Part two
Regulatory challenges
The challenge of regulators is how to assist bancassurance while at the same time protecting consumer interests. One concern is mis-selling or selling a product which is not appropriate for the client. There are some criticisms on bancassurance. One of these is that bancassurance does not really cater to most of the banks’ clientele, thus not at all capturing the attention of bank customers. Sean Rowley, managing director for Asia of ReMark stated, “Most bank customers fall within the low- to middle-income bracket, but bancassurance in its current form is not catering for these customers.”
Bancassurance models
There are several bancassurance structure models that may be adopted by the bank and insurer. Among these are: a) a financial conglomerate; b) the captive insurance company; c) a joint venture; and d) a distribution agreement. Each one brings its own benefits. A distribution agreement or a partnership is without any equity ownership and “is based entirely on an exclusive or nonexclusive agreement to sell the insurer’s products.” In a distribution agreement, “a bank agrees to distribute insurance products produced and serviced by an insurance company.” Banks may or may not be prohibited from entering into a bancassurance agreement with only one insurance company. In Poland, for example, banks may enter into a bancassurance agreement with more than one insurance company. In a financial conglomerate or an Integrated Bancassurance Model, the bank (or insurance company) is an integrated subsidiary of the insurer (or bank). In certain cases, a holding company owns both the bank and the insurance company.
The fact remains that there are no fixed ways by which banks and insurers may enter bancassurance. It has been noted that the “best way of entering bancassurance depends on the strengths and weaknesses of the organization and on the availability of a suitable partner if the organization decides to involve a partner.”
Philippine experience
IN the Philippines, as of 2013, bancassurance accounts for 45 percent of all sales in the industry, an astonishing figure. In 2014 bancassurance companies accounted for about 34 percent of the total premium income.
As of 2014, of the 31 life and composite companies, six are engaged in bancassurance. These are: Philippine AXA, BPI Philam, Sun Life Grepa Financial, Generali Pilipinas, Manulife China Bank Life Assurance Corp. and PNB Life. Their combined total premium accounted for 34 percent of the market share. Philippine AXA holds 12-percent market share of the total premium income. It is engaged in both bancassurance and agency distribution with about 70 percent attributable to bancassurance. Philippine AXA is in partnership with Philippine Savings Banks and the Metropolitan Bank & Trust Co. BPI Philam, on the other hand, has 9 percent of the market share. It is the strategic partnership between Philam Life and the Bank of the Philippine Islands. Sun Life Grepa Financial Inc. is a bancassurance company joint venture between Sun Life Financial (Philippines) and Rizal Commercial Banking Corp. Manulife China is a bancassurance joint venture company between China Bank and Manulife Philippines. A recent entrant is FWD Life which entered into an exclusive bancassurance agreement with Security Bank Corp.
In terms of regulation, bank employees are prohibited from making presentations of insurance products. As a relaxation of this rule, the Insurance Commission has allowed the “preliminary” presentation of insurance products. It has been noted, however, that bank employees, in other jurisdictions, have been allotted a share in the commissions, by as much 15 percent, for providing “warm leads.”