FNB’s ‘well-hidden secret’ taking on Discovery, Sanlam, and Old Mutual

FNB’s insurance business has shown strong growth in recent years, with it now looking to win over clients from outside the bank’s ecosystem.

This marks a fundamental shift for the bank, which first launched its life insurance offering over a decade ago and built it from scratch. 

It has since expanded its offering to include short-term insurance and more sophisticated offerings, with it offering a full suite of products across retail insurance and commercial offerings. 

FNB Insure and Invest CEO Lee Bromfield explained to Daily Investor that the insurance business has been able to successfully penetrate the bank’s client base. 

The initial plan with FNB Insurance was to service the insurance needs of the bank’s clients and effectively leverage the banking customer base to cross-sell insurance products. 

This has proven to be successful, with Bromfield saying around half of FNB’s banking customers in the mass market have an insurance product with the business. 

Its life insurance business has been the most prolific, with the bank’s internal data indicating that between 60% and 70% of all debits for life insurance go towards the FNB Insurance division. 

Bromfield said this provides the insurance business with the opportunity to go external and begin winning clients from its competitors and bring new clients to the bank. 

“The nice thing about our business now is that penetration into FNB’s client base has gone very well, so now we are also opening up to go and fetch new customers,” Bromfield said. 

“For a long time, we have worked based on what FNB had and its client base. Now we can actually go and sell to the open market.”

This will prove challenging, with FNB Insurance now having to take on the traditional dominant players in the sector in its own right. 

With existing FNB banking clients, there is an existing relationship that can be leveraged by the insurance team to cross-sell its products. 

This makes it relatively easy to sell products to these clients and, in particular, capture clients who are looking to get their first insurance product. 

Now, the FNB Insurance offering will go toe-to-toe with other insurers in the open market and look to win over clients to the bank. 

“I know it is like sometimes a bit of a well-hidden secret, but these businesses are really poised to go aggressively into the market and offer really good options for all customers, not just FNB clients,” Bromfield said. 

Taking on the titans

The bancassurance model is making a resurgent comeback in South Africa, with banks launching insurance offerings and insurers launching banks. 

The most prominent example of this in recent years has been the launch of Discovery Bank, which has taken the insurer seven years and R14.5 billion to make profitable. 

Despite the bank being profitable and set to contribute to Discovery’s earnings in its own right, it is also vital for engagement and the cross-selling of insurance products. 

The company estimates that clients engage with its banking up around 25 times a month, in comparison to the monthly visits to insurance apps. 

This engagement is crucial for the selling of other products and enhancing the distribution capability of the company. 

FNB is naturally looking to do something similar by offering its insurance products through the banking app, private bankers, and financial advisors. 

The bank has an immense network of clients, branches, and advisors it can leverage to offer its insurance products directly to clients. 

Despite FNB clearly operating on a bancassurance model, Bromfield made it clear that he does not view other banks as FNB Insurance’s main competitors. 

“You know, often, when people talk about our competitors and who we play against in this space, everyone thinks that the other banks are our main competitors,” Bromfield said. 

“Actually, our competitors are the likes of Discovery, Momentum, Metropolitan, and Sanlam. These are the companies we actually compete with.”

“Our job over the long term is to make sure that our franchise can compete with the likes of those businesses on its own merit.”

Bromfield said that with regard to some of the bank’s insurance offerings, it is getting there in terms of playing on an equal footing with these companies. 

Key to winning in this market for Bromfield is to make sure the bank’s products are simple, understandable, and easy to access.