Marktanalyse - Bancassurance in Russia: Life, Non-Life and Creditor Insurance

Marktanalyse - 'Bancassurance in Russia: Life, Non-Life and Creditor Insurance'

Finaccord’s report titled Bancassurance in Russia: Life, Non-Life and Creditor Insurance is about the distribution of insurance products through banks and other lending institutions in Russia. Types of insurance considered are: investment-related life insurance and retirement savings; risk life insurance, critical illness insurance and income protection insurance; accident insurance, medical expenses insurance and health / hospital cash plans; personal motor insurance and household insurance; and creditor insurance for mortgages, consumer finance and credit cards.

Based on a survey of 74 organisations, it identifies 239 bancassurance distribution initiatives across these types of insurance, and highlights the operating models and product providers used in the vast majority of cases. Moreover, it analyses these bancassurance agreements in terms of ‘weighted partnerships’ which take into account the size of the retail customer base of the banking institutions distributing these policies, thereby differentiating between the most important relationships and those that are comparatively minor.

In addition, with the exception of creditor insurance, for which historic, current and forecast market size data is provided for 2007, 2011 and 2015, the report also sizes the market for the various types of insurance investigated in terms of gross written premiums between 2006 and 2010, provides a general introduction to the banking sector, comments upon the general influence of the bank distribution channel for these types of insurance, and presents available data for key bancassurance underwriters, including captives, joint ventures and other dedicated bancassurance underwriters.

You may be able to use this report and the PartnerBASE™ dataset that accompanies it in one or more of the following ways:

- gain access to a source of information that provides a comprehensive overview of the provision of a range of personal insurance products by a majority of significant banking entities in Russia;

- identify partnership opportunities for these types of insurance that may arise either because a banking institution is not currently active or because there is scope for replacing an existing initiative;

- understand which underwriters and other product providers have been successful in establishing distribution relationships with the most important banking entities in Russia;

- assess the background to the most significant bancassurance deals, differentiating between those that originate from long-term or strategic objectives and those that are more transient;

- appreciate the magnitude of the opportunity to sell different types of life, non-life and creditor insurance through banks and other lending institutions in Russia.

Inhaltsverzeichnis Marktanalyse - 'Bancassurance in Russia: Life, Non-Life and Creditor Insurance'



TABLE OF CONTENTS

0.0 EXECUTIVE SUMMARY ... 1

1.0 INTRODUCTION 3

What is this report about? .. 3

Distribution partnerships with banks and other lending institutions constitute the focus of this report ... 3

Rationale 3

Across Europe, over 80% of banking entities surveyed are active in this arena to one extent or another 3

Methodology . 4

Survey of banks and other lending institutions . 4

Market data . 4

Definitions . 6

Investment-related life insurance .. 6

Retirement savings 6

Risk life insurance .. 6

Critical illness insurance . 6

Income protection insurance . 7

Accident insurance . 7

Health / hospital cash plans ... 7

Medical expenses insurance . 7

Personal motor insurance .. 7

Household insurance . 7

Creditor insurance .. 8

Mortgages, consumer finance and credit cards ... 8

Weighted provider share of partnerships .. 8

Operating models ... 9

Abbreviations and exchange rates .. 10

Finaccord 10

2.0 MARKET ANALYSIS ... 12

Banks and other lending institutions covered .. 12

Introduction to the banking sector .. 12

Banks owned ultimately by the state continue to exert a strong influence on Russia’s banking sector... 12

... with several foreign banks having decided to exit the market 13

Russia’s banking sector has changed very significantly in recent years... 13

... with a new wave of merger and acquisition activity in evidence since 2008... .. 13

... and with further changes in the market structure likely to occur 14

In spite of its problems, there is plenty of scope for the Russian retail banking market to grow... 14

Investment-related life insurance and retirement savings .. 15

Insurance market size and growth .. 15

Most of the market is likely to be composed of contributions to non-state pension funds (NPFs) ... 15

