More consumers opting for No. 2 distribution channel in insurance industry, agency still leading
Bancassurance is fast becoming a formidable No. 2 distribution channel in the insurance industry behind agency.
Agency as a whole is still the main distribution channel but industry observers generally agree bancassurance is beginning to gain headway as more consumers are turning to this channel judging from the growing demand for bancassurance products.
Two reasons for this are the selling of simple insurance products by banks with their large branch network and depositors opting for single premium (SP) products amid the low interest rates.
An industry player who requested anonymity said there was definitely a growing competition between agency and bancassurance.
“The quality of some agents needs to be further improved. There are dedicated agents but there are also some who ‘product push’. Customers also seem to be more confident of banks due to their strong financial standing and stability.
“Agency will still maintain its position as a leading distribution channel but over time bancassurance may overtake agency as the top channel,” he added.
Statistics compiled by the Life Insurance Association of Malaysia showed that in terms of market share in the distribution channels last year, bancassurance commanded 31.9% compared with 27.6% in 2008. Agency was at 67.1% in 2009 and 70% in 2008.
It also showed that bancassurance continued to be a major source of SP in terms of new business for the first six months of this year with 66% of total SP business derived from this channel.
Last year, in terms of weighted premium market share in the distribution channels, bancassurance commanded 14.3% compared with 14.5% in 2008. Agency achieved 85.7% in 2009 and 85.5% in 2008.
The scenario was different for regular premium (RP) new business. Bancassurance only contributed 12% of total new business in 2009 but this was higher than 8% in 2008.
CIMB Aviva Assurance Bhd marketing director Angela Christine Tan, while acknowledging competition between the two channels, said other reasons for the rapid growth of bancassurance were wider Internet usage and social networking among the younger generation as well as easy access to information.
“The younger generation has a wider communication platform nowadays via Internet and social networking and the traditional method of having personal service from an agent may not be the deciding factor when it comes to purchasing an insurance product.
“Easily accessible information also allows consumers to compare products offered by different companies. Bancassurance products are basically more affordable due to the pricing structure,” she noted.
She added that the company registered positive growth over the last 12 months for new business contribution from its bancassurance and bancatakaful operations and anticipated double-digit growth by year-end.
Tan viewed the channels as reaching out to different target groups. Agency was the preferred channel for those who preferred a face-to-face and personalised service, she said, adding that these people were usually from the middle- to high-income bracket.
Bancassurance customers were typically those who preferred having their financial needs catered for under one roof, she said, adding that this group would generally be the lower- to middle-income earners who favoured affordable products with the same level of coverage as those offered by the agents.
Meanwhile, Uni.Asia Life Assurance Bhd CEO Ooi Say Teng said the company’s bancassurance business registered a growth of 69% while agency grew by 45% for the financial year ended March 31.
He said the strong business relationship with bank partners and the ability to understand and work based on the banks’ specific needs also contributed to the growth of bancassurance.
He added that the company saw bancassurance and agency growing side by side in terms of RP new business, noting that their existence complemented rather than competed with each other.
The current low penetration rate of 41% had created the avenue for effective use of multiple distribution channels which many life insurers had decided to get into, he said.
Bancassurance is fast becoming a formidable No. 2 distribution channel in the insurance industry behind agency.
Agency as a whole is still the main distribution channel but industry observers generally agree bancassurance is beginning to gain headway as more consumers are turning to this channel judging from the growing demand for bancassurance products.
Two reasons for this are the selling of simple insurance products by banks with their large branch network and depositors opting for single premium (SP) products amid the low interest rates.
An industry player who requested anonymity said there was definitely a growing competition between agency and bancassurance.
“The quality of some agents needs to be further improved. There are dedicated agents but there are also some who ‘product push’. Customers also seem to be more confident of banks due to their strong financial standing and stability.
“Agency will still maintain its position as a leading distribution channel but over time bancassurance may overtake agency as the top channel,” he added.
Statistics compiled by the Life Insurance Association of Malaysia showed that in terms of market share in the distribution channels last year, bancassurance commanded 31.9% compared with 27.6% in 2008. Agency was at 67.1% in 2009 and 70% in 2008.
It also showed that bancassurance continued to be a major source of SP in terms of new business for the first six months of this year with 66% of total SP business derived from this channel.
Last year, in terms of weighted premium market share in the distribution channels, bancassurance commanded 14.3% compared with 14.5% in 2008. Agency achieved 85.7% in 2009 and 85.5% in 2008.
The scenario was different for regular premium (RP) new business. Bancassurance only contributed 12% of total new business in 2009 but this was higher than 8% in 2008.
CIMB Aviva Assurance Bhd marketing director Angela Christine Tan, while acknowledging competition between the two channels, said other reasons for the rapid growth of bancassurance were wider Internet usage and social networking among the younger generation as well as easy access to information.
“The younger generation has a wider communication platform nowadays via Internet and social networking and the traditional method of having personal service from an agent may not be the deciding factor when it comes to purchasing an insurance product.
“Easily accessible information also allows consumers to compare products offered by different companies. Bancassurance products are basically more affordable due to the pricing structure,” she noted.
She added that the company registered positive growth over the last 12 months for new business contribution from its bancassurance and bancatakaful operations and anticipated double-digit growth by year-end.
Tan viewed the channels as reaching out to different target groups. Agency was the preferred channel for those who preferred a face-to-face and personalised service, she said, adding that these people were usually from the middle- to high-income bracket.
Bancassurance customers were typically those who preferred having their financial needs catered for under one roof, she said, adding that this group would generally be the lower- to middle-income earners who favoured affordable products with the same level of coverage as those offered by the agents.
Meanwhile, Uni.Asia Life Assurance Bhd CEO Ooi Say Teng said the company’s bancassurance business registered a growth of 69% while agency grew by 45% for the financial year ended March 31.
He said the strong business relationship with bank partners and the ability to understand and work based on the banks’ specific needs also contributed to the growth of bancassurance.
He added that the company saw bancassurance and agency growing side by side in terms of RP new business, noting that their existence complemented rather than competed with each other.
The current low penetration rate of 41% had created the avenue for effective use of multiple distribution channels which many life insurers had decided to get into, he said.
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