Bet on bancassurance
Insurance companies’ increasing use of banks to sell products offers lucrative job opportunities
Despite facing a tightening regulatory regime, bancassurance remains a lucrative intersection between banking and insurance that is likely to drive demand for talent in Hong Kong in years to come.
To get an idea of bancassurance's importance as a channel for the distribution of insurance products, one needs to look no further than recent news headlines. Last month, Citibank and AIA announced a new bancassurance partnership in Hong Kong as the first implementation of a regional agreement between the two companies to offer life insurance products across Asia. This was quickly followed by news that Standard Chartered Bank and Prudential had struck a 15-year agreement to expand and extend an existing bancassurance partnership across 11 markets in Asia.
Mark Bain, director and head of insurance consulting at KPMG China, says bancassurance has evolved into an ideal channel for the sale of insurance products. One of the biggest reasons for this is that at any given point in time, banks are likely to have a better understanding of their customers' financial situation, compared to insurance companies. Banks typically know how much their customers earn, hold in cash and - by looking at the types of products used and spending habits - the stage at which they are in life, such as whether they are married and have children.
"It means that banks can effectively target customers with the right types of products that match their stage in life, their needs, and their ability to spend," Bain says. "There's huge potential growth because needs, requirements and life stages change all the time. You've got younger generations coming into the workforce, and people moving up in their jobs earning more. In terms of demand, it's unlikely to diminish."
Locally, this potential has been offset somewhat by a continuous reduction in the number of bank branches across Hong Kong over the years. Foot traffic at the remaining branches that offer counter services has also gone down as online banking grows in popularity. More important is the issue of regulation, which has focused mainly on investment-linked assurance schemes (ILAS) - products with both investment and insurance characteristics - in response to customer complaints regarding mis-selling.
Regulations include the introduction in 2011 of enhanced requirements for the sale of ILAS, which requires banks to perform needs analysis and risk profiling in the sales process. This was reinforced last year when the Hong Kong Monetary Authority imposed extra requirements on banks in the form of pre-sale disclosure of relevant fees and charges.
Because ILAS accounted for anywhere up to 70 per cent of bancassurance sales, depending on the individual institution, many banks have had to scale back their ambitions for the channel, Bain says.
"We are seeing some forced innovation taking place to be more transparent and go back to some of the more traditional products, which are a little easier to sell in terms of regulatory constraints," he says. "But I know of at least one organisation which is revamping their par portfolio products to be sold through bancassurance and very much focusing on a value-for-money customer perspective, which is refreshing to see."
He adds that he would not be surprised if the sector faces additional regulation in the short to medium term. "We are starting to see regulators come together both from banking and insurance perspectives on a global scale to dictate and suggest best practices. I would expect regulation to continue to evolve, as well as fine-tuning in additional requirements. That's going to be the norm in Asia for many years," Bain says.
On the recruitment side, he says banks are on a continual look-out for talented sales staff, especially since industry attrition remains high. He explains that depending on the organisation, it is not unusual for personnel turnover to reach 70 per cent annually. Most banks are in a continuous process of recruitment, training, coaching, and licensing in an effort to maintain and grow sales capacity.
"Most organisations struggle to find good-quality sales people," he says. "It's partly the nature of the way people are educated in Hong Kong and the predominant personality type, which is more introverted. Another issue is that culturally it's a sensitive subject, so people feel a little uncomfortable talking about death and disability."
John Mullally, associate director of financial services at Robert Walters Hong Kong, says there has been an increase in demand for bancassurance professionals. This applies to not only sales positions but also senior management ranks, as banks seek to better understand how to strategically position their distribution platforms. "The net result has been an increase in salaries for senior bancassurance candidates with a strong technical understanding of insurance products and how distribution channels work, as well as a good network of contacts within the space," he says.
This trend is set to continue as insurance companies maintain and grow existing commercial relationships with their banking partners. Junior and mid-level sales personnel at both banks and insurance companies are also being funnelled into bancassurance to make up for the relative talent shortage, Mullally says.
Sales roles are in greatest demand, but there's also a need for product specialists - both in terms of the insurance policies and the management of bancassurance platforms, project managers and compliance professionals. At the senior end of the experience spectrum, there is a demand for executives with a strong understanding of the regional bancassurance landscape.
"There's been a consistent demand for candidates who can manage the relationship between the insurer and the bank that is distributing the product," Mullally says. He adds that demand is highest for those able to display an ability to manage relationships on an institutional level, as opposed to a purely retail basis. "That skill set can be difficult for someone who is used to making one-off transactional sales to acquire. It is selling on a higher level."