Distribution share of banks .. 16

The primary bancassurance focus of Russian banks lies on creditor and motor insurance 16

Bancassurance provision rates, operating models and partnerships ... 17

Investment-related life insurance 17

Few banking entities promote any form of investment-related life insurance 17

Retirement savings ... 19

Around a quarter of major banking institutions promote non-state pension funds... . 19

... in many cases through their own captive vehicles . 19

In total, a dozen NPFs possess bank distribution partnerships... .. 19

... although a number of significant banking institutions have not yet entered this market ... 19

Performance of key bancassurance underwriters .. 20

Most ‘life insurance’ distributed by banks is actually creditor insurance 20

Protection-related life insurance . 21

Insurance market size and growth .. 21

The value of the market for protection-related life insurance has fluctuated up and down in recent years . 21

Distribution share of banks .. 22

Bancassurance provision rates, operating models and partnerships ... 23

Risk life insurance 23

Critical illness insurance ... 23

Income protection insurance ... 23

Accident and health insurance 25

Insurance market size and growth .. 25

Compulsory health insurance for government employees makes up the bulk of the market ... 25

Distribution share of banks .. 26

Bancassurance provision rates, operating models and partnerships ... 27

Accident insurance ... 27

Stand-alone accident cover (as opposed to creditor insurance) is not widely marketed by banks .. 27

Alfa-Bank distributes accident insurance with coverage options to suit different target customer groups ... 27

Probisenes Bank sells children’s insurance in addition to classic accident cover . 27

Deposit balance protection insurance is not included in Finaccord’s analysis of accident insurance .. 27

Medical expenses insurance ... 29

Health / hospital cash plans . 29

Performance of key bancassurance underwriters .. 30

Most ‘accident and health insurance’ distributed by banks is actually creditor insurance 30

Personal motor and household insurance 31

Insurance market size and growth .. 31

Personal motor insurance makes up over 95% of the combined total market .. 31

Distribution share of banks .. 32

Bancassurance is important as a distribution channel for both personal motor and household insurance . 32

Bancassurance provision rates, operating models and partnerships ... 33

Personal motor insurance 33

Provision rates are high because car finance customers must also take out motor insurance 33

However, the supply structure is highly fragmented because most banks utilise multiple underwriters... ... 33

... meaning that the weighted share of partnerships of the market leader is less than 5% ... 33

Several banks possess captive underwriters that are active in this field... 33

... although most are utilised as one of a long list of accredited insurers ... 33

Just one joint venture underwriter is apparent in personal motor insurance in Russia . 34

Household insurance ... 36

Household cover is available from almost all banks that are involved in mortgage lending... .. 36

... and is almost always bundled with creditor cover within mandatory mortgage-related policies ... 36

VSK is the leading provider in terms of its weighted share of partnerships ... 36

Banking institutions not offering household cover are mainly those not active in the mortgage market .. 36

Performance of key bancassurance underwriters .. 38

Bank-owned underwriters have gained market share in motor liability insurance... . 38

... and have also performed strongly in property insurance ... 39

Non-captive underwriters secure the most motor insurance business from the bancassurance channel ... 39

Creditor insurance . 40

Consumer lending market size and growth 40

Mortgage lending . 40

Residential mortgage lending balances in Russia have increased only slightly since 2008 40

Non-mortgage lending . 41

... with a similar assertion applying to non-mortgage consumer credit .. 41

Credit and other pay later cards .. 42

Credit and other pay later cards issued in Russia grew at a very robust rate between 2006 and 2010 .. 42

Creditor insurance provision rates, operating models and partnerships ... 44

Creditor insurance linked to mortgages .. 44

In most cases, mortgage lenders source creditor insurance from a panel of approved underwriters... ... 44

... most of which are classifiable as non-captive providers 44

In addition to VSK, Rosgosstrakh, ROSNO and Cardif are identifiable as market leaders... ... 44

