Banks could be more enduring than individual agents when selling insurance, but bancassurance relationships are not. Since the opening up of the insurance sector in ’00, as many as six bancassurance alliances have ended in divorce.

Though most of the changes have taken place among public sector banks, the latest to switch partners is the private sector Centurion Bank of Punjab, which has entered into a distribution agreement with Aviva Life Insurance, replacing Bajaj Allianz Life.

In the past, Dena Bank, which had originally partnered Kotak Mahindra Life, switched loyalty to the public sector Life Insurance Corporation. So did Allahabad Bank, which had a tie-up with ICICI Prudential Life Insurance. Punjab National Bank and Vijaya Bank have been forced to drop their bancassurance partnerships after they chose to set up an insurance broking JV.

Private sector insurance firms are finding ‘change management’ in the public sector a major challenge. State-owned banks get a new chairman, often from another bank, almost every two years, resulting in the distribution strategy undergoing a complete change. In the private sector, the M&A activity is one of the causes for change.

Foreign banks, with their expertise in wealth management and expertise in distribution of third-party products, are the most sought-after partners in insurance. However, these tie-ups are often a result of global alliances. For instance, Aviva has a tie-up with ABN Amro globally, while Germany’s Deutshce Bank sells products for Bajaj Allianz.

The other conflict that most insurers face is when they have a bank within their own group. Half of the insurance firms in India are part of a financial group that has a bank. They include ICICI Bank, State Bank of India, ING Vysya, HDFC, Jammu & Kashmir Bank, and Kotak Mahindra Bank.

According to Rajesh Relhan, head of bancassurance, Aviva Life, there is a fear among banks that at some point in future their insurance partner may end up cross-selling banking services to their policyholders. Besides, companies that sell predominantly through agents experience channel conflict when both agents and banks target the same customer.

(http://economictimes.indiatimes.com)