Rise of Bancassurance An Asia experience

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Rise of Bancassurance An Asia experience
International Insurance Society Taiwan, 13-16
July 2008
David Fried Group General Manager Regional Head
of Insurance Hongkong and Shanghai Banking
Corporation
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Contents

• Global Drivers
• Aging population brings in opportunities
• Bancassurance

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Opportunities in Asia
Insurance markets in Asia are at different stages
of development
Bancassurance is the fastest growing channel
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Why now?
Asia opportunity paradigm shift in insurance
spend as GDPs hit threshold
Life premiums/GDP ()?
Potential
Taiwan (1978)?
Japan (1976)?
South Korea
Australia
Malaysia
Philippines
China (1982)?
India
Current penetration of emerging markets
Thailand
Vietnam (1996)?
Hong Kong (1990)?
Singapore
Indonesia
Real per capita GDP, US 000
Data series of penetration start from 1970
unless specified. Real per capita GDP in log
scale. Source Swiss Re Economic Research and
Consulting
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Emerging Markets comprise 10 of world premiums
skewed to Life
Top 10 Countries 87 of Life Market
US0.33tn
Life
Top 10 Countries 64 of GI Market
GI
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Evolving customer needsa Golden Opportunity for
BanksOlder customers have different financial
needs
Financial needs map

• Over 50s possess 70 of all financial assets
• These individuals and their assets need
  protection (insurance) and investing no longer
  borrowing
• Ageing is accelerating this shift as old
  borrowers de-leverage
• Equally applicable in Developed and Emerging
  Markets
• This sea change too big an opportunity to miss
  and should build on HSBC credit credentials

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Why now?People are aging Percentage of total
population aged 60 years or over in 2050

• but will have increased significantly in many
  countries by 2050

Source UN Population Ageing 2006
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Bancassurance - catching on globally..

• France the largest bancassurance market, 62 of
  new premiums in 2005 earned through bank
  networks (favourable legislation, taxation)

USA 1999 legislation allowed insurance sales
through banks but the expected revolution
hasnt materialised (low awareness, low growth)
UK with 20 total premiums collected,
bancassurance lags in market penetration
(dominance of IFA sales force)
China gt30 of new business from bancassurance
(heavily biased by SP products)
Sth Korea since regulatory changes in 2003,
bancassurance has exploded. New Business Apr 2006
through Jan 2007 accounted for 46collected
premiums (heavily biased by SP roducts)
HK 38 bancassurance weighted penetration in
2007 (legislation, low interest rates, bank
expertise)
Others Vietnam circa 0.5 penetration in 2005,
Indonesia circa 20 in 2004 up from 5 in
1998 Malaysia circa 45 in 2005.

• Watson Wyatt Data

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Bancassurance a growing success in Asia
New Premium from bancassurance as a percentage of
total New Premium
Source various sources, Watson Wyatt and Swiss
Re reports
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Meeting Stakeholders Needs

• A three-way all-win solution
• Maximising business performance and potential

One-stop shop, holistic solutions
Customers
Bank
Insurer
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Integrated bancassurance defines where customers
are
Private Banking
Global Banking and Markets
Global Institutions
HNWI
Corporate
Mass Affluent
Commercial Banking
Personal banking
SME
Mass Market
Global product (Credit Cards)?
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Products align with different market segments
ADVISORY
The selling model(s) chosen impacts product,
distribution channel, staff selection and
training, marketing, sales processes and support
etc
NEEDS BASED
4. Advanced standalone
Sales complexity increases
3. Simple standalone / packaged

• As per Advanced Stand-alone but formal
  recommendations made

TRANSACTIONAL

• Whole life
• Endowments
• Complex riders
• Critical Illness
• Income Protection
• Unit Linked Life
• Annuities

1. Targeted outbound for simple products

• Personal Accident
• Home Contents
• Travel
• Basic Term

• Mortgage Reducing Term (cross sales for Fire
  buildings and contents)?
• Creditor on Credit Cards
• Motor (with car loans)?

• Accidental Death
• Personal Accident
• Hospital Cash

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Key is distribution. Underwriting automatically
follows
Distribution
Manufacturing
Client/insured
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5
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Invest-ments
Channel
Brand
Product
U/W
Claims
Admin
Life, Pensions Investments (LPI)?
gt20
gt30
Return on Equity (ROE)?
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• Insurers
• Support and relationship building with banks
• Understanding of banks and their needs
• More internal support, blueprints, regional or
  global academies within companies
• Benchmarking against the competition

• Banks
• Develop expertise, understanding and models
• Beauty parades, developing JVs and exclusive
  relationships
• Seeking value creation rather than just fee
  income
• Starting to see the value in manufacturing and
  building their own

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Align tasks performed with channel functionality
A bancassurance model leverages ALL distribution
channels for different stages of the sales cycle
Lead generation
Qualify sale
Diary management booking
Close sale
Post sales service
Account management
Branches
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Internet
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Telephone
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F2F (FPMs)?
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Good
OK
Poor
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Different Bancassurance Models
Integrated
Insurer
Bank
Agents

• Agents to place at bank branches
• Mine on banks client base - telemarketing

• No agent at branches
• Banks RMs to sell

Non -integrated
Bank
Insurer
Insurer
Bank
Brokers model
Partnership - Leads referral from bank on
commercial business brokers to recommend business
Broker
Bank
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Thank youQ A