Dr. Friedrich Caspers: Bancassurance in the German cooperative sector

Customers in Germany can use different sales channels to obtain insurance and make retirement provisions. One option is to use a classic sales channel and go through a general agent, but brokers and direct sales via the Internet are quite popular as well. Compared to other European countries, however, sales over the bank counter – bancassurance in short – is still clearly underrepresented, even though it offers great potential, as the example of R+V Versicherung within the cooperative banking group Genos­­senschaftlichen FinanzGruppe shows.

When a bank, an insurance company and a customer cooperate, this can be a win-win situation for everyone in­­volved. Prerequisites for the success of bancassurance are a close, strategic cooperation of the bank and the insurer, products tailored to the customer’s needs, coordinated processes and struc­­tures as well as joint teams that work together well. There is another special success factor within the cooperative banking group: the common cooperative philosophy.

A winning proposition for customer, bank and insurance provider. If these components are combined correctly, bancassurance leads to a “win-win-win situation” for the customer, the bank and the insurance company. That way, the customer requires only one contact person in his or her financial institution for all financial needs – from the current account to a real-estate loan to private retirement provisions. This allows the perfect coordination and combination of the required banking and insurance products. Of course, after all, the local principal bank knows the financial as well as the personal situation of the customer best. Apart from this, a fully insured customer is, of course, attractive for the bank and the insurer with regard to turnover and earnings.

Additional earnings opportunities for the bank. This results in a number of advantages for the bank, whereby the strategic establishment of insurances as a core business field of the bank is a requirement for sustainable success. First, the hedging against risks increases the financial freedom of the customer and the bank alike. Another positive aspect for the financial institution is the opportunity to establish a second source of income, independent of any interest-dependent business. Commission is a low-risk business for the bank. Moreover, for commission earned, there is generally no need for risk-weighted assets. Consequently, the bank can generate a higher turnover with the capital re­­sources available, while focusing largely on the commission business.

Customer retention and safeguarding the status quo. Furthermore, especially the hedging against company risks significantly improves the individual risk of a bank. Thus, for example, a business interruption insurance ensures a company’s financial ability to repay loans, as the insurer continues to pay the wages as well as the credit payments in case of loss. And, last but not least, a cooperation of this kind provides an excellent tool not only for private, but also for cor­­porate clients to retain customers and protect the customer base from other providers. Because, regardless of whether the customer wishes to buy an investment product, needs a loan or has spe­­cific insurance and provision needs – the customer will stay with the bank.

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Customer retention and safeguarding the status quo. Furthermore, especially the hedging against company risks significantly improves the individual risk of a bank. Thus, for example, a business interruption insurance ensures a company’s financial ability to repay loans, as the insurer continues to pay the wages as well as the credit payments in case of loss. And, last but not least, a cooperation of this kind provides an excellent tool not only for private, but also for cor­­porate clients to retain customers and protect the customer base from other providers. Because, regardless of whether the customer wishes to buy an investment product, needs a loan or has spe­­cific insurance and provision needs – the customer will stay with the bank.

Close interlinking and bank-affine prod­­ucts are indispensable. However, the numerous advantages by no means make bancassurance a sure-fire success. Prod­­ucts, structures, processes, technology and employees must be fully in line with the bank’s needs. In this context, products must meet the following criteria: easy to understand, standardised and tailor-made for specific target groups. The bank-relevant customer groups are the focus here. R+V thus has developed a product port­­folio for corporate custom­­ers that is tailored primarily to the most import­ant corporate clientele of the cooperative banks – small and medium-sized companies.
Interface-free technical support al­­ready at the point of contact. Not only the product offering, but also the struc­­tures and processes must be coordin­ated and interlinked between the bank and the insurer. A deeply nested integration of the insurance business into the financial institutions’ information technology is absolutely indispensable, for only in this way can the processes run smoothly.

Professional cooperation between bank employees and insurance employees. Last but not least, the cooperation and qualification of local bank employees and insurance experts plays a central role – irrespective of whether the bank supports its customers exclusively with its own employees (independent market cultiva­­tion) or with the aid of the insurer’s field staff (supporting market cultivation).
The sale of insurance policies at the bank counter will always remain a result of teamwork, regardless of the actual market cultivation model chosen. Based on the experience gained over decades, R+V has developed its own customer ser­­vice models and customised them to the respective bank. In these models, the insurer follows the structure of the bank partner, which means a shift in focus away from the traditional sector orientation of the insurance towards the target group orientation of the bank sector.

RPL-10-KopieThe German commercial credit coopera­tive Volksbank and agricultural credit cooperative Raiffeisenbank are traditionally operated on a regional basis. For perfect interaction, it is imperative that R+V follows this structure. Their specialists are available locally and are fully integrated into the teams and processes if the bank wishes to apply this customer service model. The insurance experts are especially skilled in line with the sales and business culture of the VR banks. In turn, the bank employees are trained in the area of insurances. As deciding factors for success, an optimum of support through field service staff and teamwork thus have already been common practice at the cooperative banking group (Genossenschaftliche FinanzGruppe) for years.

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Common history and philosophy. The common cooperative philosophy of the VR banks and R+V Versicherung forms the solid foundation of the cooperative “bancassurance building”. Financial insti­­tutions can rely on the fact that the insurer will support the customer in case of loss and deliver the agreed-upon ser­­vices with a high service level. This mu­­tual trust between VR banks and R+V is not only a result of the daily cooperation, but also of a long-standing tradition: al­­ready since its founding in 1922, has R+V Versicherung been the largest coop­e­­rative insurer. The insurer’s objective for the cooperative organ­­isation is true to the principle: “values create values”.

caspersThe author has been chairman of the board of R+V Versicherung AG since 2006. After earning his doctorate in eco­­nomics in Münster, Germany, he started his professional career at McKinsey & Company. Before becoming a top-level manager at R+V Versicherung, he worked for the Allianz Group for 18 years, among other things as member of the board of management of the Allianz Versicherungs-AG, Munich.