bancassurance - trends and development prospects
TRANSCRIPT
Bancassurance - trends and development prospects Case study based on the Italian market and analysis of the
market potential in Poland
Presented by
Ed Morgan
May 18, 2016
Warsaw
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Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
3
Why is bancassurance penetration relatively low in Poland
compared to Southern and Western European countries?
Looking over a long time horizon (10 years) we can see that in Southern and Western
European countries like France, Italy and Spain, bancassurance has been a dominant
channel for life insurance and a growing channel for non-life
In this talk we will examine why the Polish bancassurance market has not had as much
success as these other markets, taking Italy as an example.
The lower penetration of non-life in Italy can be attributed to lack of development of
MTPL in particular
Life Market Share Non-life Market Share
Source: Insurance Europe
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Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
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Evolution of product offering
Creditor protection
Simple savings products
Standalone protection,
Home insurance
Motor
Retirement savings
Over a period of >20 years we have seen a gradual evolution of the product offering from
simple creditor protection products and tax advantaged savings products to a wide range
of different propositions
There are various driver for this growth including low interest rates reducing banks
interest margins and requiring them to look for alternative sources of revenue.
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Italian bancassurance market – trend in production of
various protection lines
0
500
1000
1500
2000
2500
3000
3500
2010 2011 2012 2013 2014
Individual protection –term insurance
Individual protection –other
Group protection
LTC and CI
Accident
Sickness
Fire and natural forces
Other damages toproperty
Financial losses
Legal expenses
Assistance
Figures in EUR m
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Different bancassurance models
Different bancassurance models have been realized during the years:
a. Captive bancassurance company (for example Credit Agricole/ Eurizon/Intesa) – this
follows the model adopted by leading French banks and allows the full integration of
activities
b. JV between company and bank (AxA-MpS, Unipol-BPER/BPSondrio, BPM-Covèa,
Fondiaria-BancoPopolare, BCC-Cattolica, BPVi-Cattolica….). In recent years formerly
captive companies have been put on the market (Arca, MpS, BCC, now Carige..),
which can help the banks to raise capital and the insurers to secure captive
distribution
c. Exclusive distribution agreement (Desio Vita, formerly owned by the bank, now 100%
owned by Helvetia) – for some of these cases effectively goodwill has been paid for
the exclusive distribution
d. Non-exclusive distribution agreement (some ‘Casse di Risparmio’)
e. In the past a number of bancassurance companies sold through multiple banks (e.g.
Arca Vita, Eurovita etc), but this model has become less common, in part due to
consolidation in the banking sector.
f. Some bancassurers are using a captive or JV for the mainstream products and a
specialist provider for more niche products like some types of protection
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Italian Bancassurance Market – Key Players Life
INTERNAL RESEARCH FOR DISCUSSION PURPOSES
2014 Premium
income (EUR bn)Main Channel
POSTE VITA 15.4 Banks (Post Office)
INTESA SANPAOLO VITA 15.3 Banks
GENERALI ITALIA 7.4 Agents
GENERTELLIFE 5.9 Financial Promoters
FIDEURAM VITA 5.8 Financial Promoters
CREDITRAS VITA 5.4 Banks
MEDIOLANUM VITA 5.2 Financial Promoters
BNP PARIBAS CARDIF VITA 5.1 Banks
ALLEANZA ASSICURAZIONI 4.1 Agents
CREDIT AGRICOLE VITA 3.9 Banks
UNIPOLSAI ASSICURAZIONI 3.7 Agents
ALLIANZ 3.0 Agents
POPOLARE VITA 3.0 Banks
CNP UNICREDIT VITA 2.8 Banks
AXA MPS ASSICURAZIONI VITA 2.3 Banks
OLD MUTUAL WEALTH ITALY 1.7 Various
AVIVA 1.6 Banks
LOMBARDA VITA 1.5 Banks
AVIVA VITA 1.4 Banks
BIPIEMME VITA 1.4 Banks
• Poste Vita was a relatively late starter in the Italian bancassurance market. For example in 2002 it was only in 5th place in the market with EUR 2.8 bnof premiums.
