BANCASSURANCE
By Jean Louis PIQUET
April 14th, 2005
hannover life re ®
BANCASSURANCE
Introduction
Introduction
Products
How to sell ?
 Started in the 70's
Why entering into ?
 Take off in the 80's, with the development of unit linked product and
saving products
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
2
hannover life re ®
BANCASSURANCE Introduction
Introduction
Products
BANCASSURANCE MARKET SHARE (Life Insurance)
1993
1996
1999
Collected
Bancassurance
Traditional Insurance Company
51 %
49 %
59 %
41 %
60 %
40 %
61 %
39 %
62 %
38 %
Reserves
Bancassurance
Traditional Insurance Company
44 %
56 %
53 %
47 %
57 %
43 %
59 %
41 %
60 %
40 %
How to sell ?
Why entering into ?
Advantages
European overview
2002
2003
(Forecast)
The way to BA
Key of success
Potential risks
The Future
hannover life re ®
BANCASSURANCE
Introduction
Introduction
TOP TEN INSURANCE GROUP IN 2003
(Premium in Md EUR)
WW
Products
France
Life
Non Life
Axa
71.6
10.9
4.6
CNP
19.5
17.2
1.4
AGF
16.5
5.3
4.3
GROUPAMA
12.9
3.6
6.9
PREDICA / PACIFICA
11.4
10.7
0.7
European overview
GENERALI France
9.6
6.1
3.4
The way to BA
BNP Paribas Assurance
9.3
6.6
0.0
Sogecap
5.9
5.7
0.0
ACM
4.9
3.7
1.2
UAF
4.5
3.9
0.2
How to sell ?
Why entering into ?
Advantages
Key of success
Potential risks
Source FFSA
The Future
hannover life re ®
BANCASSURANCE
Introduction
But what is Bancassurance?
Introduction
Products
•
French Term
How to sell ?
•
Standardized Mass Product
Why entering into ?
•
Easy to understand / easy to sell
Advantages
•
Limited guarantee
European overview
•
Sold though a bank distribution channel
The way to BA
Key of success
Potential risks
The Future
5
hannover life re ®
BANCASSURANCE
Introduction

Products
What kind of products ?
Products
How to sell ?
Why entering into ?
Advantages
- Mainly life products that can be broken down in 3 categories
. Financial and repayment products
. Depositors products
. Simple standardized package products
European overview
The way to BA
Key of success
Potential risks
The Future
6
hannover life re ®
BANCASSURANCE

Products
Personal accident
Introduction
Products
 Credit Insurance
How to sell ?
Why entering into ?
 Mortgages / Mortgage Endowments
Advantages
European overview
 Estate management
The way to BA
Key of success
 Group pension plan / asset management
Potential risks
The Future
7
hannover life re ®
BANCASSURANCE
Products, Training and Profit
Introduction
Products
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
8
hannover life re ®
BANCASSURANCE
Introduction
How to sell ?

Bank network (branches, local office),

Direct and mail,

ATMS,

Telebanking,

World wide web.
Products
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
9
hannover life re ®
BANCASSURANCE
Introduction

Why ?
Bancassurance : why?
Products
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
- Diversification of banking activities
- Improvement of customer loyalty
- Convergences of bank and insurance activities
- Complementarity in economical cycles
- Complementarity of the risks
- To put on end to the market share's decrease on the saving products
- A new source of profit
- One contact bringing financial and insurance solutions
Potential risks
The Future
10
hannover life re ®
BANCASSURANCE
Why ?
Credit Life Insurance
Property Insurance
Introduction
Buy a
house
Products
Motor Insurance
How to sell ?
Why entering into ?
Child Education
Client
Buy a car
Advantages
European overview
Save for
retirement
The way to BA
Unit Linked Product
Key of success
Credit Life
Insurance
Potential risks
Life Insurance
The Future
11
hannover life re ®
BANCASSURANCE
Why ?
 For a Bank
• Intense competition :
Introduction
Products
How to sell ?
- Increase income generated
- Reduction of the Bank fixed cost
- Opportunity to increase productivity
- Risk diversification
Why entering into ?
Advantages
European overview
• Customers preference
- Shifting investment towards products with higher ROI
- Favourable tax
The way to BA
• Increase customer loyalty
Key of success
Potential risks
The Future
12
- Detecting the need
- Detecting cultural / social change
- Cross selling potential
- Client oriented
hannover life re ®
BANCASSURANCE
Advantages ?
Introduction
For Bank
Products
How to sell ?

Better hit ratio

Why entering into ?

Lower cost
Better processing technology
Advantages

Higher knowledge of potential needs.
European overview
The way to BA
Key of success
Potential risks
The Future
13
hannover life re ®
BANCASSURANCE
Why ?
 For an Insurance Company
Introduction
Products
• Source of new business
- Access to new client easily
- Geographic / Demographic new scope
How to sell ?
Why entering into ?
Advantages
• Wider range of products
• Products otherwise not feasible
European overview
The way to BA
Key of success
• Administration : Economy of scale
• Defensive positioning
Potential risks
The Future
14
hannover life re ®
BANCASSURANCE
Introduction
Advantages ?
For Insurers
Products
How to sell ?


Why entering into ?

