Emerging markets, including Asia-Pacific, Latin America, Turkey and Poland, present opportunities for substantial growth in the bancassurance sector, according to “‘2020 Foresight: Bancassurance,” a report from Timetric. As a result, commissions earned through sales of retail insurance products to commercial-bank customers could grow at a compound annual growth rate of 5.29 percent globally between 2013 and 2017.
Growth would not be distributed evenly across regions, however, and emerging markets would likely be responsible for the majority of growth.
In the United States, bancassurance market penetration in life insurance was projected to hit 33 percent, matching Europe. However, U.S. banks have achieved market share of just 2 percent and, with the United Kingdom, are the only markets with declining bancassurance commissions. Timetric attributes slow growth to “the almost total separation between the insurance provider and bank distributor in the U.S. market, where banks essentially just sell third-party insurance products to their clients.”
The 1999 Gramm-Leach-Bliley legislation was expected to contribute to European-like growth, but that growth has failed to materialize. Timetric said the model is low-risk and offers high commission and fee incomes, but also higher costs than the integrated model. “Thus, the insurance market in the US is dominated by more established channels such as agencies and brokers,” Timetric said.
Despite a relatively high penetration of bancassurance in Latin America, they are projected to grow, as Brazil and Mexico currently benefit from a favorable regulatory landscape and large foreign businesses have partnered with banks capturing large client bases.
“Low insurance penetration and high bank penetration presents significant growth potential for bancassurance ventures, facilitating their easy distribution of insurance products to large customer segments that are not covered by traditional distribution channels,” Timetric said.
Chile, where direct marketing from large foreign insurers dominated the market, slowing growth for the bancassurance channel, presents an exception to the trend. Aggressive marketing and attractive product offerings, in addition to demand for pension products could reverse that trend and bancassurance growth is projected to rebound until 2016.
Bancassurance is still an emerging channel in Asia-Pacific and agencies and direct marketing still dominate most channels. Declining interest rates, which dampens returns on savings, have increased demand for savings-based insurance products offered by bancassurance ventures, Timetric said. And the Asia-Pacific bancassurance sector has grown as large foreign insurance companies enter the market, targeting high net-worth people.
Improvement in customer service facilities, including CRM technology and automated sales and servicing systems also contribute to growth in this region; life-sector growth in the Asia-Pacific region, including Japan, South Korean, China and India, is forecasted to grow 19.04 percent from 2006 to 2016 on a combined CAGR basis.
Bancassurance originated in Europe, Timetric notes, and contains one-third of total market share, however, France, Italy and Spain, are mature markets.
Declining interest rates and social spending does increase demand for bancassurances and will support minimal growth; Europe’s emerging markets, including Turkey and Poland, are projected to increase 14.94 percent on a combined average CAGR basis, attributable to low-level penetration of insurance and investment-related life insurance and retirement savings products are in high demand, Timetric said.
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