• The company is wholly owned by the Italian Post Office
• It offers a simple range of products through its very wide range of Post Offices
• The banking crisis in 2008 and beyond reduced confidence of customers in banks and Post Vita was able to further improve its market position
Ownership model: wholly owned
“captive”
• Intesa Sanpaolo Vita grew from the merger of a number of the bancassurance companies of a number of banks which themselves merged
• The also has a large Irish subsidiary selling mainly unit linked business
• The Company is a captive, after buying out the joint venture share of Generali several years ago
Ownership model: wholly owned
“captive”
The table below shows the leading 20 life
companies with bancassurers highlighted in
yellow.
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Italian Bancassurance Market – Key Players Life
• Unicredit works through a number of joint ventures with different partners (Allianz-RAS, CNP and also Aviva, although this partnership is less active).
• Companies have generally been 50/50 joint ventures, backed by shareholdings from the insurers in the bank.
• The network is divide between the different partners and a single organisation within Unicreditnegotiates products with the different partners
• Product offering are usually very similar between the different partners and the partners try to avoid internal competition
Ownership model: Joint Venture
• Axa bought 50% of three bancassurancecompanies of the Montepaschi di Siena group in 2007.
• They were an Italian and an Irish life company as well as an Italian non-life company
• Due to changes in the strategy of AXA and some negative events within the bank, production is significantly lower than at the time of the acquisition and AXA has refocused its attention more on protection
Ownership model: Joint Venture
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The non-life bancassurance market is less well developed
There are a number of specialist players but they for example Poste Assicura had EUR
84m of premiums in 2014 compared to EUR 15.4 bn of life premiums from Poste Vita
Even some formerly bank owned companies (e.g. ex-Carige Assicurazioni) mainly sell
through agents
Some of the leading non-life bancassurers are shown below:
Italian Bancassurance Market – Key Players Non-Life
Name RankPremiums
(EUR m)
INTESA SANPAOLO ASSICURA 31 209
AXA MPS ASSICURAZIONI DANNI 37 160
ARCA ASSICURAZIONI 44 103
CREDITRAS ASSICURAZIONI 45 102
AVIPOP ASSICURAZIONI 70 48
CREDIT AGRICOLE ASSICURAZIONI 71 44
SOGESSUR S.A. 75 38
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Below a typical organization model in a major Italian bank is described.
2 main segments, i.e. Retail and Corporate.
Retail clients were then divided into:
– “Family”, i.e. clients with deposits < 25k Euro. These clients are followed by the “basic”
employees, i.e. tellers or those working in the common areas in the banks, and usually the less
expert ones. Common bancassurance products for them include accumulation plans (ideally small
deposits, but trying to have a constant incoming cashflow), and protection products for mortgages,
loans, credit card debt covers and similar.
– “Affluent” clients, i.e. deposits > 25k, < 1-1.5m. These are usually followed by a more expert
employee, often in a private room, or sometimes by the branch director or deputy himself. The
product usually sold to these clients are endowments, often as a single premium, so with an
investment view, rather than a saving view. These clients, though, don’t usually have specific tailor
made products built for them, but only products that could suit them better. They are then divided
into Upper and Lower affluent (e.g. <250k, >250k).
– Private clients (> 1m or 1.5m Euro). Followed by a specific team, that often visit them at home also.
Specific products are prepared for them, with lower loadings or likely higher returns.
Corporate clients are usually followed by the deputy or branch director, if they were small ones, and by specific centres when bigger.
Banks selling model
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Typical Conditions in Exclusive Bancassurance
Agreement
Most bancassurance agreements which have been negotiated as part of the creation of
JV companies include exclusivity clauses which give the JV company exclusive right to
distribute business unless mutually agreed or if a product cannot be provided (see
below).
The company’s commitments are defined. This might typically include:
– Provision of relevant material such as contractual forms
– Ensuring products distributed are compliant with all relevant laws
– Providing adequate customer service
The banks commitments include promoting the product, only using material approved by
the company, monitor sales practices to ensure that they are compliant with regulations,
ensure customers are adequately informed etc.
