UK Bancassurance 2007

Table of Contents

• Overview
  • Catalyst
  • Summary
• Table of Contents
• Table of Figures
• Table of Tables
• Market Focus
  • The bancassurance share of the life and pensions market has been declining in 2006
    • Bancassurers have grown their life business, but not as strongly as other distribution channels
      • Bancassurers have been lagging behind in the single premium life business
      • Unit linked and distribution bond products now dominate the total single premium life market
      • Bancassurers focus their sales efforts on unit-linked and guaranteed equity bonds
      • The endowment mortgage crisis has taken its toll on regular premiums
      • Bancassurers have done much better than other distribution channels for regular premium products
    • The bancassurers' pensions business has seen substantial change
      • Bancassurers have moved away from single premiums in the distribution of pensions products
      • Single premium income has been driven by SIPPs and personal pensions
      • Bancassurers have focused on stakeholder pensions
      • Group personal pensions are still the motor of growth in the regular premiums segment
      • Stakeholder pensions make up 86.5% of the bancassurers' regular premium income in the pensions segment
  • The UK bancassurance market is being driven by customers, product changes, regulation and market conditions
    • The urgent need for retirement planning is shifting the balance between products
      • Baby boomers will drive growth in the pensions and investment bonds market
      • The outlook on bancassurer' s sales of pensions is still rather guarded
    • Bancassurance sales have been limited both by market conditions and their own conflicting objectives
      • Market conditions - a shaky mortgage market is adding to the woes of protection products
    • External factors are forcing banks to re-examine their product offerings
      • Changes to the capital gains tax regime may force banks to switch offerings away from life bonds
      • Slowing of the mortgage market will limit mortgage related product sales
      • Credit and debt can be supported by general protection product sales
    • Overall, products need to be simplified to appeal to the bancassurance client base
      • Banks must sell products that best appeal to their target customer base
      • Meet RDR requirements for both product design, distribution and service
    • Banks must simplify the selling and the buying process
      • Successful sales processes rely on the teller staff
      • Simplifying the buying process and improving the buying experience
      • A longer tem goal is for advice to become separated from the product
    • Competition in the bancassurance market is fought on two fronts - the financial advice market and from within their own sector
      • Correctly using the extensive customer information that banks hold
      • Building trust and changing customer perceptions
      • Bancassurers are lacking the focus required to challenge the IFA channel
      • Attaining the focus on bancassurance will be a challenge for banks as they have conflicting objectives
    • Competition from within the bancassurance sector is fierce
      • Differentiation from the product side is difficult to achieve therefore service and execution excellence must be the goal
    • Successful application of technology is an ongoing challenge for bancassurers
    • The mass affluent sector of the baby boomer customer base should be the focus for bancassurers
      • "Thriving 40s and 50s" are currently the most important customer group
      • Customer apathy is a great challenge
      • The Northern Rock affair has rocked consumer confidence
  • The bancassurance market is forecast to grow with unit-linked bonds continuing to dominate
    • Bancassurance will continue to be dominated by unit-linked bonds and mortgage-related and savings-related term assurance
  • Multi-tie as a bancassurance business model is set to grow in importance
• Competitor Focus
  • Introduction
  • Strategies for success for UK bancassurance competitors
    • Maximizing opportunities through the mortgage lending side of the business
    • Develop reputation in the investment arena
    • Quality of teller staff and advisors must be boosted and maintained
    • Revive branch network - it is not only the number of branches that is important
    • Successful customer segmentation is vital and is too often ignored by bancassurers
  • The business model chosen is largely irrelevant to customers
    • The business model adopted does not affect customers but is important from an operational strategy perspective
      • Partnerships and multi-tie deals have failed to change the shape of the bancassurance landscape
