Life

10
February 2003
Bancassurance across the globe
Meets with very mixed response

SCOR technical Newsletters

"Bancassurance" is a term which first appeared in France after 1980 to define the sale
of insurance products through banks’ distribution channels. But this term does not just
refer specifically to distribution. Other features, such as legal, fiscal, cultural and/or
behavioural aspects form an integral part of the concept of bancassurance. In fact, all
these characteristics combined can explain the marked differences in bancassurance
across the globe. Although it is clearly a predominant feature on some markets,
representing over two thirds of the premium income in Life Insurance, other markets
do not appear to have chosen it as their model.
In this issue, Sara Fenelon who is in charge of bancassurance on the French market,
compared notes with two other market managers to provide you with a global picture
of bancassurance, the objective being to pinpoint success factors.
Your correspondent at SCOR will be pleased to provide you with any additional
information you may require.
I Romain Durand, Life Division General Manager

Bancassurance enjoys
the most success in Europe
This type of distribution is predominant in markets
such as France, Spain and Portugal, followed by
Italy and Belgium.
Bancassurance represents over 65% of the
premium income in Life Insurance in Spain,
60% in France, 50% in Belgium and Italy.
In these countries, in only ten years,
bancassurance has become widely recogni-
sed as a successful model.
In France, in the 1970s, banks had to contend
with a mature and highly competitive market
in banking. By making use of existing
legislation in insurance, bancassurance has
provided them with a new source of profit,
which served to diversify their banking activity
and optimise their choice of products, thereby
increasing customer loyalty. Consumers were
provided with simple solutions from a
“one-stop shop” addressing all their financial
concerns: short-term liquidity, estate and
retirement planning, property purchase,
protection against any unforeseen events in
everyday life.
In 2000, bancassurance accounted for 35%
of Life Insurance premiums; 60% of savings
premiums; 7% for Property Insurance and 69%
of new premium income in individual savings.
This success has made France the leading
individual savings insurance market in Europe.
In terms of premium income, it ranks first in
bancassurance.
Spain, like France, is among the most
developed markets in bancassurance. Today,
it represents over 65% of life insurance
premium income (approximately € 17 billion
in 2001), compared with 43% in 1992.
However, this high growth rate is not specifi-
cally due to bancassurance, rather the whole
of the life insurance market which has sustai-
ned a 30% increase per annum on average in
the past fifteen years. In the last decade, many
international, often European, alliances have
been made between banks and insurance
groups. This has concentrated the bancassu-
rance market which was originally highly
fragmented.
On the Spanish market, bancassurance
developed more quickly because of the
well-established network of regional building
societies which today account for 50% of Life
insurance premiums in the bancassurance
sector.
Portugal has recorded the highest penetration
rate in bancassurance, with 82% of the market
share, but it only represents approximately
€ 4 billion in premiums on a limited Life
insurance market.
 ... continued
Bancassurance enjoys
the most success in Europe
Bancassurance in Italy has been characteri-
sed by its rapid growth. The Amato Law of
1990, authorizing banks to own shares in
insurance companies, launched bancassu-
rance. This, coupled with the favourable tax
environment which prevailed between 1995
and 1998 further promoted Life insurance
products. Lastly, a substantial, well-established
banking network, combined with the Italian
public’s trust in banks contributed to the
development of this product. As a result,
bancassurers’ share of the market increased
from 8% in 1992 to 50% in 2002, representing
over 60% of new life insurance business,
including more than 70% of savings products,
either “Unit Linked” or “Index Linked”.
In Belgium, bancassurance has enjoyed rapid
growth in recent years. This trend has not
been hampered by a Life insurance market
Market share per distribution network
(percentage)
6 7 9 6
21
32 28
62 72 63
France Spain Italy
Banking networks Traditional networks
Source: The Insurance Argus – n°6781 of 12th April 2002
Bancassurance has not met with
the same success all over Europe
Although it enjoys a penetration rate in excess
of 50% in France, Spain, Italy and Belgium, other
countries have opted for more traditional
networks.
The Life insurance market in the UK is largely
in the hands of the brokers. Their market
share has increased from 40% in 1992 to 54%
in 1999. Sales agents also play an important
role on a market entirely regulated by the
Financial Services & Markets Act (FSMA)
which imposes very strict marketing condi-
tions. As a result, the banks have not managed
2 Bancassurance across the globe
largely dominated by the sale of products by
brokers, even if there are a variety of distribu-
tion methods available. It has been supported
by investments made by foreign companies,
mainly in Luxembourg. It also took advantage
of a rapidly expanding Life insurance market.
