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 Posted: Mon Jun 15, 2009 1:58 am Post subject: bancassurance |
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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? |
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darnardo1
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| Posted: Mon Jun 15, 2009 5:41 am Post subject: |
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Hi darnardo1,
| Quote: | | 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 |
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steven
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| Posted: Tue Jun 16, 2009 12:52 am Post subject: |
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| Quote: | | 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) |
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darnardo1
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| Posted: Tue Jun 16, 2009 5:03 am Post subject: |
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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 |
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steven
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| Posted: Tue Jun 16, 2009 5:40 am Post subject: |
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Hi Darnardo,
| Quote: | | 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. |
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jeorge
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| Posted: Tue Jun 16, 2009 5:47 am Post subject: |
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| Quote: | | 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. |
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darnardo1
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| Posted: Tue Jun 16, 2009 12:57 pm Post subject: |
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Hi Darnardo,
| Quote: | | 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 |
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steven
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| Posted: Tue Jun 16, 2009 1:12 pm Post subject: |
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Hey Darnardo..
| Quote: |
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 |
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roddick
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| Posted: Wed Jun 17, 2009 5:09 am Post subject: |
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| Quote: | | 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.
| Quote: | 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. |
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darnardo1
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| Posted: Wed Jun 17, 2009 8:30 am Post subject: |
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Thanks for your explanation..  |
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steven
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| Posted: Wed Jun 17, 2009 8:52 am Post subject: |
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| Quote: | | 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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jeorge
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| Posted: Thu Jun 18, 2009 12:36 am Post subject: |
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I don't know the ins and outs of insurance underwriting. But if a clients who says he has a clean bill of health and his last major credit card purchase was a MRI scan a week before he applies for life insurance, I assume it'd be hard to ignore...
I don't know any bancassurers personally so all I have is theory but as the proverb says "There is no knowledge that is not power" |
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darnardo1
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| Posted: Thu Jun 18, 2009 5:26 am Post subject: |
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| Quote: | | But if a clients who says he has a clean bill of health and his last major credit card purchase was a MRI scan a week before he applies for life insurance, I assume it'd be hard to ignore |
Sure it'd be hard to ignore. But credit report isn't the only document based on which the insurer would write the policy. They would pull a report from Medical Information Bureau to see how healthy you are. And, also may require you to undergo health check-ups before accepting your business. |
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jeorge
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| Posted: Thu Jun 18, 2009 8:08 am Post subject: |
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Good point jeorge
But what about other (non credit) information that the banks have. Banks know so much about a person; travel habits, work, family size even how many times you eat at greasy burger or frequent cheers.
Well this one has had mbership at the local health club for the past several years...sign him up!
theoretically the banks should be in a better position to evaluate risk. Where they need to improve on is how to sell life insurance as things often seem to be purchased at banks and not so much sold. |
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darnardo1
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| Posted: Thu Jun 18, 2009 9:04 am Post subject: |
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Well, a life insurer would ask the similar questions to the applicant prior to issuing the policy. An insurer would ask questions about-
* The nature of your job
* Height & weight
* Medical history
* Hobbies/adventure sports
* Smoking & drinking habit
* Family history
* Number of dependents
I don't say that the insurance companies attimes don't write bad businesses but at the same time I'm not pretty convinced that the bank would get a upper hand in the business of insurance. |
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jeorge
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