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Bancassurance in the UK: Life, Non-Life and Creditor Insurance
Finaccord, November 2011
PUBLICATION OVERVIEW
Finaccord’s report titled Bancassurance in the UK: Life, Non-Life and Creditor Insurance is about the distribution of insurance products through banks and other lending institutions in the UK.
Types of insurance considered are:
- investment-related life insurance and retirement savings;
- risk life insurance, critical illness insurance and income protection insurance;
- accident insurance, medical expenses insurance and health / hospital cash plans;
- personal motor insurance and household insurance;
- creditor insurance for mortgages, consumer finance and credit cards.
Based on a survey of 176 organisations, it identifies 451 bancassurance distribution initiatives across these types of insurance, and highlights the operating models and product providers used in the vast majority of cases. Moreover, it analyses these bancassurance agreements in terms of ‘weighted partnerships’ which take into account the size of the retail customer base of the banking institutions distributing these policies, thereby differentiating between the most important relationships and those that are comparatively minor.
In addition, with the exception of creditor insurance, for which historic, current and forecast market size data is provided for 2007, 2011 and 2015, the report also sizes the market for the various types of insurance investigated in terms of gross written premiums between 2006 and 2010, provides a general introduction to the banking sector, comments upon the general influence of the bank distribution channel for these types of insurance, and presents available data for key bancassurance underwriters, including captives, joint ventures and other dedicated bancassurance underwriters.
KEY BENEFITS
You may be able to use this report and the PartnerBASE™ dataset that accompanies it in one or more of the following ways:
- gain access to a source of information that provides a comprehensive overview of the provision of a range of personal insurance products by a majority of significant banking entities in the UK;
- identify partnership opportunities for these types of insurance that may arise either because a banking institution is not currently active or because there is scope for replacing an existing initiative;
- understand which underwriters and other product providers have been successful in establishing distribution relationships with the most important banking entities in the UK;
- assess the background to the most significant bancassurance deals, differentiating between those that originate from long-term or strategic objectives and those that are more transient;
- appreciate the magnitude of the opportunity to sell different types of life, non-life and creditor insurance through banks and other lending institutions in the UK.
WHO SHOULD BUY THIS REPORT
1. Insurance underwriters: these studies offer a uniquely comprehensive guide to the status of bancassurance in each country that can be used to identity partnership opportunities and to monitor competitor activity;
2. Banks and other lending institutions: the research will help banking entities in each country to understand how their bancassurance strategy compares to that of other comparable institutions in their domestic market;
3. Management consultancies: are you helping an insurance company or bank with its bancassurance strategy in any of the 20 countries covered? Understand the current status of bank distribution of personal insurance products in each country, saving time and effort on researching the subject yourself;
4. Investment banks and private equity companies: with banking institutions under financial pressure in many European countries, this research may be useful to understanding where there is scope for them to divest captive or joint venture underwriters in order to raise capital.
0.0 EXECUTIVE SUMMARY
1.0 INTRODUCTION
What is this report about?
Distribution partnerships with banks and other lending institutions constitute the focus of this report
Rationale
Across Europe, over 80% of banking entities surveyed are active in this arena to one extent or another
Methodology
Survey of banks and other lending institutions
Market data
Definitions
Investment-related life insurance
Retirement savings
Risk life insurance
Critical illness insurance
Income protection insurance
Accident insurance
Health / hospital cash plans
Medical expenses insurance
Personal motor insurance
Household insurance
Creditor insurance
Mortgages, consumer finance and credit cards
Weighted provider share of partnerships
Operating models
Abbreviations and exchange rates
Finaccord
2.0 MARKET ANALYSIS
Banks and other lending institutions covered
Introduction to the banking sector
The crisis of 2007 onwards forced many institutions to close, merge or be nationalised...
... with Santander as the only bank to emerge much stronger from the turmoil...
... while the Nationwide and the Yorkshire rescued several building societies in trouble
New entrants are appearing, with 700 branches scheduled to change hands at the time of publication
Investment-related life insurance and retirement savings
Insurance market size and growth
In aggregate, the UK’s investment-related life insurance and retirement savings market peaked in 2007
Distribution share of banks
The distribution share of banks and building societies in life insurance appears to be stable...
... although for personal and stakeholder pensions, it has fallen back to the margins in recent years
Bancassurance provision rates, operating models and partnerships
Investment-related life insurance
In the UK, the sale of investment bonds requires financial advice...
...which means that some leading banks do not believe that they can support this product
The captives of Lloyds Banking Group and HSBC have the largest weighted share of partnerships...
