Bancassurance - trends and development prospects

Bancassurance - trends and development prospects
Case study based on the Italian market and analysis of the
market potential in Poland
Presented by
Ed Morgan
May 18, 2016
Warsaw
Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
2
Why is bancassurance penetration relatively low in Poland
compared to Southern and Western European countries?
Life Market Share
Non-life Market Share
 Looking over a long time horizon (10 years) we can see that in Southern and Western
European countries like France, Italy and Spain, bancassurance has been a dominant
channel for life insurance and a growing channel for non-life
 In this talk we will examine why the Polish bancassurance market has not had as much
success as these other markets, taking Italy as an example.
 The lower penetration of non-life in Italy can be attributed to lack of development of
MTPL in particular
Source: Insurance Europe
3
Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
4
Evolution of product offering
Simple
savings
products
Standalone
protection,
Home
insurance
Motor
Retirement
savings
Creditor
protection
 Over a period of >20 years we have seen a gradual evolution of the product offering from
simple creditor protection products and tax advantaged savings products to a wide range
of different propositions
 There are various driver for this growth including low interest rates reducing banks
interest margins and requiring them to look for alternative sources of revenue.
5
Italian bancassurance market – trend in production of
various protection lines
3500
Individual protection –
term insurance
Individual protection –
other
Group protection
3000
2500
LTC and CI
2000
Accident
Sickness
1500
Fire and natural forces
1000
Other damages to
property
Financial losses
500
Legal expenses
Assistance
0
2010
2011
2012
2013
Figures in EUR m
6
2014
Different bancassurance models
Different bancassurance models have been realized during the years:
a.
Captive bancassurance company (for example Credit Agricole/ Eurizon/Intesa) – this
follows the model adopted by leading French banks and allows the full integration of
activities
b.
JV between company and bank (AxA-MpS, Unipol-BPER/BPSondrio, BPM-Covèa,
Fondiaria-BancoPopolare, BCC-Cattolica, BPVi-Cattolica….). In recent years formerly
captive companies have been put on the market (Arca, MpS, BCC, now Carige..),
which can help the banks to raise capital and the insurers to secure captive
distribution
c.
Exclusive distribution agreement (Desio Vita, formerly owned by the bank, now 100%
owned by Helvetia) – for some of these cases effectively goodwill has been paid for
the exclusive distribution
d.
Non-exclusive distribution agreement (some ‘Casse di Risparmio’)
e.
In the past a number of bancassurance companies sold through multiple banks (e.g.
Arca Vita, Eurovita etc), but this model has become less common, in part due to
consolidation in the banking sector.
f.
Some bancassurers are using a captive or JV for the mainstream products and a
specialist provider for more niche products like some types of protection
7
Italian Bancassurance Market – Key Players Life
 The table below shows the leading 20 life
companies with bancassurers highlighted in
yellow.
POSTE VITA
2014 Premium
Main Channel
income (EUR bn)
15.4
Banks (Post Office)
INTESA SANPAOLO VITA
GENERALI ITALIA
GENERTELLIFE
FIDEURAM VITA
CREDITRAS VITA
MEDIOLANUM VITA
BNP PARIBAS CARDIF VITA
ALLEANZA ASSICURAZIONI
CREDIT AGRICOLE VITA
UNIPOLSAI ASSICURAZIONI
ALLIANZ
POPOLARE VITA
CNP UNICREDIT VITA
15.3
7.4
5.9
5.8
5.4
5.2
5.1
4.1
3.9
3.7
3.0
3.0
2.8
Banks
Agents
Financial Promoters
Financial Promoters
Banks
Financial Promoters
Banks
Agents
Banks
Agents
Agents
Banks
Banks
AXA MPS ASSICURAZIONI VITA
OLD MUTUAL WEALTH ITALY
AVIVA
LOMBARDA VITA
AVIVA VITA
BIPIEMME VITA
2.3
1.7
1.6
1.5
1.4
1.4
Banks
Various
Banks
Banks
Banks
Banks
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INTERNAL RESEARCH FOR DISCUSSION PURPOSES
Ownership model:
wholly owned
“captive”
• Poste Vita was a relatively late starter in the Italian
bancassurance market. For example in 2002 it
was only in 5th place in the market with EUR 2.8 bn
of premiums.