...with AlfaStrakhovanie featuring as the most prominent captive underwriter .. 44

A handful of banking institutions, including Probisenes Bank, work with a single underwriter... .. 45

... with a larger number opting for a hybrid operating model including both captive and non-captive insurers 45

Just one joint venture underwriter is apparent in mortgage-related creditor insurance in Russia 45

The Russian insurance sector was also experiencing some consolidation at the time of research 45

Typically, mortgage-related insurance in Russia is configured differently to other European countries... ... 47

... with mandatory mortgage insurance complemented increasingly by voluntary creditor insurance . 47

Creditor insurance linked to consumer finance .. 48

The link with its parent company makes Russian Standard Strakhovanie a leader in this sector 48

... followed by Cardif, VSK, Rosgosstrakh and ROSNO 48

Captive underwriters are comparatively prominent in the market for loan payment protection insurance ... 48

As for mortgage-related creditor insurance, Sberbank maintains links with four separate insurers . 48

Underwriters with exclusive non-captive deals include Aviva, CiV Life, ERGO Russ and MetLife Alico . 49

A third of entities offering consumer finance have no program for related creditor insurance .. 49

Creditor insurance linked to credit cards . 51

Around one third of credit card issuers have developed an associated creditor insurance scheme 51

Russian Standard Bank uses its own captive underwriter for most of the credit cards that it issues ... 51

Creditor insurance risk coverage . 53

Cover for temporary incapacity and unemployment is most commonly available to credit card customers 53

Alternative distribution channels .. 53

Creditor insurance market size, growth and forecast . 54

Total gross written premiums could break through the EUR 1 billion barrier by 2015 .. 54









Tabellenverzeichnis Marktanalyse - 'Bancassurance in Russia: Life, Non-Life and Creditor Insurance'



LIST OF GRAPHICS / TABLES

0.0 EXECUTIVE SUMMARY ... 1

Overview of bancassurance provision rates for different types of insurance in Russia, 2011 ... 2

1.0 INTRODUCTION 3

Banks and other lending institutions in Russia contacted by Finaccord, segmented by type ... 4

2.0 MARKET ANALYSIS ... 12

Gross written premiums for investment-related life insurance and retirement savings in Russia, 2006-2010 ... 15

Gross written premiums for investment-related life insurance and retirement savings in Russia, 2006-2010 (data) . 16

Bancassurance provision of investment-related life insurance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships 18

Market share in total life insurance of key bancassurance underwriters in Russia, 2006-2010 (data) ... 20

Gross written premiums for protection-related life insurance in Russia, 2006-2010 21

Gross written premiums for protection-related life insurance in Russia, 2006-2010 (data) . 22

Bancassurance provision of risk life insurance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 24

Gross written premiums for accident and health insurance in Russia, 2006-2010 .. 25

Gross written premiums for accident and health insurance in Russia, 2006-2010 (data) ... 26

Bancassurance provision of accident insurance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 28

Market share in voluntary accident and health insurance of key bancassurance underwriters in Russia, 2006-2010 (data) .. 30

Gross written premiums for personal motor and household insurance in Russia, 2006-2010 31

Gross written premiums for personal motor and household insurance in Russia, 2006-2010 (data) . 32

Bancassurance provision of personal motor insurance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 35

Bancassurance provision of household insurance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 37

Market share in total motor liability insurance of key bancassurance underwriters in Russia, 2006-2010 (data) . 38

Market share in total property insurance of key bancassurance underwriters in Russia, 2006-2010 (data) ... 39

Residential mortgage lending balances outstanding in Russia (absolute and per capita), 2006-2010 .. 40

Consumer non-mortgage lending balances outstanding in Russia (absolute and per capita), 2006-2010 41

