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June 8, 2009updated 13 Apr 2017 8:56am

The big allure of China’s bank channel

Though bancassurance has already grown to become a major source of new business for Chinas life insurance industry, research commissioned by Allianz China Life suggests strongly that it remains a marketing channel offering considerable potential for expansion. Bancassurance in China remains in its infancy and presents life insurers with enormous growth potential as a distribution channel, believes Wilf Blackburn, CEO of Allianz China Life (ACL).

By LII editorial

Though bancassurance has already grown to become a major source of new business for China’s life insurance industry, research commissioned by Allianz China Life suggests strongly that it remains a marketing channel offering considerable potential for expansion.

 

Bancassurance in China remains in its infancy and presents life insurers with “enormous growth potential” as a distribution channel, believes Wilf Blackburn, CEO of Allianz China Life (ACL).

His enthusiasm is underpinned by an in-depth study of bancassurance in China undertaken on behalf of ACL by Chinese research firm Oracle Value Added (OVA).

The study was conducted in 12 provinces in China from March to September 2008 among 3,100 bank customers of five major Chinese banks: Industrial & Commercial Bank of China (ICBC), China Construction Bank, Agricultural Bank of China, Bank of China and China Merchants Bank.

It emerged clearly from the study that stimulating growth in the Chinese bancassurance channel depends heavily on increasing consumer awareness of the availability of insurance products in bank branches.

OVA found that a mere 37 percent of customers were aware that they could buy insurance over bank counters. In contrast 66 percent knew about personal loans and 50 percent about bonds.

When it comes to buying products in a branch, 97 percent of bank customers demand saving accounts, 40 percent apply for credit cards, but only 3 percent buy insurance. In respect of insurance sales channel choices, one out of two bank customers prefer to purchase insurance from an insurance agent, 11 percent through banks and 4 percent through brokers.

“Actually, many bank customers either do not know that insurance is available through bank branches, or do not yet consider buying insurance in banks,” commented Blackburn.

“There are two consequences for us at Allianz China Life,” he continued. “Firstly, we will raise the awareness levels among Chinese people that insurance is available in bank branches. And, secondly, we will make suitable and highly competitive products available to our bank partners, which are tailor-made to meet the needs of their customers.”

Based on the results of this study, ACL has already launched one new life insurance product marketed as Allianz An Yu Feng Cai III. The product is a regular-premium participating insurance product which features a minimum guarantee of 100 percent premium return together with accident protection against nine natural disasters. It is a unique product in China, according to ACL.

Market segmentation

Another primary objective of OVA’s study was identification and separation of different consumer groups among urban residents in China to enable ACL to improve product design according to the specific distribution channel.

A total of eight customer groups with distinct needs, desires and buying patterns were identified. The three most important groups are:

• The Family Pillar describes 13.5 percent of Chinese urban residents, Most of them are married and with a child, aged 30 to 49 with average education and below-average salary. Most of them live in first- and second-tier cities in East China.

• The Young Future Builders describes 8.1 percent of Chinese urban residents. Most are single, aged 20 to 29, with an academic background and relatively high income.

• Savvy Investors describes 6.6 percent of urban residents. The majority live in Shanghai and Guangzhou, are between 30 and 39 years of age, are married and have children, and have a good education and high salary.

Other groups identified are the Low Income Striver, Protectors of My Future, Enjoy Now, Plan Future and Traditional Family Nester.

Distribution channels

ACL was established in January 1999 as a joint venture with Chinese financial services company firm CITIC Trust & Investment with Allianz holding a majority stake of 51 percent. Initial focus was on establishing an agency sales force which has increased significantly in recent years from about 7,700 agents in 2006, to 10,000 in 2007 and 18,000 in 2008.

ACL first major entry into the bancassurance channel came in January 2006 via an alliance with the country’s big-four banks in terms of assets, ICBC. The alliance was strengthened the same year when Allianz as part of a consortium with American Express and Goldman Sachs acquired a 2.5 percent stake in ICBC for $1 billion.

Allianz’s stake in ICBC was reduced to 0.97 percent when it sold a portion of its shareholding in April this year. Allianz confirmed that the sale has had no influence on their strategic cooperative relationship with ICBC.

The alliance with ICBC provides ACL with potential access to the bank’s 18,000 branches, 100 million private customers and 4 million corporate customers.

Further strengthening its bancassurance channel ACL has formed further alliances with the most significant being with China’s second largest bank Agriculture Bank of China in September 2006. The alliance provides potential access to the bank’s 30,000 branches, 150 million private customers and 2.5 million corporate customers.

Serving corporate customers was the motivation for ACL’s addition of a third marketing channel in April 2008 with the launch of Group Sales Allianz China Life. “The huge corporate insurance market in China is our next target market,” ACL’s then CEO Christian Molt said at the time of the launch. According to Allianz, China’s corporate insurance market was worth €58 billion ($80 billion) in 2007.

Overall ACL’s multichannel strategy has served it well with the insurer enjoying significant growth in premium income between 2004 and 2007 with bancassurance becoming the biggest contributor in the latter year.

ACL experienced a growth setback with premium income down 20 percent compared with 2007 to CNY2.4 billion ($351.3 million). Despite this ACL retained its position as China’s fourth-largest foreign life insurer in 2008.

income China

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