Distribution Trends in the Asian Insurance Market
29 June 2010
Asian insurance companies are moving away from a sales model that is built around agents towards developing a diverse model that encompasses various channels such as agents, banks, direct sales and financial advisers. Insurance agents from insurance companies still form the major sales channel for life insurance in many Asian countries and regions. But their market share has been gradually declining as banks are gaining more market share and catching up on them. Although the level of development of bancassurance varies with different countries and regions in Asia, insurance sales through the banking network is becoming a common trend. In some markets, the premium income for new life insurance businesses generated via banks has exceeded that of the traditional insurance model of selling via individual agents. In Celent report "Distribution Trends in the Asian Insurance Market
" (Chinese version, English version coming soon), we analyzed various reasons for the rapid development of bancassurance, including:
- In Asia, bank revenue is mainly derived from interest income, and to raise profits, a huge sum of fee-based income has to be generated. Banks are very keen on selling insurance products because the processing fees can help generate income.
- Customers are more comfortable signing a contract with a bank than with an insurance agent because banks have a better reputation.
- Insurance companies are able to generate more premium income and expand their market share by selling their insurance products through banks. Moreover, the commission and management costs are lower than selling via individual agents.
However, the products sold by the banks are mostly single premium investment-linked insurance products, and the bank processing fees are high. As such, this channel does not, in reality, contribute in a significant way to the profits of insurance companies, nor does it bring about sustainable premium income for the insurers. In some countries, local regulatory authorities have requested a structural adjustment of bancassurance in the hope that the banks would increase sales of traditional insurance products and policies with annual premiums. The percentage for bank processing fees has also been regulated. Besides the general trends, the report also discussed distribution channels in mainland China, Hong Kong, Taiwan, Singapore, Malaysia, Japan, South Korea, and India markets. Presently, technological solutions that are able to support multi-channel distribution models are fast gaining the attention of an increasing number of insurance companies.