Financial strategies encompassing credit and insurance tailored for small and medium-sized enterprises
In the financial sector, the integration of banking and insurance services is strategically important, and this is particularly true when it comes to Small and Medium-sized Enterprises (SMEs). The need to diversify revenue streams and improve customer engagement is driving this integration.
According to Andrea Parisi, CEO of Aon's Italy and Eastern Mediterranean region, the importance of providing SMEs with a range of safeguards to ensure their survival and prosperity cannot be overstated. One such strategy is bancassurance, which allows banks to serve as a vehicle for providing insurance products specifically designed for SMEs.
Banks, with their extensive territorial presence and trust among entrepreneurs, can leverage this position to reach SMEs more efficiently. This is because many SMEs already maintain relationships with banks, making bancassurance a more efficient way to increase insurance penetration and coverage for SME risks.
However, bancassurance is not without its challenges. Regulatory and compliance complexity, data quality and risk assessment issues, and economic uncertainty and credit risks are some of the obstacles that need to be addressed.
Despite these challenges, the benefits of bancassurance are compelling. The strategy allows for enhanced customer coverage and cross-selling, improved risk management and product diversification, and increased revenues and market footprint for both banks and insurance companies.
The report "Bancassurance: Solutions and Opportunities for Protecting SMEs," conducted by SDA Bocconi in collaboration with Aon, provides sector operators, SMEs, and all interested stakeholders with concrete data, innovative analyses, and strategic recommendations. The main objective of the report is to contribute to the public and professional debate on bancassurance strategies for SMEs in Italy.
The report highlights various organizational models for offering bancassurance services, including commercial partnerships and multi-brand strategies. Commercial partnerships are perceived as the most advantageous, particularly in terms of increasing the customer base, enhancing customer loyalty, and improving profit margins.
Italian SMEs invest significantly less in insurance coverage compared to their counterparts in other industrialized countries, with an average annual expenditure of 14,013 euros compared to a global average of 22,600 euros. This gap presents a strategic opportunity for banks, as they can strengthen their role as reliable financial partners and increase revenues through a new source of income by addressing this gap.
Moreover, the report suggests that banks and insurers can develop seamless digital bancassurance platforms tailored to SMEs, facilitating product customization and faster service delivery. Additionally, opportunities lie in expansion in Northern Italy and wealthier regions, as well as in climate and environmental risk insurance.
In summary, bancassurance represents a promising strategy in Italy to serve SMEs by combining banking and insurance expertise, with benefits of cross-selling and risk diversification. However, it must navigate regulatory complexity, data quality issues, and SME economic vulnerabilities. Opportunities lie in digital innovation, regional expansion, and specialized risk products tailored to SMEs' evolving needs.
Other business strategies, such as bancassurance, can help banks and insurance companies increase their revenues and market footprint, while simultaneously providing SMEs with the necessary insurance coverage to ensure their survival and prosperity. The enhanced customer coverage and cross-selling opportunities offered by bancassurance could also strengthen banks' roles as reliable financial partners for SMEs.
