Star Union Dai-ichi eyeing more bank tie-ups to bolster bancassurance channel

Star Union Dai-ichi Life Insurance is looking forward to associating with more banks to enhance the bancassurance distribution channel, while at the same time increasing distribution productivity through 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 rates. Through bancassurance, you can target captive and underutilized customer segments that you would not have been able to do otherwise,” said Managing Director and CEO Abhay Tiwari.

In addition to the promoted banks, Star Union Dai Ichi Live Tiwari said his tie-up is with three regional rural banks, and he is also eyeing more commercial banks after the insurance regulator allowed the banks to tie-up with more than three insurers each.

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“Given the current insurance penetration numbers, there is a lot of room for us to grow in this area,” he said, adding that the bancassurance channel will remain a mainstay of the insurance company’s distribution strategy.

The two promoted banks have a network of 14,000 branches, of which Bank of India has about 5,000 branches and Union Bank has about 9,000 branches. Bancassurance contributes 95 percent to Star Union Dai-ichi’s distribution mix, against the overall industry level of 56-57 percent.

The push is also being driven by the fact that the promoter banks are looking to double fee income from the sale of the policies, which exceeded Rs 100 crore in FY22, according to Ganesh Muruga, Executive Vice President and Head of Sales.

In contrast, Star Union Dai-ichi has taken measures such as creating differentiated sales segments for Bank of India and Union Bank, geo-tagging of field sales staff to increase productivity, and launched a pilot project to generate leads from promoted banks.

Branch activation, or the number of bank branches selling insurance policies, rose to 50 percent for Bank of India in FY23 from 34 to 35 percent before the pandemic, while Union Bank improved to 40-41 percent from 24-28 percent in pre-pandemic period. Branch level productivity is currently around Rs 2 lakh of policy sales per month.

Despite this focus on bancassurance, its share is expected to drop to 80 percent of the distribution mix over the next few years, as do other channels such as agency and digital channels.

The agency channel, which started in FY23, brought in revenue of Rs 20 crore during the year. The insurance company has also tied up with six insurers, with the distribution to be phased out by the end of June.

“Digital is going to create revolutionary growth. Word of mouth, it will catch up like anything. So we are waiting for that breakpoint and a lot of thinking is going on around that. We are very confident that digital and the agency will grow this year,” Muruga said.

The life insurance company also aims to build out its internal website and digital infrastructure by the second quarter, and hopes to see 50 percent of digital business come through internal channels and digital partners, all by the third quarter of this fiscal year.