Bancassurance models worldwide
Banking and insurance in Europe have developed on the basis of 3 main models:
- simple commercial agreements between banks and insurers setting out the framework for the distribution of insurance products
- a joint venture between a bank and an insurer, backed by exclusive distribution agreements
- the fully integrated model in which the bank has a wholly-owned insurance subsidiary that it uses purely on its own behalf
There is also a fourth bancassurance model known as open architecture, which is the most common model found in the USA and certain countries of Northern Asia.
In this model, the banks have no significant equity investment in insurers, and limit their role to that of distributor, but without exclusive distribution agreements. Bank branch networks therefore sell the product ranges of multiple competing insurers. This model originated in the USA, where the Glass Steagal Act adopted following the 1929 Wall Street Crash prohibited banks from owning insurance companies. It has also developed in some Asian markets, including Japan, Korea, China and Taiwan.
Bancassurance was virtually non-existent in Asia at the end of the 1990s, but has grown very strongly since then and in very different ways from one country to another. In Japan, for example, the market is a mature one with a high degree of bank penetration and around 120 banks. Paradoxically, bancassurance remains underdeveloped largely as a result of the high level of insurance take-up in the market prior to introduction of the legislation enabling bancassurance, added to the fact that interest rates have remained very low since that legislation was introduced, which has done very little to encourage the launch of competitive life insurance policies. In the fast-growing economies of South Korea and Taiwan, the bancassurance market is extremely dynamic and already holds a market share in excess of 50% (more than 66% in Taiwan) and offers a very sophisticated range of products. In other emerging countries, such as Thailand and Vietnam, bank penetration is still low, although growth rates are high, offering bancassurance significant potential for growth.
One characteristic shared by many Asian markets is a bancassurance distribution model based principally on open (or semi-open) architecture, and banks very often distribute insurance products marketed by a range of different suppliers. However, we are now seeing a significant reorientation towards a more integrated model in some countries.
In China, for example, the bancassurance regulations introduced in 2003 triggered a real boom in over-the-counter sales of insurance policies by bank branches. Some major banks use up to 30 different suppliers for life insurance, and as many as 10 for property and casualty insurance. However, the Chinese regulators have recently made it possible for major banks to take majority shareholdings in insurance companies. This development could change the market significantly.
In Taiwan, where the great majority of life insurance savings policies sold through banks are marketed using the open architecture model, there have been a number of joint ventures set up by major banks and foreign insurers over the last two to three years (e.g. First Commercial Bank and Aviva, and the Taiwan Cooperative Bank and BNP Paribas Cardif).
In South America
In South America, bancassurance focuses mainly on protection products (personal protection and protection for companies).
In this market, pension funds have historically attracted the majority of medium/long-term savings, especially in Chile, Brazil, Argentina and Mexico.
As a result, sales of protection products are booming: credit insurance, death cover, disability, home all-risks insurance, card protection products, automobile insurance and all types of extended warranties for white goods (fridges, cookers, washing machines, etc.) and brown goods (TVs, Hi-Fi, etc.).
Alongside the banks, major retailers and specialist financial institutions (automobile credit providers, etc.) are also major sales channels for mass-market insurance products. Telemarketing centers, the Internet and even ATMs are widely used by these sales networks. In 2010, the bancassurance channel accounted for 40% of all new insurance policies purchased in South America.