While 80.5% of life insurance is sold through banks in Brazil, just 12.5% goes through bank distribution in the UK which reflects the wide variation across the world of the involvement of banks and other lending institutions, the ‘Bancassurance in Global Markets’ report revealed.
Based on an investigation of over 1,300 banks and other lending institutions in 16 developed and emerging economies in the Asia-Pacific, European and Latin American regions, the research also showed that there were high bank share distributions for life insurance in France, Italy, South Korea and Spain, and for non-life insurance in Brazil, Chile, India, South Korea and Spain.
Countries with the lowest bank distributed life insurance were Chile, India, Japan, the UK and Vietnam and for non-life insurance in China, Germany, Italy, Japan and Vietnam.
Tobias Schneider, a consultant at Finaccord, said: “Analysed by product and country, there are some interesting anomalies. 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."
Analysis of the operating models used by banking institutions to sell different types of insurance showed substantial differences across these countries, reflecting both the structure of the underlying market and regulatory issues.
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.
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, Finaccord stated.
Overall 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.
The share of the bancassurance channel in Indonesia’s life insurance market grew from around 25% to 41% between 2007 and 2012, which replaced agents as the main distribution channel.
But the share of bancassurance in Europe’s advanced economies “is likely to have 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 but also because alternative distribution systems tend to be stronger here”.
To see the distribution share of the bancassurance channel in life and non-life insurance in all 16 major global markets, click here.