... followed by Aviva, AXA Wealth and Legal & General among external underwriters
Smaller partnerships are scattered across a dozen independent financial advisers
Retirement savings
Pension products sold by banks polarise between high-value SIPPs and low-value stakeholder pensions
Over a quarter of banks and other institutions offer some form of pension
AJ Bell, a specialist provider of SIPPs, holds partnerships with three major banking networks
Legal & General’s major relationship is limited to stakeholder pensions only
In 2010, Bank of Scotland and Halifax stopped marketing stakeholder pensions
Skipton Financial Services is used by two external building societies as well as by the Skipton itself
Performance of key bancassurance underwriters
Bank-owned insurance providers account for a very low combined share of total life insurance
Protection-related life insurance
Insurance market size and growth
The UK’s market for protection-related life insurance is multi-faceted but mature
Distribution share of banks
The distribution share of banks and building societies in life insurance appears to be stable...
... although for critical illness insurance, it has fallen back quite significantly in recent years
Bancassurance provision rates, operating models and partnerships
Risk life insurance
Risk life insurance
Operating models are limited to brokers (IFAs) or a single underwriter
Aviva is the leading non-captive partner for risk life insurance in the UK...
... followed by Legal & General
Friends Life expanded its market share through Resolution’s acquisition of AXA’s protection business
HSBC Life (UK) is used by HSBC itself but not the banking group’s other UK subsidiaries
Captive or external independent financial advisers are used by 13 other banks and building societies
Critical illness insurance
Most bancassurance distributors offer stand-alone critical illness cover as well as risk life insurance...
...with the notable exception of Aviva
Chartis’s ‘WellWoman Plan’ distributed by Barclays is unique among bancassurers
Income protection insurance
Both long-term and short-term policies are distributed by bancassurers...
...with HSBC and the Nationwide verified as the largest institutions that offer both types of policy
Pinnacle Insurance and CUNA Mutual are the leading external underwriters for short-term policies...
... with the latter having established deals with several smaller building societies as well as credit unions
Performance of key bancassurance underwriters
Accident and health insurance
Insurance market size and growth
In aggregate, the UK’s accident and health insurance market achieved modest growth from 2006 to 2010
Distribution share of banks
The performance of banks and building societies in accident and health insurance has been variable
Bancassurance provision rates, operating models and partnerships
Accident insurance
Accident insurance is marketed by relatively few banking institutions in the UK
Medical expenses insurance
The interest of bancassurers in selling private medical insurance is also lukewarm...
...although two partnerships exist that Finaccord considers to be reasonably significant
Health / hospital cash plans
For this product, Chartis is dominant in terms of its weighted share of partnerships...
...although Pinnacle Insurance has also captured a pair of viable relationships
Performance of key bancassurance underwriters
Personal motor and household insurance
The combined market increased in value by EUR 587 million between 2006 and 2010
Distribution share of banks
For personal motor insurance, banks and building societies have found it increasingly hard to compete...
... and their influence in household insurance has come under pressure from at least two factors
Bancassurance provision rates, operating models and partnerships
Personal motor insurance
Online aggregators make it difficult for banks to compete in personal motor insurance...
...which means that many have adopted a broker model to source a wider range of products...
... which has been to the benefit of two affinity brokers, in particular
The two leading underwriters by weighted share of partnerships are both subsidiaries of RBS
American Express and HSBC have different product providers for standard and prestige policies
Heath Lambert and Lloyd Latchford occupy niche positions in this market
Tesco Underwriting has been launched with ambitious growth targets
Household insurance
Underwriting partners are stronger in household insurance than for personal motor cover
Aviva (including Gresham Insurance) and BISL hold the largest weighted share of partnerships...
...while RSA has the higher outright number of partners, thanks to its alliances with building societies
AXA Insurance is another company competing for bancassurance distribution mandates
The supply structure for household insurance is comparatively fragmented...
... and several product providers lay claim to just one banking sector partner
Aviva’s partnerships with Barclays and HSBC are planned to run up to 2015 and 2016, respectively
Performance of key bancassurance underwriters
For a variety of reasons, UK Insurance has suffered a rapid loss in market share in recent years
Creditor insurance
Consumer lending market size and growth
Mortgage lending
Mortgage lending balances per capita reached their highest point in 2008...
Non-mortgage lending
... with a similar assertion applying in the case of non-mortgage consumer lending balances
Credit and other pay later cards
The number of credit cards issued in the UK has been in retreat since 2005
Creditor insurance provision rates, operating models and partnerships
Creditor insurance linked to mortgages
External underwriters, captive underwriters and captive brokers dominate distribution
Aviva is the leading external provider for mortgage term life insurance...