• The company is wholly owned by the Italian Post
Office
• It offers a simple range of products through its very
wide range of Post Offices
• The banking crisis in 2008 and beyond reduced
confidence of customers in banks and Post Vita
was able to further improve its market position
Ownership model:
wholly owned
“captive”
• Intesa Sanpaolo Vita grew from the merger of a
number of the bancassurance companies of a
number of banks which themselves merged
• The also has a large Irish subsidiary selling mainly
unit linked business
• The Company is a captive, after buying out the
joint venture share of Generali several years ago
Italian Bancassurance Market – Key Players Life
Ownership model:
Joint Venture
• Axa bought 50% of three bancassurance
companies of the Montepaschi di Siena group in
2007.
• They were an Italian and an Irish life company as
well as an Italian non-life company
• Due to changes in the strategy of AXA and some
negative events within the bank, production is
significantly lower than at the time of the
acquisition and AXA has refocused its attention
more on protection
9
Ownership model:
Joint Venture
• Unicredit works through a number of joint ventures
with different partners (Allianz-RAS, CNP and also
Aviva, although this partnership is less active).
• Companies have generally been 50/50 joint
ventures, backed by shareholdings from the
insurers in the bank.
• The network is divide between the different
partners and a single organisation within Unicredit
negotiates products with the different partners
• Product offering are usually very similar between
the different partners and the partners try to avoid
internal competition
Italian Bancassurance Market – Key Players Non-Life
 The non-life bancassurance market is less well developed
 There are a number of specialist players but they for example Poste Assicura had EUR
84m of premiums in 2014 compared to EUR 15.4 bn of life premiums from Poste Vita
 Even some formerly bank owned companies (e.g. ex-Carige Assicurazioni) mainly sell
through agents
 Some of the leading non-life bancassurers are shown below:
Name
10
Rank
Premiums
(EUR m)
INTESA SANPAOLO ASSICURA
31
209
AXA MPS ASSICURAZIONI DANNI
37
160
ARCA ASSICURAZIONI
44
103
CREDITRAS ASSICURAZIONI
45
102
AVIPOP ASSICURAZIONI
70
48
CREDIT AGRICOLE ASSICURAZIONI
71
44
SOGESSUR S.A.
75
38
Banks selling model
Below a typical organization model in a major Italian bank is described.
2 main segments, i.e. Retail and Corporate.
 Retail clients were then divided into:
–
–
–
“Family”, i.e. clients with deposits < 25k Euro. These clients are followed by the “basic”
employees, i.e. tellers or those working in the common areas in the banks, and usually the less
expert ones. Common bancassurance products for them include accumulation plans (ideally small
deposits, but trying to have a constant incoming cashflow), and protection products for mortgages,
loans, credit card debt covers and similar.
“Affluent” clients, i.e. deposits > 25k, < 1-1.5m. These are usually followed by a more expert
employee, often in a private room, or sometimes by the branch director or deputy himself. The
product usually sold to these clients are endowments, often as a single premium, so with an
investment view, rather than a saving view. These clients, though, don’t usually have specific tailor
made products built for them, but only products that could suit them better. They are then divided
into Upper and Lower affluent (e.g. <250k, >250k).
Private clients (> 1m or 1.5m Euro). Followed by a specific team, that often visit them at home also.
Specific products are prepared for them, with lower loadings or likely higher returns.
 Corporate clients are usually followed by the deputy or branch director, if they were small
ones, and by specific centres when bigger.
11
Typical Conditions in Exclusive Bancassurance
Agreement
 Most bancassurance agreements which have been negotiated as part of the creation of
JV companies include exclusivity clauses which give the JV company exclusive right to
distribute business unless mutually agreed or if a product cannot be provided (see
below).
 The company’s commitments are defined. This might typically include:
–
–
–
Provision of relevant material such as contractual forms
Ensuring products distributed are compliant with all relevant laws
Providing adequate customer service
 The banks commitments include promoting the product, only using material approved by
the company, monitor sales practices to ensure that they are compliant with regulations,
ensure customers are adequately informed etc.
 Typically there will be a provision in the joint venture agreement which deals with the
case in which the distributor (e.g. the bank) indicates a need to offer products not
available from the JV company. In this case the JV company has effectively a right of
first refusal to offer the products, but if it cannot do so within a reasonable timescale, the
bank may use a third party supplier
12
Reasons for Success of Bancassurance
Bancassurance has been for many years been the leading channel in the Italian market.