Typically there will be a provision in the joint venture agreement which deals with the
case in which the distributor (e.g. the bank) indicates a need to offer products not
available from the JV company. In this case the JV company has effectively a right of
first refusal to offer the products, but if it cannot do so within a reasonable timescale, the
bank may use a third party supplier
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Reasons for Success of Bancassurance
24 April 2013
Bancassurance has been for many years been the leading channel in the Italian market.
Its success can be attributed to many factors including
High level of trust in banks from Italian consumers, although this has been eroded in
recent years due to a number of scandals (most recently that of Banca Montepaschi
di Siena). This contrasted with a sometimes mixed feeling towards insurers who
were very associated with compulsory motor business
Product innovation – the Italian market used to be more or less a tariff market and
bancassurers were the earliest movers in introducing products like unit linked and
more flexible savings products
Low marginal costs for banks in selling insurance compared to life companies – this
was helped by fairly limited regulations directly around the selling process
Banks needed to and were willing to extend their traditional activity in part to
substitute reduced interest margins as interest rates dropped in the Euro
convergence period. This was particularly the case of Unicredit
Insurers like AXA, Aviva and Allianz saw bancassurance as a way of gaining
important market shares
French bancassurers like BNP-Paribas and Credit Agricole have also imported
successful practices from France
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Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
15
Primary banking groups with their Subsidiary Insurers - Italy
Banking Group Subsidiary Insurance Company Comments
Gruppo Bancario
Intesa Sanpaolo Intesa Sanpaolo Vita
The bank resulted from a major banking merger and now the
insurance operations have largely been integrated into a
single captive bancassurer (buying out Generali from
previous JV)
Gruppo Unione di
Banche Italiane Aviva Vita and Lombarda VitaThis was the result of a previous process to sell stakes in the
bancassurance companies of the group
Gruppo Bancario
Veneto Banca Apulia Previdenza
Gruppo BipiemmeBipiemme Vita S.p.A.
Recently created a JV with the French insurer COVEA,
having previously been a captive company
Gruppo Monte dei
Paschi di Siena Axa-MPS AXA won a major process to buy 50% of Montepaschi Vita
Gruppo Banco
PopolarePopolare Vita S.p.A., Aviva
Assicurazioni Vita
These shares came from a major process similar to the MPV
one, but were divided between Aviva and Fonsai
Gruppo UnicreditCNP UniCredit Vita S.p.A, Aviva S.p.A,
CreditRas Vita S.p.A
Unicredit is in a unique position in having several insurance
partners – partly for historic reasons – but this gives it more
bargaining power with these partners
Gruppo Bancario
Cariparma Credit
AgricoleCrédit Agricole Vita CA follows its captive bancassurance model from France
Gruppo BNP
Paribas Cardif Vita S.p.A., BNL VitaCardif sells through third party banks whereas BNL Vita was
bought out by BNP Paribas, which had acquired BNL itself
earlier
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Primary banking groups with their most important banks
and number of branches - Italy
Gruppo Bancario Intesa
Sanpaolo
Intesa Sanpaolo Banco di NapoliCassa di Risparmio del
Veneto
Cassa di
Risparmio di
Firenze
Cassa di
Risparmio in
Bologna
1.955 700 398 307 215
Gruppo Unione di Banche
Italiane
Banca Popolare di
Bergamo
Banco di Brescia San
Paolo CabBanca Carime
Banca Regionale
Europea
Banca Popolare
Commercio e
Industria
359 325 261 257 233
Gruppo Bancario Veneto
Banca
Veneto Banca S.C.P.A. Banca Apulia
Cassa di Risparmio di
Fabriano e
Cupramontana
326 105 61
Gruppo Bipiemme
Banca Popolare di
MilanoBanca di Legnano
547 206
Gruppo Monte dei Paschi
di Siena
Banca Monte dei Paschi
di SienaBanca Antonveneta
2.295 376
Gruppo Banco PopolareBanco Popolare Credito Bergamasco
1.648 239
Gruppo UnicreditUnicredit
4.276
Gruppo Bancario
Cariparma Credit Agricole
Cassa di Risparmio di
Parma e Piacenza
Banca Popolare
Friuladria
Cassa di Risparmio della
Spezia
609 204 73
Gruppo BNP Paribas
Banca Nazionale del
Lavoro
895
17
Relations of banks and insurers on the Polish market
Source: prnews.pl, press releases
*including clients of BGŻOptima
BankAssets
(bPLN)
