UK Bancassurance 2010

Introduction

The UK bancassurance market is preparing for significant changes bought about by the implementation of the RDR in 2012. The change in charging structures, professionalism and independence will provide the bancassurance distribution channel with the opportunity to gain market share in the life assurance and pensions market. Players in the bancassurance channel will need.
Features and benefits

* The bancassurance channel is forecast to gain market share in the life assurance market over the next five years.* Banks will tailor their bancassurance models to best suit their business models and their consumers demands.
Highlights

Bancassurers have failed to exert pressure and gain a substantial market share in both the life assurance and pensions market over the past five years. Bancassurance has faced an extremely challenging market, with consumer's attitudes towards life assurance and pension products affecting the whole market.Bancassurers as well as IFAs and other advice services will be required to charge fees for the advice given rather than receiving commission on products sold. The advice gap will grow as a result of the implementation of the RDR, which will result in IFAs focusing their attention on high net worth consumers.
Your key questions answered

* How the RDR is likely to affect the bancassurance market and what banks can do to maximize the opportunities that the RDR presents.* Use our forecasts of the bancassurance model to build upon your companies strategic approach going forward.

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Executive Summary
OVERVIEW
Catalyst
Summary
STABALIZING THE ROAD TO GROWTH
The turbulent economic conditions have affected the market since 2007
Banks have seen gross lending plummet since the crash in 2007
The economy remained fragile in 2009, leaving banks wary of extending their operations
Banks are changing the focus of their bank branches
Bancassurers have been consistently unsuccessful at challenging IFAs in the life assurance and pension distribution channels
There are four main distribution channels for life assurance and pension products
Within the bancassurance channel, the single premium life assurance market is the most prevalent, with the largest market share year-on-year from 2005 to 2009
The distribution of life assurance products is dominated by the IFA channel
Unit-linked bonds have fallen victim to the economic turmoil since 2007
Regular premium life products through bancassurance have seen growth in 2009 after a declining market since 2005
Bancassurers distribute a fraction of total pension products
Single premium pensions distributed through bancassurance fell by 46.1% from 2008 to 2009
The regular premium pension market has declined in 2009
Bancassurance needs to seize the opportunity to gain market share of life assurance
Single premium life assurance is forecasted to make a strong recovery, with a predicted CAGR of 14.6% from 2010 to 2014
The regular premium life assurance market distributed through bancassurance will remain flat for the five year forecasted period of 2010 to 2014, with a CAGR of 0.1%
Pension products are forecast to maintain a small percentage of new business sold through bancassurance
The single premium pensions market distributed through bancassurance is forecast to decline with a CAGR of -2.8%
The regular premium pensions market distributed through bancassurance is forecast to decline in line with single premium pensions distributed through the same channel
THE RDR'S LOOMING PRESENCE
The definitions of tiered advice outlined by the RDR aim to achieve clarity for consumers
Bancassurers will need to clarify which category their advice falls into in order to provide clarity to their customers
The implementation of upfront fees will widen the advice gap, as some consumers will be underserved
IFAs who focus on high net worth individuals will leave the lower end of the market underserved
Consumers are reluctant to pay upfront fees for advice
Bancassurers can acquire consumers underserved by other distribution channels, but they must identify an appropriate advice pricing strategy
Money Guidance provides banks with opportunities to entice more consumers through bridging the advice gap
Higher professional standards will help to increase consumer confidence in the market
Consumer confidence will be bolstered by higher professional standards
A proportion of IFAs will sell their practices and retire rather than retraining and up-skilling
The associated costs of up-skilling staff and the length of the advice process will turn bancassurers off giving advice
The independence requirements will provide clarity about levels of advice, aligning the RDR to the standards of treating customers fairly
The current advice provided by banks will be classified under the RDR as being restricted advice, which will need to be clearly explained to clients
Bancassurance caters for the mass market; therefore, basic advice might be more suitable to the client base
The current economic climate is stunting distribution through banks
The decrease in the demand for mortgages is reducing the cross-selling opportunities for banks
Consumers with variable rate mortgages have benefited from a fall in interest rates
The increase in the protection gap highlights the opportunities in the market for bancassurance
Pensions provide a significant opportunity for bancassurers, whereas currently they do not feature as a major product offering
Consumers differentiate certain attributes in IFAs and banks when taking out pensions, more so than when purchasing life assurance
Consumers look for the same attributes in providers when purchasing life assurance products
Consumers look for different attributes in banks and IFAs when purchasing a pension product
Consumers who use banks and IFAs have the same age demographics
The profile of consumers who purchase pension products from IFAs and banks differ
Consumers on higher incomes are generally more likely to go to an IFA for life assurance and pension products than consumers on lower incomes
Consumers earning more than £25,000 are more likely to go to their bank for advice
Consumers value online banking facilities and knowledgeable staff within banks
Merger and acquisition activities and partnerships continue to consolidate the market
Large players have been seeking opportunities to engage in M&A activities
Smaller players are focusing their business models on enhanced customer service in order to retain business
Bancassurers will have to adapt their bancassurance models in the future in order to take advantage of the opportunities that arise from the RDR
Banks can place focus on mortgages and life assurance products that do not fall under the remit of the RDR
Banks are likely to combine both scenarios and move to a multi-tied model
Smaller banks and building societies will pass on the responsibility of selling products to a third party
Alternative options will develop for consumers who are willing to be involved in the research and transactional aspects of the investment process
APPENDIX
Supplementary tables
Stabilizing The Road to Growth chapter
The RDR's Looming Presence chapter
Product definitions
Life-based savings products
Life assurance
Single premium life
With-profits 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
DWP rebates
Employer-sponsored stakeholder (ESS) pension
Self-invested personal pensions (SIPPs)
Free-standing additional voluntary contributions (FSAVCs)
ABI definitions of distribution channels
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Methodology
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer

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