UK Bancassurance 2008
Datamonitor, December 2008, Pages: 52
Weathering the crash through bancassurance
With banks and building societies in the UK facing a near stagnant market environment, the report assesses the attractiveness of the bancassurance channel, and concludes that bancassurance share of the life and pensions business will struggle to be maintained. This report examines the strategies available for different bancassurance models in the current financial turmoil.
Scope of this research:
- Comprehensive analyses of key product, regulatory and customer behaviour trends affecting the UK bancassurance industry in 2008.
- Examines the current shape of the bancassurance market and explores factors that are currently limiting banks' ability to sell investment products.
- Assesses the key changes to differing bancassurance business models that are needed for future success in the bancassurance market.
Research and analysis highlights:
- Bancassurers have had a near stagnant market environment for life and pensions products with current market conditions proving to be big threats for sustainability of the bancassurance model. Many banks lack the reputation on the life and pensions side of business and have not built up confidence in their customer base to offset consumer cynicism.
- For banks there needs to be a more efficient use of their inherent qualities such as strong branch networks, cross-selling opportunities and face-to-face contact opportunities to gain back consumer trust.
Key reasons to purchase this research:
- Access expertise and detailed analysis to gain insight into the complexities of the current market.
- Identify the current changes taking place in the distribution landscape, and the issues and developments facing the bancassurance channel.
- Understand the future of the market and the way in which the bancassurance channel is likely to develop over the next five years.
OVERVIEW
Catalyst
Summary
EXECUTIVE SUMMARY
SPECIAL FEATURE: WEATHERING THE CRASH THROUGH BANCASSURANCE
Introduction
Banks can capitalize on their inherent qualities to gain back consumer trust
Strong branch networks are invaluable opportunities for banks
Bancassurers can focus on service and execution excellence to differentiate themselves from other channels
Mortgage-oriented models can capitalize on making protection more tangible
The case for business protection is stronger than ever and warrants more focus from mortgage-oriented bancassurers
Product innovation that demonstrates a tangible benefit to customers will win new market share
A winning bancassurance model requires banks and insurers to rethink their relationship
Investment-oriented models can focus on promoting the right products to consumers
Banks must sell products with securities and guarantees that appeal to the recessionary consumer
Bancassurers should be mindful of the need for communication to customers about financial stability
Bancassurers can offer regular financial health checks to reduce customers’ exposure to the downturn
Banks should better identify customers who can gain from current market conditions for starting investments
MARKET CONTEXT
Distribution dynamics
The bancassurance share of the life and pensions market remains unchallenging to dominant IFAs
The current bancassurance single premium life market is dominated by unit-linked and guaranteed bonds
Regular life premiums have been adversely affected by the mortgage crisis
Bancassurers have not been able to increase their pensions business over the last five years
Challenging market conditions are affecting all aspects of bancassurance sales
There are numerous barriers that hinder the development of bancassurance
The gloomy outlook on the mortgage market will continue to add woes to protection products
A subdued consumer credit sector has detrimentally impacted upon protection sales
The credit crunch has eaten into current accounts, deposits and ISAs, making consumers sacrifice protection
Bancassurers may still lack the focus to challenge the IFA channel
The recessionary consumer’s behavior is forcing banks to re-examine their product offerings
Economic turmoil is the most challenging issue faced by customers
The ‘recessionary consumer’ is attracted to products with less risk
Regulatory requirements presents opportunities for banks to secure distribution
Banks are well placed to engage in the middle market space with the RDR-proposed sales tier
Money Guidance is a potential gateway for consumers into sales services
The RDR aims to increase consumer access to and confidence in the financial services industry
Market Forecasts
Guaranteed bonds are forecast to further increase in popularity for single premium life income
Bancassurance will continue to be dominated by term assurance for regular premium life sales
Stakeholder pensions, including employer-sponsored forms, will be the most popular pension products
Single premium life sales will dominate the bancassurance channel, while the pensions segment's growth will be almost static
APPENDIX
Data
Product definitions
Life-based savings products
Life assurance
Single premium life
With-profit bond
Unit-linked bond
Income and growth bonds
Guaranteed equity bonds
Distribution bonds
Purchased life annuities
Other bonds
Annual premium life
Endowment policy
Whole of life insurance
Term assurance
Income protection
Critical illness
Collective life
ISAs
Personal pensions
Stakeholder pensions
Group personal pensions (GPPs)
DSS rebates
Employer-sponsored stakeholder pension (ESS)
SIPPs (Self Invested Personal Pensions)
FSAVC (Free-Standing Additional Voluntary Contributions)
ABI definitions of distribution channels
Independent financial advisors (IFAs)
Direct sales forces
Tied agents
Multi-tied agents
Bancassurance
Direct marketing
Telesales
Other
Matrix-Data definitions
IFA firm types
Grossed Annual Aggregate Turnover
IFA sales people
Further reading
Ask the analyst
Disclaimer
TABLES
Table: Life and pensions new business by distribution channel, £m APE
Table: New business premiums through the bancassurance channel by product group, £m APE
Table: Total life and pensions new business premiums by distribution channel, £m APE
Table: Single premium life new business premiums by the bancassurance channel, £m APE
Table: Single premium pensions new business premiums by the bancassurance channel, £m APE
Table: Regular premium life new business premiums by the bancassurance channel, £m APE
Table: Regular premium pensions new business premiums by the bancassurance channel, £m APE
Table: Forecast total single premium life new business 2008–12, £m APE
Table: Forecast regular premium life new business by the bancassurance channel 2008–12, £m APE
Table: Forecast single premium pensions new business by the bancassurance channel 2008–12, £m APE
Table: Forecast regular premium pensions new business by the bancassurance channel 2008–12, £m APE
FIGURES
Figure: Face-to-face remains the preferred method by consumers for arranging a mortgage
Figure: Bancassurers’ mix of life and pensions business has not gained momentum
Figure: Bancassurers have focused their sales efforts on unit-linked and guaranteed bonds
Figure: The mortgage crisis has taken its toll on regular premiums
Figure: Banks have not been able to increase their share of the pensions market between 2003 and 2007
Figure: SIPPs and stakeholder pensions are the two most important single premium income generators
Figure: Stakeholder pensions dominate the bancassurers’ regular premium income in 2007
Figure: The number of home loans being granted in the UK has dropped dramatically
Figure: Consumer credit gross lending in the UK market has continued to fall in 2007 whereas balances outstanding have continued to grow steadily
Figure: Guaranteed bonds are forecast to dominate single premium life sales
Figure: Term assurance will continue to dominate regular premium life sales
Figure: Stakeholder pensions are forecast to continue to dominate the single premium pensions market
Figure: Regular premium pensions income will also be dominated by stakeholder pensions
Figure: Single premium life sales will dominate the bancassurance channel
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