No of clients
('000)
Own
branches
Branches +
agencies and
partnerships
Relation with insurers
PKO BP 262.4 8,982 1,277 2,158 Insurer within group
Bank Pekao SA 165.8 5,089 975 975According to news looking for an
insurance partner
BZ WBK 125.5 4,300 723 837 JV with Aviva
mBank 118.8 4,967 183 245 Former own insurer acquired by AXA
ING Bank Śląski 106.1 4,100 395 395 Insurer within group
Getin Noble Bank 71.5 2,189 277 476 Insurer within group
Bank Millennium 66.1 1,951 411 411
Bank BGŻ BNP Paribas 63.0 1,654* 486 508 Insurer within group
Citi Handlowy 49.4 711 45 45 Intensified cooperation with Warta
Alior Bank 40.0 2,461 328 851 PZU owns over 25% of Alior's shares
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Productivity per Branch - indications
Full data on productivity for Italy and Polish bancassurance is hard to obtain on an
exactly comparable basis. However we can look at some figures from dedicated
bancassurance companies:
It can be seen that levels of non-
life production are not very
different between the two
countries, but that life production
is much higher
This can be seen as being driven
primarily by the successful sales
of savings products.
Note further that almost all Intesa
Sanpaolo production is traditional
(“endowment”) and further unit
linked production is sold on a
cross border basis by the Irish life
company of the group
Production per branch in EURm in 2014
Italy Poland
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Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
20
Challenges for Polish Insurance Market/opportunities in
bancassurance
The Polish insurance market is facing a whole series of regulatory and legal challenges
which are too long to go into here, but make the future evolution very unpredictable
The agency sales model in its historic form is probably no longer viable except for the
most efficient players
Trends in bancassurance partnership model are uncertain, but we may see some
combination of more dedicated models for mainstream products, but use of specialised
providers for more niche products
The potential for bancassurance can be realised, but only with a combination of:
– Working hard to develop value and integration of partnerships
– Investing in more sophisticated products and associated training
– Looking closely at all aspects of the business model
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Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
22
Conclusions and Predictions
Mid-term growth of bancassurance market share towards the highest levels seen in
Europe seems a probable outcome when we consider:
– Bancassurance has much lower marginal selling costs than traditional channels like
agencies
– In particular we do not believe the historical agency sales model is sustainable without
changes in Poland. Competition from banks is likely to accelerate this
– The low interest rate environment squeezes other margins of the banks and make
insurance intermediation an attractive proposition
However there are some “clouds” which may slow down this trend:
– Regulator/consumer protection action is likely to make it hard to sell very high margin
business
– Move to digital can (a) compete with banks on cost (b) reduce banks contact with clients
and hence opportunities for selling
We would expect:
– Trend in commissions from premium based to asset based for savings business
– More investment in sophisticated products and sales training
23
Development of the life insurance
Austria
Belgium Switzerland
Czech Republic
Germany
Spain
Finland
France
Greece
Italy
Netherlands
Poland
Portugal
Sweden
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0% 5% 10% 15% 20% 25%
Lif
e In
su
ran
ce
Pe
ne
tra
tio
n
Expense ratio
Source: Generally data is from Insurance Europe (except Germany expenses). Expenses are average of available data over the last10 years as a percentage of earned premiums. Life insurance penetration is the latest available figure as percentage of GDP.
Milliman’s analyses show that there is an inverse correlation between the development of the life market and the expense ratio (and this is quite independent of state of the economy – look at France and Portugal and Germany and Greece). We note that many of the relatively more developed markets have an important share of bancassurance.
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This presentation is intended solely for educational purposes and presents information of a
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