Bancassurance, when banks and other lending institutions get involved in the distribution of insurance, varies greatly across the world depending on the product and structure of the market, finds research by Finaccord.
The distribution share of banks is highest for life insurance in Brazil, France, Italy, South Korea and Spain, and for non-life insurance in Brazil, Chile, India, South Korea and Spain. In contrast, they are weakest for life insurance in Chile, India, Japan, the UK and Vietnam and for non-life insurance in China, Germany, Italy, Japan and Vietnam.
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“Analysed by product and country, there are some interesting anomalies,” says Tobias Schneider, consultant at Finaccord. “For example, banks in South Korea perform particularly well in investment-related life insurance whereas their counterparts in Chile are banned by regulation from selling these types of product. Moreover, while banking institutions in Hong Kong offer a wide range of health-related products, European banks exert only a limited influence in this sector.”
Finaccord’s research also investigated the operating models used by banking institutions to sell different types of insurance. The analysis revealed substantial differences across these countries, reflecting both the structure of the underlying market and regulatory issues.
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For example, captive insurance underwriters owned by banks themselves are favoured in Brazil, France, Hong Kong, Italy, Mexico and Vietnam whereas banks in China, Japan and South Korea are more likely to use multiple non-captive underwriters. Meanwhile, in India, a key regulation caps foreign direct investment in the insurance sector at a maximum of 26%; therefore, the joint venture bancassurance model is the most prominent one in India, mainly out of necessity.
Generally, growth in the bancassurance channel is occurring most rapidly in emerging economies outside of Europe, where insurers are increasingly making use of banks’ large customer bases to market their policies. For instance, the share of the bancassurance channel in Indonesia’s life insurance market grew from around 25% to 41% between 2007 and 2012, thereby replacing agents as the main distribution channel.
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In contrast, the share of bancassurance in Europe’s advanced economies has reached a peak and may even decline in future years, partly because of reputational damage to the banking sector in the wake of the financial crisis.
“The emerging markets of the Asia-Pacific region and Latin America clearly show the greatest potential as a consequence of both growth in the underlying insurance market and the fact that the share of the bancassurance channel is likely to increase,” says Schneider.
He adds, “However, the key to tapping these promising markets is for insurance companies to arrive at a detailed understanding of how they are structured, the regulations that are in place, the products that banks are interested in selling and the partnerships they already have with insurance providers.”