Bancassurance and its status around the world - Scor

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What are the key factors for the successful sale of life insurance policies through a banking network? The reality of bancassurance is multifaceted. A clear success in many markets such as France, Spain or Italy, it remains a marginal player in other countries. However, it is not so easy to understand why it fails to develop in the same way everywhere. Because the keys to success are numerous, variegated and sometimes surprising! It is also difficult to establish priorities and identify determining factors, because each country’s situation, history and culture contributes, and sometimes runs counter, to the studies devoted to this question. So, there appears to be no “miracle recipe” but a certain number of facts that we have been able to establish, after analyzing a number of cases of bancassurance around the world. A favourable environment The legal framework The legal framework for bancassurance and the authorities’ attitude to its development are clearly essential and have a real influence on the model’s conditions for success in a given country. Tax advantages can provide a strong incentive for consumers to invest in one life insurance or pension product rather than another. Changes in the law providing such incentives can have a positive, or negative, influence on the sales of a product. Take the French example: the finance laws for 1998 and 1999 reformed the tax framework for life insurance, reducing tax advantages previously applicable to certain capital redemption contracts. The 1998 law restricted tax relief on capital gains to certain amounts for products with a term in excess of 8 years. The 1999 law changed the system of inheritance tax exemption applicable to certain life insurance contracts. This change in the tax regulations made these products less attractive and sales of this category of life insurance products was seen to fall by some 15% after 1998. 9 focus october 2005 Bancassurance To take a wider example, it can be said that sales of life insurance policies by banks in France, Italy and Spain have increased significantly, largely as a result of tax breaks. This factor is a real driving force in the launch of bancassurance, still a relatively underused mechanism in most countries. As regards legislation, it is obvious that favourable laws, which do not restrict banks’ options to acquire stakes in insurance companies or to set up their own insurance companies, and where there are no or few restrictions on the sale of insurance products by banking networks, will enable bancassurance to develop more easily and more quickly. To give a few examples: In Italy: It was the Amato law of July 30, 1990 and the directives that followed, which really enabled bancassurance to take off. Since that date, it has been able to adopt one of the following legal forms: ● A bank acquiring a stake in an insurance company, or vice versa; ● A bank and insurance company creating a joint subsidiary; ● A bank selling insurance policies provided by one or more partner insurance companies. However, in order to protect the activities of banks and insurance companies, a so-called “exclusivity” principle governs the world of bancassurance. As a result, banks can only sell insurance policies under certain conditions, laid down in 1995 in directive No. 241 of the ISVAP (“Istituto per la vigilanza sulle assicurazioni private e di interesse collettivo”): ● Insurance policies must be drawn up by the insurer and cannot be changed by the bank; ● If necessary, the insurance company must be prepared to change a customer’s insurance cover at the behest of its banking partner; ● Bank staff are trained by the insurance company; ● Insurance policies must be easily transmissible to the insurance company, which is directly responsible for the obligations listed in the original policies;
● The bank’s insurance business must be monitored by the insurance company. These standards and directives regulate crossholdings in the share capital of banks and insurance companies. In the USA, the “Glass Steagall Act” (GSA) of 1933, one of the pillars of the banking laws, put something of a brake on the growth of bancassurance in that country. To begin with, this law built a wall between retail banks and investment banks. All American banks had to choose whether to specialize in commercial banking or investment banking. Next, in 1956, the “Glass Steagall Act” was followed by the “Bank Holding Company Act”, the purpose of which was to forestall and limit the power of the USA’s powerful financial conglomerates. This law created a clear barrier between banks and insurance companies, emphasizing the risks of having insurance companies underwritten by banks, which do not enjoy the necessary professional expertise in this area. These restrictions were removed in 1999 by the passing of a new law, which will undoubtedly facilitate relations between banks and insurance companies, although there has not so far been any significant move in this direction. In South Korea: this country, the world's 7 th largest market in terms of life insurance premium volumes, was until recently completely excluded from the development of bancassurance. The reason is simple: it only became legal for banks to sell insurance products in 2003. However, deregulation will be gradual and introduced in several phases, with completion initially planned for April 2007. At present, few products are on sale and certain aspects of the law continue to inhibit smooth development: exclusive contracts between banks and insurance companies are prohibited. As a result, several provisional partnerships between banks and insurance companies have been abandoned. The distribution network A banking network with a dense and structured geographical presence is an essential factor for success. It is obvious that a large number of points of sale, able to offer customers or prospects geographical and human proximity, will facilitate contacts between banks and consumers and therefore increase sales 10 focus october 2005 Bancassurance opportunities. Proximity to the customer is a factor whose importance should not be underestimated. It is a fundamental factor in establishing a relationship and, therefore, a sense of trust and loyalty. In Spain for example, although there is only a small number operating in the marketplace, the banks have a very large (probably the densest in Europe) and extremely effective network. This latter point should also be emphasized, since it might be said that banking networks enjoy a “homogeneity” which makes it possible not just to harmonize products and sales processes but also to coordinate sales campaigns and to impose imagerelated standards. An additional asset for success in insurance… Market image The way consumers perceive banking in a given market and the role it plays in society are two essential factors. This image can be a direct consequence of the way the banking network is organized and how many branches it has in a country. In countries like France, Spain, Italy or Belgium, perception of the banks is good: customers have a special relationship of trust with their bank or banker. Banks also benefit from the impression, justified or not, that they are better than insurance companies at handling financial issues. This trusting relationship is directly proportional to the power of the brand power and its true reputation. Customers in the countries mentioned above believe in a face-to-face relationship with their banker. The Anglo-Saxon countries take a different approach and most banking transactions are conducted online or by phone. And it is precisely in these countries that bancassurance has made no significant inroads. It is also worth noting the example of Germany, where the banking network is fragmented. Banks are often organized into small, more or less independent Savings Banks. In consequence, without banks that enjoy strong positions or a highprofile image in the market, bancassurance has failed to penetrate to any degree.
Page 1 and 2: focus Oct. 2005 Analysis of Bancass
Page 4: Editorial As a leader in life & acc
Page 8 and 9: Preambule I Pierre-Denis CHAMPVILLA
Page 10 and 11: this difficulty, potential exporter
Page 12 and 13: How and why go into bancassurance?
Page 14 and 15: ● The special relationship betwee
Page 18 and 19: Exploiting these keys to success An
Page 20 and 21: Regulation/Tax Banking law 1984 in
Page 22 and 23: Establishing, training & motivating
Page 24 and 25: of profit-sharing for insurance pro
Page 26 and 27: The products When asked, several ex
Page 28 and 29: Which life insurance products are s
Page 30 and 31: Our reference here is the French ba
Page 32 and 33: ● The possibilities of extending
Page 34 and 35: A world tour of bancassurance In pr
Page 36 and 37: offensive. The figures more than sp
Page 38 and 39: Asia: A promising start The Asian f
Page 40 and 41: distribution networks. In the space
Page 42 and 43: Twenty years ago, everyone agreed t
Page 44 and 45: In Israel, despite the legal prohib
Page 46: Conclusion It is difficult to draft

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