by darnardo1 » Mon Jun 15, 2009 01:58 am
I'd like to satrt a discussion on bancassurance...
In the US bancassurance only accounts for 2% of the life insurance market but in Europe it averages 30% with wide variances per country...
In the varying bancassurance models, the joint venture type of ownership...Do the banks also underwrite the insurance along with the insurer? WHat are the specifics of this kind of ownership?
In the US bancassurance only accounts for 2% of the life insurance market but in Europe it averages 30% with wide variances per country...
In the varying bancassurance models, the joint venture type of ownership...Do the banks also underwrite the insurance along with the insurer? WHat are the specifics of this kind of ownership?
Posted: Mon Jun 15, 2009 05:41 am Post Subject:
Hi darnardo1,
Do the banks also underwrite the insurance along with the insurer?
It's certainly a challenge between the banks and the carriers to organize their profit out of this new opportunity.They are going for it since the banking networks would allow a face-to-face interaction with the consumers which is often very important at selling life insurance. Since, life insurance is being sold mainly through the independent agents which is costly, it would be beneficial for the carriers to utilize so many potential customer under one bank-database.
Many potential banking consumers are yet to obtain life insurance. Don't you think this kinda partnership between banks and carriers would help spot such consumers?
Don't you think it would see an upsurge in the volume of life insurance sales through the banks in US (which is just 1% at present)?
Steven
Posted: Tue Jun 16, 2009 12:52 am Post Subject:
Don't you think it would see an upsurge in the volume of life insurance sales through the banks in US (which is just 1% at present)?
I think the US is at the bottom of a steep learning curve with regards to bancassurance. It's only a matter of time before banks learn how to market life insurance products then they will be shooting fish in a barrel. If I were an agent, I'd be looking to become an FA for a bank right now.
Since banks have ownership of valuable proprietery information they will have an advantage going into the market. Afterall who doesn't have a bank account?
In your professional oppinion, list the following in order of importance to the success of bancassurance:
Consumer awareness (That insurance can be purchased through banks [currently only 47%])
Tax Benefits
IT Integration
Bank's level of Commitment (Staff training, incentives, marketing etc)
Banks Reputation
Banks Penetration (# of branches)
Products (simple bundled products to complex tailored products)
Posted: Tue Jun 16, 2009 05:03 am Post Subject:
Hi,
I'd list the factors in the following way-
Bank's Reputation
Tax Benefits
Bank's level of Commitment (Staff training, incentives, marketing etc)
Products (simple bundled products to complex tailored products)
IT Integration
Bank's Penetration (# of branches)
Steven
Posted: Tue Jun 16, 2009 05:40 am Post Subject:
Hi Darnardo,
Since banks have ownership of valuable proprietery information they will have an advantage going into the market. Afterall who doesn't have a bank account?
Why do you feel that possession of valuable information would actually help the banks in achieving sucess in insurance business?
I hope you understand that the insurance companies and banks function quite differently.
Posted: Tue Jun 16, 2009 05:47 am Post Subject:
Why do you feel that possession of valuable information would actually help the banks in achieving sucess in insurance business?
Since banks are privy to such information as credit reports and credit card purchase information they are able to avoid the adverse selection problems that insurers frequently incur.
Posted: Tue Jun 16, 2009 12:57 pm Post Subject:
Hi Darnardo,
Since banks are privy to such information as credit reports and credit card purchase information they are able to avoid the adverse selection problems that insurers frequently incur.
Don't you think selection problems are more with the banks due to their large customer-databases?
I didn't quite get the factors you're specifically pointing to.
Steven
Posted: Tue Jun 16, 2009 01:12 pm Post Subject:
Hey Darnardo..
Tax Benefits
IT Integration
Bank's level of Commitment (Staff training, incentives, marketing etc)
Banks Reputation
Banks Penetration (# of branches)
Products (simple bundled products to complex tailored products)
Shouldn't the "Tax Benefits" rank higher in your list?
Does the "Bank's Reputation" really matter?
Roddick
Posted: Wed Jun 17, 2009 05:09 am Post Subject:
I didn't quite get the factors you're specifically pointing to.
Hi Steven
The adverse selection problem is a common problem in economics. See the wikipedia definition below:
It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information (i.e. access to different information): the "bad" products or customers are more likely to be selected.
Shouldn't the "Tax Benefits" rank higher in your list?
Does the "Bank's Reputation" really matter?
Hi Roddick
Tax benefits on purchasing insurance products differ in every country. In some countries consumers are not affected by them as much. Furthermore there are no differences between the tax benefits when purchasing insurance products through a bank or through an independent agent.
See China for an example, in 2006 16.3% of all life insurance was sold through banks. This is despite both low tax benefits on insurance products and low consumer awareness (37%). Reputation however is strong in China where banks are less dynamic. Bank names have been around for generations.
In America life insurance sold through banks was only 2% (2006). In addition, 52% of US consumers are aware that insurance products can be sold through banks. This low market share is despite various tax incentives on life insurance products. Many believe this is due to the banks reputation, tight banking regulation as well as the long divisional history of banks and insurance companies.
Posted: Wed Jun 17, 2009 08:30 am Post Subject:
Thanks for your explanation.. :)
Posted: Wed Jun 17, 2009 08:52 am Post Subject:
Since banks are privy to such information as credit reports and credit card purchase information they are able to avoid the adverse selection problems that insurers frequently incur.
It’s specifically said that one's insurability shouldn't be adjudged by his credit history. Though P&C insurers are increasingly looking at the credit scores of applicants, I'm not aware if the life/health insurers doing the same too.
Also, apart from that insurance underwriting takes into account many other aspects. Therefore, the possession of privy information might not help the banks entirely in the business of insurance. What do you say?
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