How financial institutions are evolving to make bancassurance work for SMEs

In Italy, bancassurance has been gaining momentum over the past decade, initially focusing on individual clients. Taken together, Italy’s aging population, traditional aversion to risk, and limited understanding of insurance create ample room for sector growth.

For SMEs, bancassurance is still in its early stages, with significant untapped potential – yet it requires new skills to succeed. Italian SMEs spend €14,000 per year on insurance on average, which is around half of what they spend in Ireland (the most insurance-sensitive country) and 25% less than in France.

Given the clear thrust toward bancassurance, our research posed the following questions: What motivates banks and insurers to pursue bancassurance? And is there an ideal model or trajectory to follow in this direction?

We investigated these questions with a team that included Rachele Anconetani, Jessica Baro, Gennaro De Novellis, and Raffaele Turazzo. Using a survey targeting banks and insurers which represent around 80% of total premiums, as well as four focus groups held at SDA Bocconi School of Management, we explored the bancassurance trend in greater depth.

For the majority of financial institutions, the shift to bancassurance is driven by strategic needs rather than by cost-cutting. Institutions with strategic motivations reported better results than those with other aims.

The conglomerate model, combining a banking group and an insurance group, is used by a minority of institutions (15%), but it achieves the best results, with significant revenue upsurges reported in half of the cases. A relative majority of banks (39%) distribute products from multiple brands, although in two-thirds of these cases, revenue growth remains moderate. Banks offering a limited number of products (1 or 2) tailored to SMEs struggle to achieve substantial revenue increases.

Generally, banks with broader portfolios of insurance products for SMEs are also those that invest more in branch staff training, so they find the transition to bancassurance less challenging.

Investments in technology  (aimed at better integration between banks and insurers) and in training are strongly correlated with revenue rises, while marketing investments show a moderate impact.

For insurers, the most common organizational model (71%), which also yields the best results, is a partnership based on a commercial agreement. Joint ventures are less frequent (14%) and tend to be less profitable.

In this context, focus proves beneficial: insurers that see the most significant revenue growth in bancassurance for SMEs are those where SME policies make up over 25% of their portfolio, but they also maintain a limited range of offerings (between 3 and 5 categories).

Our research homed in on two key factors for a successful transition: technology investments to enhance integration and customer segmentation through reliable data, and investments in training to enable branch employees to understand and fulfill coverage needs of SMEs.

However, the entire market will need to make substantial efforts to enhance an insurance culture among SMEs. Future research could explore effective ways to address this.