Emerging markets to fuel bancassurance in next 5 years

MANILA, Philippines - The emerging markets of Asia-Pacific, Latin America, Turkey and Poland are projected to offer significant growth in the bancassurance sector to 2017, according to one of the leading provider of online data, analysis and advisory services on key financial and industry sectors. 

Timetric said that the value of commissions earned through bancassurance – the sale of retail insurance products to a commercial bank’s client base – is set to grow at a compounded annual growth rate (CAGR) of 5.29-percent globally between 2013 and 2017. 

It added that bancassurance in the Asia Pacific region, while still a blossoming distribution channel, is expected to register the fastest growth rate in the next five years. 

In Asia-Pacific, most markets are still dominated by traditional channels such as agencies and direct marketing. However, the region’s declining interest rates – which have a detrimental effect on the remuneration offered by bank savings – have sparked a growth in the demand for savings based insurance products offered by bancassurance ventures. 

“Furthermore, the Asia-Pacific bancassurance sector has swelled thanks to the entry of large foreign insurance players into the market, who are primarily targeting the region’s high net worth individuals,” the report said.

Further drivers in the Asia-Pacific bancassurance market include the dramatic improvement in customer service facilities, the use of customer relationship management (CRM) technology, and the increasing use and effectiveness of automated sales and servicing systems. With these shifts in the market, strong growth is forecast for the Asia-Pacific region, with Japan, South Korean, China and India set for a combined CAGR in the life sector of 19.04 percent between 2006 and 2016.  

Timetric, which has a client base of over 1,500 financial services institutions and their partner companies around the world, pointed out that bancassurance originated in Europe, where it holds one third of the total market share. 

As such, many of its bancassurance markets – such as France, Italy and Spain –have reached maturity. While declining interest rates and reductions in social spending – which boosts demand for private insurance that can be met by bancassurance ventures – are still likely to yield growth in these markets, it is forecast to be minimal. 

Europe’s emerging markets of Turkey and Poland are set to grow significantly, with a projected combined average CAGR of 14.94 percent. 

“This is primarily due to the low levels of insurance penetration in those countries, coupled with attractive investment related life insurance and retirement savings products that are in high demand,” it added. 

Meanwhile, there is a relatively high penetration of bancassurance in the majority of Latin American states, with countries such as Brazil and Mexico benefiting from a favorable regulatory landscape and the presence of large foreign players who have successfully captured large client bases by partnering with banks. 

It added that a combination of 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.