Banks seek insurance partnerships to target rich customers

Several banks in Asia have embarked on bancassurance programs with insurers to target high-net-worth individuals.

In Hong Kong, China CITIC Bank teamed up with FWD Macau, enabling the bank’s customer base to access FWD’s suite of insurance products and services.

In particular, the arrangement seemed to target the bank’s high net worth individual, with China CITIC Bank International executive director and deputy CEO Helen Kan noting that customers are likely to “reassess their insurance and protection needs with respect to wealth accumulation, preservation and legacy planning for future generations.” In Singapore, HSBC inked a 15-year bancassurance deal with MSIG Singapore. Under the exclusive agreement, MSIG will distribute its commercial and personal suite of insurance solutions to HSBC’s customers in Singapore.

“With our combined strengths and expertise, we can create value for a more protection focused future for individuals, their families and businesses. Through our partnership, we look forward to strengthening MSIG’s position in Singapore with profitable growth,” MSIG Asia CEO Clemens Philippi said, commenting on the new partnership.

Back at Hong Kong, Dah Sing Bank and Sun Life Insurance closed a HK$1.5b deal for a 15-year bancassurance partnership.

With this, Sun Life is now the exclusive provider of life insurance solutions to Dah Sing Bank’s 570,000 retail banking customers. Following the completion of regulatory processes and approvals, distribution of Sun Life products is anticipated to start in July 2023.

Bancassurance refers to the arrangement between a bank and an insurance company in which an insurer is allowed to offer their products to the bank’s current customer base, according to one definition by Investopedia. Bancassurance has since become an important distribution channel for insurance products across Asia–Pacific. In a report, around 31%of life insurance premiums in the Asia Pacific region came from bancassurance, according to data from McKinsey & Company.

“To successfully tap into the potential of this market in the coming years, banks and insurers need to act on three emerging imperatives: digitalising the bancassurance channel, reinventing the business model, and bringing purpose to the fore,” wrote McKinsey’s Vikas Gour, Anindya

Mukharjee, Sumit Popli, and Sujin Saj in a bancassurance report published in 2022.

To capture attention, banks and insurers must reimagine the bancassurance business model with customers’ preferences and expectations at the core, the four McKinsey & Co. authors said.

“This could imply, for instance, the emergence of contextual products that are embedded in the insurance journey and ongoing advice to help customers change certain behaviors. Incumbent players need to build these capabilities rapidly, as customer behavior has transitioned rapidly,” the report stated.

The future of bancassurance will involve recasting the channel as a way for customers to build and manage an integrated financialwellness plan. In addition to purchasing appropriate life and nonlife insurance protection, customers will be able to access comprehensive financial support, including loans to achieve life goals and advice on savings and investment, McKinsey said.

Amongst capabilities expected of banks and insurers include: products across multiple asset classes; third party services to cover broader financial needs; and simpler, more modularized products.

Underwriting capabilities must be driven by advanced analytics, including a simplified process for medical underwriting and access to extensive propriety research.

Insurers and banks must also have the right sales platform capabilities, including an advanced analytics–driven robo-advisory engine, online-to-offline journey assistance, multimedia educational content, one-click sales journeys, and continuous engagement throughout the customer life cycle via both digital and in-person channels.

Underserved Mainlanders Drive Hk Insurance Market

Digital Insurance

programme, including social insurance, that they cannot afford or contribute to due to their lower income.

To address this issue, regulators will have a pending task to provide innovative financial solutions that may provide financial security to informal workers. One of the said solutions is micro pensions.

Micro pensions

Hong Kong’s life insurance market faces a boon over the next two years, as tourism from the mainland ramps up.

New business growth for the life segment will climb 20% to 25% in 2023, before slowing down to a 10% to 15% growth in 2024.

"Hong Kong's geographic proximity provides an opportunity for its insurers to better serve the mainland's underpenetrated market,” said S&P Global Ratings credit analyst Judy Chen

Cross-border travel fully resumed in February 2023, leading to a significant increase in the average case size of new life policies for mainlanders. During the first quarter, the average case size more than doubled to around HK$280,000, compared to HK$126,000 in 2019 prior to the pandemic.

Mainland China customers are attracted to Hong Kong due to several factors. These include a widening interest rate differential, opportunities for asset diversification, and access to comprehensive healthcare.

Insurers from Hong Kong offer savings and investment policies in foreign currencies, as well as more detailed critical illness and medical insurance options compared to their mainland alternatives.

Sales have shown a strong rebound, but they have not fully recovered to pre-COVID levels. In the first quarter of 2023, new-business premiums from the mainland experienced a significant surge to HK$9.6b, compared to HK$345m in the same period the previous year. This is still below the quarterly average of HK$12.3b recorded between 2015 and 2019.

However, the benefits will vary based on brand reputation and service quality, with larger insurers to excel.

Insurers like AIA International Ltd. and Prudential Hong Kong Ltd., who invested in and maintained their agency forces during the pandemic, have benefited from the return of visitors, said S&P.

How micro pensions help informal workers

Insurance Products

The lack of insurance amongst informal workers could create problems in governments and taxpayers in the near future, sparking the need for game changers such as micropensions to keep this segment covered.

Speaking at a panel discussion during the 2022 Singapore Fintech Festival, Parul Seth Khanna, Director of pinBox Solutions, noted that taxpayers might catch the burden of paying each worker for their social insurance, especially when they reach old age.

“The government will pay out any kind of tax-funded benefits to the elderly, which is not going to be an option because all of us will pay $1 per day for their pension,” she said.

An estimated two billion workers, or 61.2% of the world’s labour force, belong to the informal sector, according to data from the International Labour Organisation. They all have limited access to a social protection

These life insurance products provide small, affordable contributions and benefits designed to be flexible, simple, and accessible to any informal worker. However, to make micro pensions work for the workers in the informal sector, according to Dr David Tuesta, the former Minister of Finance in Peru, it required financial education, which is another pending task for regulators.

“Until now, regulators have been taking timid steps in this area. The potential is there. We need to continue preaching to regulators to open their minds to this decision,” Dr Tuesta said in the same panel discussion.

To make the task easier, several regulators integrated technology into tools they used for behavioural finance and financial inclusion to help them encourage informal workers to save.

Aside from financial education, regulators must also emphasise the importance of digitalisation.

According to Kamal Quadir, founder and CEO of bKash Limited, a growing technological infrastructure in developing countries and cheaper access to smartphones allowed informal workers to contribute and receive micro pensions easily through digital platforms such as WhatsApp.

“Today, technology is allowing poor people to participate in the financial platform. So instead of putting the money in the pocket or under the mattress, you're putting the money in the system, and you feel very safe because you can access that money anytime you want,” Quadir said.

However, the panelists agreed that the challenge in developing long-term micro pensions remains. According to Quadir, regulators need to build trust to make long-term savings for informal workers happen. “Trust is based on how the system is built. And that system includes regulatory bodies, the financial institutions, and the technology they offer,” he said.