Finally Aviva bags DBS partnership after losing a few

The festive season has finally ended a series of losses for Aviva and bought some good cheer having bagged the distribution deal (on 15 September 2009) with DBS Bank of Singapore to distribute its life insurance products. The bank was earlier distributing life insurance products of Tata AIG Life.

New Business Premium figures reported by the IRDA reveal the slide Aviva has witnessed over the last one year following the loss of some major bancassurance partnerships, particularly Centurion Bank of Punjab (CBOP) and Canara Bank. While Canara Bank entered in to a life insurance joint venture with Oriental Bank and HSBC Bank, CBOP merged with HDFC Bank. Reportedly, CBOP was performing very well for Aviva and was one of the better banks when it came to cross selling of life insurance products. It was one of the banks with a higher percentage of fee based income to its total income. However, word on the street stated that the bank was paid high upfront fees to sign up and demanded higher commission rates, resulting in not so profitable business for Aviva.

While the partnership with DBS may not prove to be as large in terms of new business, it is still a strategic move. DBS has just about 10 branches in India covering 10 cities. However, being a foreign bank, it enjoys a significantly high net and affluent customer base. Large ticket sizes would be the key. That's what has done the trick for HSBC, StanC and ABN Amro apart from better cross-sell techniques, targeted products and customer segmentation approaches. Reportedly, HSBC was able to garner business to the tune of Rs300 Crores with around 35-40 odd branches during its previous tie-up with Tata AIG Life. And that was a couple of years ago.

Not many are aware that Aviva has a tie-up with DBS in the region including Singapore and Hong Kong with plans to extend it to China, Taiwan and Indonesia. Sometimes having a strong partnership in the region or in many other countries can translate in to securing a partnership in other countries. This for me is a prime example. Presume, there would have been a strong role for the Aviva regional team to play in this. Earlier this year, Aviva and DBS had extended their partnerships in HK and Singapore till 2015.

While the committee appointed by the IRDA to explore open architecture (one bank can tie-up with multiple players) with respect to bancassurance distribution is awaited, most industry players anticipate that it may be opened up, albeit gradually. Say two tie-ups to begin with before scaling up to many. In light of this, many insurance companies seem to have started discussions with various banks to position themselves as the preferred second partner as and when the regulations permit doing so.

The open architecture may perhaps set in before the end of this year or even early next year. Only time will tell...when and in what form.