Its success can be attributed to many factors including
 High level of trust in banks from Italian consumers, although this has been eroded in
recent years due to a number of scandals (most recently that of Banca Montepaschi
di Siena). This contrasted with a sometimes mixed feeling towards insurers who
were very associated with compulsory motor business
 Product innovation – the Italian market used to be more or less a tariff market and
bancassurers were the earliest movers in introducing products like unit linked and
more flexible savings products
 Low marginal costs for banks in selling insurance compared to life companies – this
was helped by fairly limited regulations directly around the selling process
 Banks needed to and were willing to extend their traditional activity in part to
substitute reduced interest margins as interest rates dropped in the Euro
convergence period. This was particularly the case of Unicredit
 Insurers like AXA, Aviva and Allianz saw bancassurance as a way of gaining
important market shares
 French bancassurers like BNP-Paribas and Credit Agricole have also imported
successful practices from France
24 April 2013
13
Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
14
Primary banking groups with their Subsidiary Insurers - Italy
Banking Group
Subsidiary Insurance Company
Comments
Intesa Sanpaolo Vita
The bank resulted from a major banking merger and now the
insurance operations have largely been integrated into a
single captive bancassurer (buying out Generali from
previous JV)
Gruppo Unione di
Banche Italiane
Aviva Vita and Lombarda Vita
This was the result of a previous process to sell stakes in the
bancassurance companies of the group
Gruppo Bancario
Veneto Banca
Apulia Previdenza
Gruppo Bancario
Intesa Sanpaolo
Gruppo Bipiemme
Gruppo Monte dei
Paschi di Siena
Gruppo Banco
Popolare
Gruppo Unicredit
Gruppo Bancario
Cariparma Credit
Agricole
Gruppo BNP
Paribas
15
Bipiemme Vita S.p.A.
Axa-MPS
Recently created a JV with the French insurer COVEA,
having previously been a captive company
AXA won a major process to buy 50% of Montepaschi Vita
Popolare Vita S.p.A., Aviva
Assicurazioni Vita
These shares came from a major process similar to the MPV
one, but were divided between Aviva and Fonsai
Unicredit is in a unique position in having several insurance
CNP UniCredit Vita S.p.A, Aviva S.p.A,
partners – partly for historic reasons – but this gives it more
CreditRas Vita S.p.A
bargaining power with these partners
Crédit Agricole Vita
Cardif Vita S.p.A., BNL Vita
CA follows its captive bancassurance model from France
Cardif sells through third party banks whereas BNL Vita was
bought out by BNP Paribas, which had acquired BNL itself
earlier
Primary banking groups with their most important banks
and number of branches - Italy
Gruppo Bancario Intesa
Sanpaolo
Gruppo Unione di Banche
Italiane
Intesa Sanpaolo
Banco di Napoli
Cassa di Risparmio del
Veneto
1.955
700
398
Banca Popolare di
Bergamo
Banco di Brescia San
Paolo Cab
Banca Carime
359
325
Gruppo Bancario Veneto Veneto Banca S.C.P.A.
Banca
326
Banca Popolare di
Milano
Gruppo Bipiemme
547
Banca Monte dei Paschi
Gruppo Monte dei Paschi
di Siena
di Siena
2.295
Banco Popolare
1.648
Unicredit
Gruppo Unicredit
4.276
Cassa di Risparmio di
Gruppo Bancario
Parma e Piacenza
Cariparma Credit Agricole
609
Banca Nazionale del
Lavoro
Gruppo BNP Paribas
895
Gruppo Banco Popolare
16
Banca Apulia
105
261
Cassa di Risparmio di
Fabriano e
Cupramontana
61
Banca di Legnano
206
Banca Antonveneta
376
Credito Bergamasco
239
Banca Popolare
Friuladria
204
Cassa di Risparmio della
Spezia
73
Cassa di
Risparmio di
Firenze
307
Banca Regionale
Europea
257
Cassa di
Risparmio in
Bologna
215
Banca Popolare
Commercio e
Industria
233
Relations of banks and insurers on the Polish market
Bank
Assets
(bPLN)
No of clients
('000)
Own
branches
Branches +
agencies and
partnerships
Relation with insurers
PKO BP
262.4
8,982
1,277
2,158
Bank Pekao SA
165.8
5,089
975
975
BZ WBK
125.5
4,300
723
837
JV with Aviva
mBank
118.8
4,967
183
245
Former own insurer acquired by AXA
ING Bank Śląski
106.1
4,100
395
395
Insurer within group
Getin Noble Bank
71.5
2,189
277
476
Insurer within group
Bank Millennium
66.1
1,951
411
411
Bank BGŻ BNP Paribas
63.0
1,654*
486
508
Citi Handlowy
49.4
711
45
45
Alior Bank
40.0
2,461
328
851
*including clients of BGŻOptima
Source: prnews.pl, press releases
17
Insurer within group
According to news looking for an
insurance partner
Insurer within group
Intensified cooperation with Warta
PZU owns over 25% of Alior's shares
Productivity per Branch - indications
Full data on productivity for Italy and Polish bancassurance is hard to obtain on an
exactly comparable basis. However we can look at some figures from dedicated
bancassurance companies:
 It can be seen that levels of non-
life production are not very
different between the two
countries, but that life production
is much higher
 This can be seen as being driven
primarily by the successful sales
of savings products.