...while Scottish Widows is the leading captive underwriter
Friends Life combines the partnerships formed by AXA and Friends Provident
15 banks and building societies use financial advisers for mortgage term life insurance...
... but only two of these distribute mortgage payment protection insurance
Creditor insurance linked to consumer finance
Only a handful of lending institutions still offer creditor insurance related to consumer finance...
... albeit some have introduced short-term income protection cover as a substitute product
Jubilee is the leading provider in this fast-shrinking market
Creditor insurance linked to credit cards
Only four schemes for credit card payment protection insurance are still active
Creditor insurance risk coverage
Mortgage-related creditor insurance propositions are focused mainly on cover for death and critical illness
Alternative distribution channels
Mortgage brokers and financial advisers are major distributors of mortgage term life insurance...
... while online aggregators and brokers sell ‘accident, sickness and unemployment’ cover
Towergate’s British Insurance has a long-established and fairly high profile presence in this area...
... with other competitors including Ant Insurance, Best Insurance, i:protect and Paymentcare
Creditor insurance market size, growth and forecast
The market for classic payment protection insurance has collapsed since 2007
Citizens Advice filed its original ‘super-complaint’ as long ago as September 2005...
... on the basis of at least five concerns
Lending institutions began to withdraw from the payment protection market from 2007 onwards...
... and have made provisions for compensation in excess of the GBP 4.5 billion estimated by the FSA
New regulations for payment protection insurance are being introduced...
... with the result that three outcomes look likely for this product in the UK
LIST OF GRAPHICS / TABLES
0.0 EXECUTIVE SUMMARY
Overview of bancassurance provision rates for different types of insurance in the UK, 2011
1.0 INTRODUCTION
Banks and other lending institutions in the UK contacted by Finaccord, segmented by type
2.0 MARKET ANALYSIS
Gross written premiums for investment-related life insurance and retirement savings in the UK, 2006-2010
Gross written premiums for investment-related life insurance and retirement savings in the UK, 2006-2010 (data)
Distribution share of banks in life insurance and personal / stakeholder pensions in the UK, 2005, 2007 and 2009 (data)
Bancassurance provision of investment-related life insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Bancassurance provision of retirement savings in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Market share in total life insurance of key bancassurance underwriters in the UK, 2006-2010 (data)
Gross written premiums for protection-related life insurance in the UK, 2006-2010
Gross written premiums for protection-related life insurance in the UK, 2006-2010 (data)
Distribution share of banks in critical illness and life insurance in the UK, 2005, 2007 and 2009 (data)
Bancassurance provision of risk life insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Bancassurance provision of critical illness insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Bancassurance provision of income protection insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Gross written premiums for accident and health insurance in the UK, 2006-2010
Gross written premiums for accident and health insurance in the UK, 2006-2010 (data)
Distribution share of banks in dental, health / hospital cash, personal accident, and private medical insurance in the UK, 2005, 2007 and 2009 (data)
Bancassurance provision of accident insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Bancassurance provision of medical expenses insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Bancassurance provision of health / hospital cash plans in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Gross written premiums for personal motor and household insurance in the UK, 2006-2010
Gross written premiums for personal motor and household insurance in the UK, 2006-2010 (data)
Distribution share of banks in personal motor and household insurance in the UK, 2005, 2007 and 2009 (data)
Bancassurance provision of personal motor insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Market share in total non-life insurance of key bancassurance underwriters in the UK, 2006-2010 (data)
Bancassurance provision of household insurance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Residential mortgage lending balances outstanding in the UK (absolute and per capita), 2006-2010
Consumer non-mortgage lending balances outstanding in the UK (absolute and per capita), 2006-2010
Credit and other pay later cards issued and per capita in the UK, 2006-2010
Key data points for the consumer lending market in the UK, 2006-2010
Provision of creditor insurance linked to mortgages in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Provision of creditor insurance linked to consumer finance in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Provision of creditor insurance linked to credit cards in the UK, 2011: provision rate, operating models and weighted provider share of partnerships
Risk coverage of creditor insurance policies in the UK, segmented by type of underlying product, 2011
Creditor insurance gross written premiums in the UK, segmented by policy type, 2007, 2011 and 2015 (forecast)
Creditor insurance gross written premiums in the UK, segmented by cover type, 2007, 2011 and 2015 (forecast)
Creditor insurance gross written premiums in the UK, segmented by policy and cover type, 2007, 2011 and 2015 (forecast) (data)
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