Lastly, the fact that many mergers, acquisitions
and company restructures have taken place
has brought banks and insurers closer
together. The five market leaders are members
of bank groups or insurance groups. With 56%
of the market share in Life insurance products,
bancassurance has become the leading
distribution network. It is characterised by a
large percentage of individual products
(35% excluding Unit linked products) and
a balance between savings products and
protection products.
2
14
30
86 77
56
12 17
Belgium United Germany
Kingdom
Direct selling network
to penetrate the market: their share reached a
ceiling of 15% in the early 1990s, and is
around 9% today. Although partnerships are
formed between banks and insurers, and
reforms in the distribution of Life insurance
products are expected, it is still difficult to
forecast growth in bancassurance.
In Germany, the market continues to be
dominated by general sales agents, even if
their market share has declined from 85%
in 1992 to 54% in 1999. This decline has
benefited both brokers and bancassurers,
...
 ... continued
Bancassurance has not met with
the same success all over Europe
whose market shares increased respectively
from 2% to 20% and 1% to 18% between 1992
and 1999. The fact that bancassurance has
met with little success can be explained by
existing regulatory constraints linked to
insurance products. Lastly, although the
bancassurers’ market share increased during
the 1990s, the numerous partnerships and
cross shareholdings made between banks
and insurers have also tended to act as a
barrier to new players on the market.
On other continents too, such as
America and Asia, bancassurance
meets with mixed response
In the United States, bancassurance is either
in the early stages of development or
non-existent. There are very few partnerships
between bankers and insurers, apart from
creditor insurance, and the fact that they do
not share the same information system does
not facilitate development. Today, the only pro-
ducts distributed by banks are savings pro-
ducts (fixed and variable annuities). Marketing
of a few protection products such as Long
Term Care or term insurance has only just
begun.
In several countries in Latin America, banks
have benefited from recent reforms –
financial deregulation, among others – by
selling insurance products across the
counter. An example is the Brazilian market
where private pension products are marketed.
Bancassurance also took advantage of the
large number of national and especially inter-
national partnerships which took place in the
1990s. For example, in Argentina and Mexico,
foreign insurers formed partnerships with local
banks which had well-established networks.
Today, bancassurance is well represented in
Argentina, and it continues to develop in
Mexico, Chile and Brazil.
What are the success factors
in bancassurance?
In countries where The most crucial success factor is undoub-
bancassurance tedly the legal and fiscal environment of the
has met with little country concerned. National regulations play
success, visiting
the bank often a major role here which was illustrated in Italy
does not come with the Amato Law authorizing banks to invest
naturally to in insurance companies. Conversely, the Glass
customers. Steagall Act slowed down the phenomenon in
the United States. Secondly, tax advantages
3 Bancassurance across the globe
In the Netherlands, a concentrated and
competitive market, where all the distribution
channels are represented, bancassurance
appears to be recognised as offering compe-
titive prices and a complete service from a
single sales outlet. Although brokers continue
to dominate the market, bancassurance has
gained significant market shares in recent
years, representing 18% of the market today,
and it should consolidate this position in the
future.
In Asia, markets have often been or will be
subject to deregulation, thereby authorizing a
wide variety of distribution methods.
In Thaïland, until quite recently, insurance
companies were not allowed to pay commis-
sions to banks. Today, any insurance product
can be distributed through the bank. Also,
many shareholding links between banks and
insurance companies are encouraging the
development of this distribution channel.
In Japan, the authorities have been gradually
deregulating the financial sector since the
1990s. Bancassurance was prohibited until
then. Today banks are distributing their
first authorized products: mainly creditor
insurance. They also have the right to
distribute life annuities since October 2002.
Faced with endemic deflation, coupled with
insurers having guaranteed higher rates than
the return on their assets, many players are
expecting a huge increase in bancassurance.
In South Korea, bancassurance should get
the green light by August 2003 due to
deregulation of the financial sector. This will
probably alter the structure of a highly
concentrated market: joint ventures with
foreign counterparts have already been
concluded.
encouraging personal savings: in France this
was one of the crucial factors of success.
Lastly, cultural and behavioural factors: the
good image of banks, their privileged
relationship with customers and the proximity
of banking networks as in France, Spain,
Italy and Belgium. In countries where
bancassurance has met with little success,
...
 ... continued
What are the success factors
in bancassurance?