Advantages

European overview


The way to BA

Key of success

Potential risks

Know customer -> risk assessments easier
Increase market penetration
Access to different market segment
Improve public image
Lower cost
Product that match the need (peace of mind)
Delivery at doorstep
Convenience in payment
Easy & automatic renewal
The Future
15
hannover life re ®
BANCASSURANCE

Introduction
European overview
France :
- 60 % of the market share
- 35 % of the market share (Term Life Insurance )
- 7 % of the market (Non Life Insurance)
- 69 % of the market (New Individual Saving)
- Bank establishing Bancassurance Company
Products
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success

Spain :
- 65 % of the market (Life Insurance)
- A 30 % growth in average since the 15 past years
- Alliance between Bank and Insurance Companies
- A regional specifity which quicken the Bancassurance set up
(Regional Saving Bank = 50 % of the premium)
Potential risks
The Future
16
hannover life re ®
BANCASSURANCE
Introduction
Products
How to sell ?
Why entering into ?
Advantages
European overview
 Portugal :
- 82 % of the market share
- But a rather small market (= population 4 Mios)
 Italy :
- Amato Law 1990
- From 8 % market share in 1992 to 50 % in 2002
- 70 % market share for saving product ("unit linked" or "index linked")
European overview
The way to BA
 Belgium :
Key of success
Potential risks
The Future
17
- The first Insurance Groups are Bancassurer
- First distribution network
- 56 % market share
hannover life re ®
BANCASSURANCE
European overview
 UK :
Introduction
Products
- From 40 % Broker's market share in 1992 to 54 % in 1999
- From 15 % Bancassureur's market share in 1990 to 9 % in 2003
How to sell ?
 Germany :
Why entering into ?
Advantages
European overview
- Direct sale forces : 85 % in 1992 – 54 % in 1999
- Broker : 8 % in 1992 – 20 % in 1999
- Bancassurance : 1 % in 1992 – 18 % in 1999
- Growth of markets shares of Bancassurance due to agreement between
Bank and Insurers.
The way to BA
Key of success
Potential risks
The Future
18
hannover life re ®
BANCASSURANCE
Introduction
The way to achieve BA
 Distribution agreement (exclusive or not)
Products
How to sell ?
 A Bank wholly or partially acquires a
Company
Why entering into ?
Advantages
European overview
 The Bank start establishing a Insurance
Company
The way to BA
Key of success
Potential risks
The Future
19
hannover life re ®
BANCASSURANCE
Introduction
The way to achieve BA
 Distribution agreement (exclusive or not)
Products
• Strength :
- No cost for the bank
- Product can be branded or co – branded
- Basic training for bank employee
• Weakness :
- Need a close cooperation between
Insurance Company / Bank
- No gain for Database access (or nearly
nil)
- Insurance products must match the need
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
- Low reactivity to cultural and social
change.
The Future
20
hannover life re ®
BANCASSURANCE
Introduction
Products
How to sell ?
 A
The way to achieve BA
Bank wholly or
Company
• Strength :
Why entering into ?
partially
acquires
a
- Easier access to Database
- Dedicated products
- Better cooperation between Insurance
Company and Bank
Advantages
European overview
The way to BA
Key of success
• Weakness :
- Higher cost for the bank
- Higher reactivity to the change
- Bank employees need a training
Potential risks
The Future
21
hannover life re ®
BANCASSURANCE
Introduction
Products
How to sell ?
The way to achieve BA
 The Bank start establishing a Insurance
Company
• Strength :
- Dedicated products
- higher efficiency in detecting the needs
and customers habits
- Very close cooperation between
Insurance Company and Bank
• Weakness :
- Need staff training
- High capital cost
- Need to acquire Insurance skill
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
22
hannover life re ®
BANCASSURANCE
The way to achieve BA
 Distribution agreement :
• OIB & MIC
Introduction
• NBK & ALICO
Products
• BBK & BKIC
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
 Merge and Acquisition :
• ING (Netherland) – National Nederlanden & NMB
Postbank
• Arope Insurance (Blom Bank)
• Dubai Islamic Bank & Aman Bank
• Citigroup / Travelers Life & Annuity
Key of success
Potential risks
The Future
23
 Establishing a new company :
• Bancassurance Lebanon (CA / Fransabank / Libano
Française)
• Sogecap / NSGB Life (Société Générale) in Egypt
• Assurance Biat (Natexis) in Tunisia
hannover life re ®
BANCASSURANCE
Key of success
External Factors
Introduction
Products
How to sell ?

Legal & Fiscal Environment
i.e. Amato Law in Italy (+)
i.e. Glass Steagal Act in U.S. (-)
Why entering into ?
Advantages
 Low rate of Insurance penetration
European overview
The way to BA
Key of success
Potential risks
The Future
24
hannover life re ®
BANCASSURANCE
Key of success
Internal Factors
Introduction
Products

Organisation / IT System integration

Remuneration / Training

Public image

Products sold
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
25
hannover life re ®
BANCASSURANCE
Introduction
Potential Risks

Lack of sufficient experience

Complexity of the structure making supervisory oversight
more difficult

Difference of culture between Bank and Insurance

Inadequate capital allocation

An aggregate risk exposure rather than acting as a hedge
Products
How to sell ?
Why entering into ?
Advantages
European overview
The way to BA
Key of success
Potential risks
The Future
26
hannover life re ®
BANCASSURANCE
The Future
 Shop Insurance :
Introduction
Products
- Carrefour
- Auchan
How to sell ?
Why entering into ?
Advantages
European overview
 Insurance Bankers :
- AGF (Banque AGF)
- AXA (Banque Directe -> AXA Banque)
- Prudential (Egg)
The way to BA
Key of success
Potential
The
Future
risks
The Future
27
hannover life re ®
Introduction
Products
How to sell ?
Why entering into ?
Advantages
Thanks for your
attention!
European overview
The way to BA
Key of success
Potential risks
The Future
28
hannover life re ®