Effects of Bancassurence on the traditional distribution channels of insurance companies in Kenya

Abstract

Distribution is a key determinant of success of all insurance companies involving a combination of different decisions regarding various channels of distribution. As competition in the insurance industry intensifies, cost savings and customer retention has become critical, forcing insurers to look for ways to drive sales and customer convenience while keeping costs low and maintaining profitability. These factors have led to emergence of new channels such as bancassurance thereby bypassing traditional channels such as brokers and agents. Bancassurance has emerged as an important distribution channel across different countries. Bancassurance as a temi first appeared in France in 1980, to define the sale of insurance products through banks distribution channels. The purpose of the study is to assess the effect ofbancassurance on the traditional distribution channels of insurance companies. The study specifically focused on the effects of life bancassurance, non-life bancassurance and health bancassurance on the traditional distribution channels of insurance companies. The study used a descriptive research design. The study targeted 55 marketing managers of insurance companies in Kenya and data was collected by use of a questionnaire. The data obtained was cleaned, coded and statistical analysis done with the aid of SPSS. Descriptive and inferential statistics were employed to analyze the data. Descriptive statistics included mean, standard deviation, frequencies and percentages while inferential statistics included simple and multiple regression analysis. The results showed that life bancassurance had a positive and significant effect on the use of traditional distribution channels of insurance companies in Kenya. Further, non-life bancassurance had a positive and significant effect on the use of traditional distribution channels of insurance companies in Kenya. In addition, the study found that health bancassurance had no significant effect on the use of traditional distribution channels of insurance companies in Kenya. The study also found that life, non-life and health bancassurance have a joint effect on the use of traditional distribution channels of insurance companies in Kenya. However, while life bancassurance and non-life bancassurance have a positive effect on traditional distribution channels of insurance companies, health insurance had no significant effect. The study recommends that the govemment of Kenya should come up with policies to guide the alliance and partnerships between insurance companies and commercial banks as a way of improving the penetration of bancassurance. In addition, the insurance companies should make use of bancassurance in the distribution of products such as unit-linked policies, endowment policies, term assurance policies, group life policies and term policies. Also, insurance companies should come up with strategies to use bancassurance in the distribution of personal insurance, motor insurance, property insurance, liability insurance and Work Injury Benefits Act (W IBA) policies. Further, due to convenience to customers, insurance companies should start distributing health insurance products such as individual health policies, outpatient cover and maternity cover through aancassurance.