.

“The partnership would expand service delivery pipeline with Access Bank through the coming together of both organisations,” Sunmonu said.

Experts and analysts have submitted that having more bancassurance in Nigeria would help to reposition the insurance industry, especially at a time when the insurance sector is faced with meeting up recapitalisation deadline, cultural barriers to insurance, amongst other factors which contribute to low insurance penetration level in the country.

In the view of Emmanuel Abolo, who holds a doctorate in economics, a risk expert and banker and the director-general of the Economic Thinktank Centre Limited: “This will shape the financial services industry significantly even though this is not the origin of Bancassurance in Nigeria. It will create perturbations in the insurance industry, no doubt.”

In the view of Francis Ewherido, managing director of Titan Insurance Brokers Limited, customers would benefit more from bank and insurance partnership.

“The major beneficiaries of bancassurance are customers, who can now do their insurance and bank transactions and some other financial transactions under one roof. It is supposed to be a symbiotic relationship between banks and insurance companies, where they leverage each other’s strengths and clientele to grow their income and profit.”

Similarly, Ekerete Ola Gam-Ikon, a consultant in management, strategist and insurance, highlighted an increase in the volume of transactions, income growth, and more market share and enhanced brand mileage as benefits open to the bank and insurance companies.

“There are a large number of opportunities for both parties, but more so for insurance. There will be an opportunity for product development, customer loyalty and trust to a large extent,” he added

Empirical evidence on rise of bancassurance market

Following a report by IMARC showing that global bancassurance market size reached $1.2 billion in 2019 and the market is projected to reach a value of $1.8 billion by 2025, recent times has seen global bancassurance market size soar with the prospect to further increase in the near future with factors such as the ageing population (necessitating the need for health and life insurance and retirement product plans; increasing economic growth in developing countries, along with rising internet penetration and technological advancements.

Accordingly, Research and Markets reported that the global bancassurance market size reached around $1.17 billion in 2018. The market is further projected to reach a value of $1.7 billion by 2024, growing at a CAGR of 6.1 per cent during 2019-2024.

However, in Nigeria, NAICOM approved 18 out of 20 applications seeking bancassurance model after the implementation of the referral model of the bancassurance model approved in 2017 between the National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN). But what lies ahead? Should the decision by Access Bank be seen as a mirage to the market or opportunity for expansion?

Ewherido, in his comments said: “There’s no threat anywhere. Insurance penetration in Nigeria is 0.3 per cent, so there’s basically 99.7 per cent that’s unexplored. There are opportunities in telecoms, agric, and marine and motor, where we have more fake insurance certificates than genuine ones. There are insurance opportunities among low-income earners where insurance penetration is very low. There’s a huge market out there. The industry needs more daring and innovative players, who think out of the box.”

In the view of Abolo: “Competition is the name of the game. Insurance companies that have challenges meeting capital adequacy requirements should go into mergers and acquisitions.”

In addition, Gam-Ikon added, “Coronation Insurance getting into partnership with Access Bank Plc to distribute its products is the taste of what we desire to see into the future especially as we leverage the National Financial Inclusion Strategy in Nigeria and elsewhere. Besides insurance brokers, the relationship between the insurers and banks (better known as bancassurance) is the strongest distribution channel for insurance sales in Nigeria. So, getting it at this time puts Coronation Insurance on the path to compete strongly and win more market share. Good thing, Access Bank is also emerging as a dominant player with Holdco structure amongst its peers.”

Speculating the banking group’s reach in the nearest future, Abolo noted that considering Access Bank’s plans to widen its reach, the bank’s links with Coronation Insurance may soon lead into acquiring insurance firm(s) as a way to expand their reach and offering a robust insurance service, considering their exploits within the banking space in recent times.