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Bancassurance Sales and Market Sharein Asia

Full Report

Ingrid R. Goodenow, FLMI

International [email protected]


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mailto:[email protected]:[email protected]://www.limra.com/mailto:[email protected]:[email protected]


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A 2009 Report

BANCASSURANCE SALESAND MARKET SHARE IN ASIA

2009, LIMRA

300 Day Hill Road, Windsor, Connecticut 06095, U.S.A.

This publication is a benefit of LIMRA membership. No part may be shared with other organizations or

reproducedin any form without LIMRAs written permission.

008281-1009 (562-44-0-J34) Printed in U.S.A.


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CONTENTS

Page

HIGHLIGHTS .................................................................................................................. 5

Conclusions and Recommendations ............................................................................. 5

INTRODUCTION .............................................................................................................. 6

BANCASSURANCE IN ASIA.............................................................................................. 7

Market Share ................................................................................................................. 7

Organizational Models .................................................................................................. 8

Bancassurance Organizations and Sales Staff .............................................................. 9

Sales ............................................................................................................................ 10

First-Year Commissions ............................................................................................. 11

PARTICIPATING COMPANIES ....................................................................................... 12

RELATED LINKS .......................................................................................................... 13


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FIGURES AND TABLES

Page

Figure 1 Bancassurance Market Share in Asia ............................................................... 7

Figure 2 Percentage of 2008 Premiums From Bank Channel ...................................... 10

Table 1 Organizational Relationship Between Bank and Insurer ................................... 8

Table 2 First-Year Commission Rates Paid to Banks for New Sales ........................... 11


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Bancassurance Sales and Market Share in Asia

6

INTRODUCTION

Bancassurancethe sale of insurance (assurance) products through banksis a relatively new

distribution channel in Asia. This report explores market share, sales, and bank commission rates by

product, and organizational models used by insurers in Asia.

Though a new distribution channel, bancassurance has grown rapidly in Asia. In a relatively short

period of time, bancassurance is fast approaching the agency system in many Asian countries as the

major distribution system for life insurance sales. Many of the regulatory agencies in Asia continue

to implement changes that favor the expansion of the bancassurance channel. Cost efficiencies in

comparison to the agency system drive many of these changes.

However, even with favorable regulations in place, there are some challenges that could hinder the

expansion of bancassurance in Asia. Chief among these challenges is the current global financial

crisis that has damaged consumers trust in large banks. This is the case not only in Asia, but all

across the globe.

Another challenge is the potential for channel conflict. Horizontal conflict occurs when the goal of an

insurer to expand into the bancassurance channel results in increased competition for its existing

distribution channels. The existing channels may view this expansion as direct competition for the

sale of similar products to a common client base.4


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8

ORGANIZATIONAL MODELS

Banks and insurers can use several different types of models. The four most common models are:

Pure DistributorThe bankacts as an intermediary offering products of more than one

insurance company.

Strategic AllianceThe bank sells the products of only one insurance company.

Financial Holding CompanyA holding company owns both the insurer and the bank.

Joint VentureThe bank and the insurer establish a jointly owned insurance company or

distributor, thus creating a new entity.

Thirteen companies use one type of organizational model and three companies use two types.

Companies clearly prefer the Pure Distributor model. Results are broken out for India, Japan, and

Malaysia; countries with three or more participating companies (Table 1). These relationships are

shown for participants only on a company-by-company basis in Appendix Table A-1.

Results were similar in a 2008 LIMRA report with a large majority of companies using the Pure

Distributor model.5 Driving this choice are the advantages to both the insurer and the bank. The

insurer has easy access to an expanded customer base and the bank has new products to offer its

clients without a heavy upfront investment.

Table 1

Organizational Relationship Between Bank and Insurer*

PureDistributor

StrategicAlliance

FinancialHolding

CompanyBank Owns

InsurerJoint

Venture

Asia (16) 11 4 2 1 1

India (3) 3 1

Japan (4) 4

Malaysia (3) 2 1 1

*Multiple responses allowed.

_____5Study of Bancassurance Operations in AsiaPart 1, LIMRA, 2008


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9

BANCASSURANCE ORGANIZATIONS AND SALES STAFF

Participating insurers that sell individual insurance through the bank channel use an average of

33banking organizations to sell their products. Japans rate exceeds that of all other countries as

there is a tendency for banks to sell one type of product from each provider, ratherthan to sell

competing products.6

Fifty-five percent of insurers employees who are involved in bancassurance workwithin the banks.

This includes the top three companies in terms of having the highest number of employees working

in the channel. The number of insurance company employees involved in bancassurance for all

participating companies ranges from two to 1,200 employees.

Insurers in Indonesia have found success in placing advisors within bank branches. They augment

this practice with referrals from the banks they distribute their products through. Insurers in Vietnam

favor placing their own staff in banks over using bank staff to sell their insurance products, though

they do use both methods. Insurance agents in India work within the bank branches wheneconomically feasible. The more remote branches use brochures and banners, and have toll-free

numbers customers can use.7

_____6

AXCO reports,www.axco.co.uk, accessed September 20097

Ibid
http://www.axco.co.uk/http://www.axco.co.uk/http://www.axco.co.uk/http://www.axco.co.uk/


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10

SALES

Participants in this years study have been selling individual insurance products through the bank

channel for an average of six years. The most active year for this group was 2003 when six of the

participating companies started selling individual life insurance products through the bank channel.

