In Europe, bancassurance is a fairly significant channel for life insurance. However, it has remarkably low market penetration in the United Kingdom. Accenture research shows that only 22 percent of UK insurance customers prefer to purchase from a bank—compared to nearly 50 percent of consumers in France and Spain.
Trends in UK life insurance
In the United Kingdom, the bank channel has seen very low market penetration. What success it has seen has mostly been in simple products that are tied to other banking products (for example, individual protection policies tied to mortgages). Face-to-face sales dominate the industry, and agents and brokers are the primary channels for life insurance sales.
Further, Retail Distribution Review (RDR) will be implemented in 2012. The RDR is a new regulation, led by the Financial Services Authority (FSA), that aims to regulate distribution in the retail investment market.
The RDR will facilitate a major shift in insurance product development and distribution strategy.
Challenges and opportunities
As much as RDR poses challenges to the industry, it also presents an opportunity for bancassurance to capture greater market share. This will not be without challenges. After the recent economic downturn, consumers are wary of financial services firms. Insurers and banks need to rebuild consumer trust. Further, with increasing customer caution, decreased demand for insurance products and a focus on more competitive pricing, there is a lot to consider.
Requirements for a new business model
The opportunity for bancassurance is significant, but it will require a new business model. This model includes:
- Rich customer insight.
- Multichannel sales distribution.
- Simple products.
- Simplified advice.
- Slick sales processes.
- Low-cost operations.
Next week, I’ll discuss the five capabilities that insurers need to create a dominant bank channel in the United Kingdom.
Accenture has developed a Point of View on this topic. Download How Bancassurance Can Dominate the UK Life Insurance Industry.