      • Acquisitions of life companies by banks have not become a widespread strategy
      • Own product manufacture remains a sensible strategy for larger scale businesses
• APPENDIX
  • Product definitions
    • Life based savings products
    • Life Assurance
    • Single Premium Life
    • With-profit bond
    • Unit-linked bond
    • Income and growth bonds
    • Guaranteed Equity bonds
    • Distribution bonds
    • Purchased Life Annuities
    • Other bonds
    • Annual Premium Life
    • Endowment Policy
    • Whole of Life Insurance
    • Term Assurance
    • Income Protection
    • Critical Illness
    • Collective Life
    • ISAs
    • Personal Pensions
    • Stakeholder Pensions
    • Group personal pensions
    • DSS Rebates
    • Employer Sponsored Stakeholder pension (ESS)
    • SIPPs (Self Invested Personal Pensions)
    • FSAVC (Free-Standing Additional Voluntary Contributions)
  • ABI definitions of distribution channels
    • Independent Financial Advisors (IFAs)
    • Direct sales forces
    • Tied agents
    • Multi-tied agents
    • Bancassurance
    • Direct marketing
    • Telesales
    • Other
  • Matrix-Data definitions
    • IFA firm types
    • Grossed Annual Aggregate Turnover
    • IFA sales people
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Forecasted gross advances in the UK residential market under the Datamonitor View, 2006-11f (£m)
    • Table 2: Forecast single premium life sales through the bancassurance channel, 2007-11, £m APE
    • Table 3: Forecast regular premium life sales through the bancassurance channel, 2007-11, £m APE
    • Table 4: Forecast single premium pensions through the bancassurance channel, 2007-11
    • Table 5: Forecast regular premium pensions through the bancassurance channel, 2007-11, £m APE
    • Table 6: HBOS sales of investment and protection products 2005-06, £m APE
    • Table 7: Number of UK retail bank branches, 2004-06
    • Table 8: Historic single premium life new business premiums through bancassurance 2002-06
    • Table 9: Historic regular premium life new business premiums through bancassurance 2002-06
    • Table 10: Historic single premium pensions new business premiums through bancassurance 2002-06
    • Table 11: Historic regular premium pensions new business premiums through bancassurance 2002-06
    • Table 12: Total life and pensions new business premiums through the bancassurance channel split by single-tie and multi-tie
    • Table 13: New business premiums through the multi-tie bancassurance channel split by product group, £m APE
  • List of Figures
    • Figure 1: Bancassurers have been unable to match the growth rates in the life and pensions markets over the past five years, 2002-06
    • Figure 2: Single premiums have seen strong growth in the life segment, 2002-06
    • Figure 3: Unit-linked bonds have gone through stunning growth in the last 5 years, 2002-06
    • Figure 4: Bancassurance is remarkably strong in Guaranteed Equity bonds, 2002-06
    • Figure 5: Bancassurers have done better than the total market in mortgage related products, 2002-06
    • Figure 6: Bancassurers have been able to increase their regular premium business in the pensions segment, 2002-06
    • Figure 7: SIPPs have become the second most important premium generator, 2002-06
    • Figure 8: Stakeholder pensions make up almost half of the bancassurers' premium income from single premium pension products, 2006
    • Figure 9: Group personal pensions continue to be the motor of growth of regular premium pension products, 2002-06
    • Figure 10: Stakeholder pensions dominate the bancassurers' regular premium income, 2006
    • Figure 11: Gross lending in the UK mortgage market is forecast to fall to £335.7 billion in 2008
    • Figure 12: Legal & General' s banking partnerships provides access to over 40 million bank customers
    • Figure 13: Unit-linked bonds are forecast to continue to dominate single premium life sales by bancassurance
    • Figure 14: Mortgage-related and savings-related term assurance is forecast to continue to dominate regular premium life sales through the bancassurance channel
    • Figure 15: Stakeholder pensions are forecast to continue to dominate the single premium pensions market through the bancassurance channel
    • Figure 16: Forecast regular premium pensions through the bancassurance channel, 2007-11
    • Figure 17: Multi-tie business is due to grow to £328m APE by 2010
    • Figure 18: Single premium life sales will dominate the multi-tie bancassurance channel
    • Figure 19: HBOS sales of investment and protection products 2006-07
    • Figure 20: Overall the number of bank branches in the UK fell by 6% between 2004 and 2006
    • Figure 21: Lloyds TSB type of retail distribution by channel