Bancassurance – an opportunity for advisers?

Advisers love to hate bancassurance – the low or no advice process, the perceived pressure to use bank products alongside mortgage lending (whether that is real or not) and more limited products make it easy for advisers to find fault with bank offers.

Thursday, April 22nd 2021, 11:18AM

by Russell Hutchinson

At one point they accounted for more than a third of the premium written in the market, and more like 40% of the policies.

What is the future for the bank channel?

If lending is a guide, there is plenty of opportunity.

After a deep fall in bank lending in April and May 2020, we began to see a recovery in June 2020. Since then lending has been above trend, catching back up according to RBNZ data.

Given interest rates are near zero, you would hope so – this is exactly the point of low interest rates. Whether the lending is productive or speculative is beyond the scope of this article to ponder but more bank lending usually means more opportunity for them to offer insurance.

If the economy is a guide, there are also good signs - after more than $22 billion in loans were on payment holiday in 2020, the RBNZ tells us that this figure has dropped to $260 million.

There is plenty of demand – the protection gap, the gap between what the insurance consumers own and what they really should have, is so large that we don’t need to quibble over how big it is.

My favourite stats on the subject are that more than 80% of working-age New Zealanders have no mortgage or income protection insurance and more than 70% have no trauma insurance.

In normal times it would be fair to predict a big rise in bank-related insurance sales. But these are not normal times. Banks have been fundamentally re-assessing their relationship with their insurance businesses. Most of them want out.

The last in a well-known series of sales was the recent announcement that BNZ Life will go to Partners Life. How the channels perform depends a lot on how banks and insurers navigate the new conduct requirements. That the old methods cannot simply be re-started seems obvious. What will replace them?

Digital is likely to play a big role in that, and that takes some time to develop and deploy. Although adviser production will likely recover strongly over the balance of the year, we think it will take more time for bancassurers to develop the systems necessary to rebuild production based on convenience and integration.

That provides breathing space in which advisers can do businesses. Space to enjoy a less crowded market where your customers will not be constantly approached for business by the bank.

Time in which you can develop your own digital advice systems.

Tags: Bancassurance banks Russell Hutchinson