A majority of participating companies (11) sold single premium products in 2008. Additional

products include term life products (8 companies) and endowments (7 companies). Six companies

sell unit linked/variable life and whole life products.

Other products

Other products sold through the bank channel include hospital plans, child plans, savings products,

health and accident policies, personal accident, and pension plans. These products accounted for

approximately 9 percent of new individual insurance premiums for participating companies in 2008.

Figure 2 shows the percent of 2008 new individual insurance premiums for each product soldthrough the bank channel.

Figure 2

Percentage of 2008 Premiums From Bank Channel

(14 companies)

*Single premium products are reported at 10% of premium; includes annuity premiums

In addition to reporting the percent of new premiums sold through the bank channel on a per-product

basis, participating companies reported that 26 percent of their total new individual life premiums

were sold through banks in 2008. Responses range from a low of less than half of one percent to a

maximum of 80 percent.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Unit Linked/

Variable Life

Single

Premium*

Endowment Term Life Whole Life

39%37%

33%

10%8%


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11

FIRST-YEAR COMMISSIONS

Fourteen companies shared their average first-year commission (FYC) rates paid to banks for new

sales of individual life insurance products. The highest rate26.1 percentwas paid on the sale

of new endowment policies, a long-standing product sold by insurers in Asia. Similar to the results of

another recent LIMRA study, rates paid to banks for single premium products are again the lowest.8

Rates are shown on a company-by-company basis in Appendix Table A-2.

Table 2

First-Year Commission Rates

Paid to Banks for New Sales

Product Average Range

Endowment 26.1% 8.0% 45.0%

Term life 23.5 13.0 35.0

Whole life 20.8 2.0 38.0

Unit linked/Variable life 18.8 4.6 32.4

Annuities 12.2 1.5 29.1

Single premium products 4.1 1.8 10.0

The average FYC rate for other insurance products (see Other products on page 10) sold through the

bank channel is 21.5 percent, ranging from 15.0 percent to 25.7 percent.

_____8

As reported in Study of Bancassurance Operations in AsiaPart 1, LIMRA, 2008


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PARTICIPATING COMPANIES

A special thank you to the 16 companies that participated:

India Korea

HDFC SL Insurance Company Samsung Life Insurance

ING Vysya Life Insurance

Max New York Life Malaysia

Great Eastern Life Assurance

Indonesia MAA Berhad

Manulife Uni.Asia Life Assurance

Sun Life Financial

Singapore

Japan NTUC Income

Manulife

Meiji Yasuda Thailand

Sompo Japan Himawari Siam Commercial New York Life

Sony Life

Vietnam

Manulife


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RELATED LINKS

The following links are valid as of 19 October 2009.

LIMRA

The Study of Bancassurance Operations in AsiaPart 1 (2008)

This report presents an overview of bancassurance operations in Asia. Information on the

organizational relationship between the bank and the insurer, the division of labor between the

insurance company and the bank for different functions, first-year commission rates paid to banks,

and training provided to banks are provided.

http://www.limra.com/abstracts/abstract.aspx?fid=6052

The Study of Bancassurance Operations in AsiaPart 2 (2008)

This report provides separate chapters with detailed information on the bancassurance operations of

insurance companies in China, India, Japan and Malaysia. These chapters examine specific

information for the selected countries and include results from a recent LIMRA survey of insurance

companies with bancassurance operations.


The Study of Bancassurance Operations in Latin America (2008)

This report presents an overview of bancassurance operations in the region. Information on the

organizational relationship between the bank and the insurer, the division of labor between the

insurance company and the bank for different functions, first-year commission rates paid to banks,

and training provided to banks are provided.


2007/2008 Bank Life Insurance Sales Study: The Financial Institutions' Perspective (2008)

Many banks are struggling to take life insurance sales to the next level. This report gauges many

facets of bank life insurance sales programs, including the distribution methods used by financial

institutions; bank customer base revenue penetration; and sales force productivity and compensation

by distribution method.


Banks Offer Life Insurance: Who Knew? (2008)

If financial institutions are to succeed in selling life insurance, more people need to be aware that

they have the option of purchasing it at banks. This study emphasizes the importance of building

people's awareness and the potential impact that awareness could have on bank life sales. The report

also looks at some of the key incentives consumers respond to when considering life insurance

product offerings from financial institutions.

http://www.limra.com/abstracts/abstract.aspx?fid=6052http://www.limra.com/abstracts/abstract.aspx?fid=6073http://www.limra.com/abstracts/abstract.aspx?fid=8089http://www.limra.com/abstracts/abstract.aspx?fid=8082http://www.limra.com/abstracts/abstract.aspx?fid=7007http://www.limra.com/abstracts/abstract.aspx?fid=7007http://www.limra.com/abstracts/abstract.aspx?fid=8082http://www.limra.com/abstracts/abstract.aspx?fid=8089http://www.limra.com/abstracts/abstract.aspx?fid=6073http://www.limra.com/abstracts/abstract.aspx?fid=6052


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HARTFORD MIAMI TORONTO LONDON KUALA LUMPUR SHANGHAI HO CHI MINH CITY SEOUL

300 Day Hill Road, Windsor, CT 06095, U.S.A.

Phone: 860-688-3358 Fax: 860-298-9555 Web: www.limra.com

2009, LIMRA

This publication is a benet of LIMRA membership. No part may be shared with

other organizations or reproduced in any form without LIMRAs written permission.

008281-1009 (562-44-0-J34)

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