Bancassurance has long been a cornerstone of insurance distribution in Sri Lanka, accounting for nearly 37% of the country’s life insurance business. Traditionally driven by physical bank branches offering life and general insurance as part of financial service packages, this model is now undergoing a dramatic transformation. With the rise of digital banking platforms and fintech innovation, the question arises: Are digital banks poised to become the next major players in insurance distribution?
The Shift: From Branch-Based to App-Based Bancassurance
Historically, bancassurance thrived on face-to-face trust and the convenience of handling banking and insurance in one place. However, with the growing digital penetration in Sri Lanka, particularly after the COVID-19 pandemic, consumer behavior has shifted. Mobile banking apps and digital wallets are becoming the norm, leading to a significant channel disruption for insurance brokers and underwriters alike.
Emerging platforms such as:
- DFCC Virtual Wallet
- People’s Wave App (People’s Bank)
…have already built substantial user bases. These platforms present a massive opportunity for embedded insurance, where protection is seamlessly integrated into digital banking journeys. For example:
- Offering life or accident cover during a digital loan application
- Embedding travel insurance within forex card transactions
- Providing microinsurance options at wallet top-ups
Digital Banks: The Next Insurance Giants?
The evolution of digital financial services suggests that banks with robust digital infrastructure could become dominant insurance distributors through:
- Data-driven cross-selling (based on user behavior, age, or transaction patterns)
- Seamless integration of insurance APIs into mobile platforms
- Low-cost customer acquisition, as users are already on the bank’s digital platform
For example, a digital-only bank could provide a pre-approved micro health insurance plan to all users with salary accounts—an offering that insurance brokers would traditionally push manually or via email campaigns.
What It Means for Insurers and Brokers
This shift doesn’t make traditional insurance brokers obsolete, but it requires adaptation. Insurers and brokers must:
✅ Explore white-label partnerships with fintech and digital banks
✅ Develop API-friendly products designed for fast integration
✅ Focus on simplified, mobile-first policy structures with instant issuance
✅ Strengthen data analytics and embedded insurance capabilities
Collaborations will be key. For example:
- Life insurers might tie up with the People’s Bank to co-launch bundled savings + insurance plans via mobile
- Brokers could act as product architects, designing risk solutions tailored for digital wallets and prepaid accounts.
Regulation: A Moving Target
The Insurance Regulatory Commission of Sri Lanka (IRCSL) will also need to address the emerging risks of digital-only distribution:
- Ensuring customer awareness and consent
- Monitoring for fair pricing and claim practices
- Adapting distribution licensing norms to include digital platforms as agents or intermediaries
Final Thoughts
Bancassurance is no longer just about placing an insurance desk at a bank branch. In 2025 and beyond, it’s about embedding insurance into digital financial ecosystems where customers already live and transact. Digital banks in Sri Lanka, armed with data and access, are well-positioned to become insurance giants in disguise—but only if insurers and brokers evolve in tandem with them.
Now is the time for strategic partnerships, product innovation, and digital transformation. Because in the future of insurance, distribution is digital.
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