 Note further that almost all Intesa
Sanpaolo production is traditional
(“endowment”) and further unit
linked production is sold on a
cross border basis by the Irish life
company of the group
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Production per branch in EURm in 2014
Italy
Poland
Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
19
Challenges for Polish Insurance Market/opportunities in
bancassurance
 The Polish insurance market is facing a whole series of regulatory and legal challenges
which are too long to go into here, but make the future evolution very unpredictable
 The agency sales model in its historic form is probably no longer viable except for the
most efficient players
 Trends in bancassurance partnership model are uncertain, but we may see some
combination of more dedicated models for mainstream products, but use of specialised
providers for more niche products
 The potential for bancassurance can be realised, but only with a combination of:
20
–
Working hard to develop value and integration of partnerships
–
Investing in more sophisticated products and associated training
–
Looking closely at all aspects of the business model
Contents
1. Italian Bancassurance Market
2. Comparison of Italian and Polish insurance and banking
3. Can Italian market success be replicated in Poland?
4. Conclusions and predictions
21
Conclusions and Predictions
 Mid-term growth of bancassurance market share towards the highest levels seen in
Europe seems a probable outcome when we consider:
–
Bancassurance has much lower marginal selling costs than traditional channels like
agencies
–
In particular we do not believe the historical agency sales model is sustainable without
changes in Poland. Competition from banks is likely to accelerate this
–
The low interest rate environment squeezes other margins of the banks and make
insurance intermediation an attractive proposition
 However there are some “clouds” which may slow down this trend:
–
Regulator/consumer protection action is likely to make it hard to sell very high margin
business
–
Move to digital can (a) compete with banks on cost (b) reduce banks contact with clients
and hence opportunities for selling
 We would expect:
–
Trend in commissions from premium based to asset based for savings business
–
More investment in sophisticated products and sales training
22
Development of the life insurance
Milliman’s analyses show that there is an inverse correlation between the development of
the life market and the expense ratio (and this is quite independent of state of the economy
– look at France and Portugal and Germany and Greece). We note that many of the
relatively more developed markets have an important share of bancassurance.
Life Insurance Penetration
9%
Finland
8%
France
7%
Portugal
6%
Italy
5%
Belgium
Sweden
4%
Switzerland
Netherlands
3%
Germany
Czech Republic
Austria
Spain
2%
Poland
1%
Greece
0%
0%
5%
10%
15%
20%
25%
Expense ratio
Source: Generally data is from Insurance Europe (except Germany expenses). Expenses are average of available data over the last
10 years as a percentage of earned premiums. Life insurance penetration is the latest available figure as percentage of GDP.
23
Questions?
Edward Morgan
ed.morgan@milliman.com
Legal disclaimer
This presentation is intended solely for educational purposes and presents information of a
general nature. It is not intended to guide or determine any specific individual situation and
persons should consult qualified professionals before taking specific actions. The
information contained in the presentation is of a general nature and should not be
construed as advice on an individual situation or company. Neither the author, nor the
author's employer has certified the information contained in this presentation or guarantee
the accuracy and completeness of such information. The use contained in this presentation
is voluntary and should not be relied upon unless an independent review of its accuracy
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content of this presentation.
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