such as the United Kingdom or the United
States, visiting the bank often does not come
naturally to customers.
A low penetration rate in life insurance,
encouraging foreign insurers to invest in
bancassurance can also have an important
impact. In fact these insurers often choose
alliances with local banks which have
well-established networks and are customer
oriented in terms of their proximity, such as
Spain and certain countries in Latin America.
The bancassurance model also has its
inherent success factors: its organisation,
The characteristics
of products sold
information system, training and remuneration
are essential. of its salesmen, sales methods, as well as the
actual insurance products sold.
An information system which fully integrates
insurance practices into the bank’s culture is
essential. It enables players to decentralise the
underwriting process as much as possible in
the bank, and centralise policy and claims
management in the insurance company.
Also, a successful marketing strategy neces-
sarily entails training and motivating banking
staff to sell insurance products by informing
them of the financial benefits.
Lastly, the characteristics of products sold are
essential. The insurance activity of a banking
Sara Fenelon, in charge of Bancassurance on the French market, sfenelon@scor.com
Marjorie Chevalier, in charge of the International Division market, mchevalier@scor.com
Ollivier Goualou, in charge of North Asia, ogoualou@scor.com
network often begins with products that are
linked to the banking activity such as individual
life insurance, credit and banking transactions
insurance (mortgages, consumer loans,
overdraft insurance, credit card cover…). By
distributing life insurance products the bank
increases its share of long term savings. By
distributing credit and banking transactions
insurance, it offers an additional service to its
customers. It provides them with easy access
to insurance, a simple method of payment and
advantageous financial cover due to group
rates. Even when bankers widen their range of
insurance products, the contracts on offer are
easy for the customer and salesman to
understand since they provide simple, low
premium coverage with very few options,
which afford a simplified underwriting
approach.
The ability to market insurance products
successfully through the banking networks
necessarily implies that the bank enjoys a
good reputation with a large base of regular
customers, and the marketing process is fully
integrated into the bank’s daily routine. It is
also absolutely essential that these products
be adapted to the banking network.

SCOR and bancassurance:

the ability to design simple products
Insurance products sold across the counter must be
simple. SCOR is able to share its product develop-
ment skills with its customers.
The main features of this simple product are its
limited number of options in terms of cover, its
low premium coverage, its easy access for
customers and coherent underwriting terms and
conditions. SCOR has the experience to assume
the difficult task of designing this type of product
in close co-operation with its customers. Lastly,
SCOR commits itself to the latter by reinsuring
the risk.

Editor Editing committee

Romain Durand Christian Mounis Division Vie
Life President Pierre-Yves Le Corre I, avenue du Général de Gaulle
Sub-editors René Lemaire 92074 Paris La Défense cedex
Tel: 33 (0) 1 46 98 77 65 Alain Chevreau France
Béatrice Julienne Miguel Alferieff www.scor.com
bjulienne@scor.com Dietmar Zietsch
Sébastien Bergeron
sbergeron@scor.com ISSN 1638-4024

4 Bancassurance across the globe