Credit and other pay later cards issued and per capita in Russia, 2006-2010 . 42

Key data points for the consumer lending market in Russia, 2006-2010 . 43

Provision of creditor insurance linked to mortgages in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 46

Provision of creditor insurance linked to consumer finance in Russia, 2011: provision rate, operating models and weighted provider share of partnerships 50

Provision of creditor insurance linked to credit cards in Russia, 2011: provision rate, operating models and weighted provider share of partnerships . 52

Risk coverage of creditor insurance policies in Russia, segmented by type of underlying product, 2011 .. 53

Creditor insurance gross written premiums in Russia, segmented by policy type, 2007, 2011 and 2015 (forecast) ... 54

Creditor insurance gross written premiums in Russia, segmented by cover type, 2007, 2011 and 2015 (forecast) ... 55

Creditor insurance gross written premiums in Russia segmented by policy and cover type, 2007, 2011 and 2015 (forecast) (data) ... 55





0.0 EXECUTIVE SUMMARY



Given an overall distribution share of bancassurance in 2010 of 60.3% for total life insurance and 3.5% for total non-life insurance, it is clear that banking institutions in Italy are far more influential in the former area than in the latter. However, it should be added that the figure for total non-life insurance understates the impact of banks as distributors in personal non-life insurance markets to which they are more suited, such as accident and household insurance.

Overall, across the 120 banks and other lending institutions researched in Italy, Finaccord’s research identified 748 bancassurance distribution initiatives for the various types of insurance investigated with provision rates for each as follows:



- within the relevant universe of banking entities (i.e. all organisations researched other than automotive finance captives), bancassurance provision rates for investment-related life insurance and retirement savings were 64.2% and 66.1%, respectively;

- among the same entities, risk life insurance, critical illness insurance and income protection insurance registered equivalent figures of 65.1%, 2.8% and 19.3%, respectively;

- turning to forms of non-life insurance, and across the same banking institutions, 53.2%, 45.0%, 51.4%, 46.8% and 75.2% were the respective rates of provision for accident insurance, medical expenses insurance, health / hospital cash plans, motor insurance and household insurance;

- 100.0% of banks and other lending institutions offering mortgages were found to offer creditor insurance related to mortgages;

- as for creditor insurance linked to consumer finance and credit cards, the respective rates of provision among the relevant banking entities were 96.5% and 20.8%.



Hence, these data points indicate that a significant number of banks and other lending institutions are active in the distribution of all of the insurance product types researched apart from critical illness insurance, which is not commonly marketed through any channel in Italy.



Moreover, across all forms of insurance investigated (and excluding a handful of bank-owned investment management firms involved in retirement savings), Finaccord identified a total of 29 underwriters acting in a captive capacity and 12 joint venture underwriters in Italian bancassurance:



- ordered alphabetically rather than by size or importance, captive underwriters were Allianz Global Life, BancAssurance Popolari, BNL Vita, CACI, Cardif, Carige Assicurazioni, Carige Vita Nuova, CBA Vita, Chiara Assicurazioni, Crédit Agricole Assicurazioni, Crédit Agricole Vita, Darta Saving Life Assurance, Eurizon Vita, Fondiaria SAI, Genertel, Global Assicurazioni, Global Assistance, Intesa Sanpaolo Assicura, Intesa Sanpaolo Previdenza, Mediolanum Assicurazioni, Mediolanum International Life, Mediolanum Vita, Poste Assicura, Poste Vita, PSA Life, RB Vita, SOGECAP, Sud Polo Vita, and Unipol;

- meanwhile, joint venture insurers were ABC Assicura, Berica Vita, BIM Vita, CARMA, Chiara Vita, Credem Assicurazioni, Credem Vita, CreditRas Assicurazioni, CreditRas Vita, Incontra, Popolare Vita, and UBI Assicurazioni.



As in other European countries, Italy’s bancassurance remains in a state of continuing flux caused by a variety of factors including the structural evolution of the wider banking sector, and the product and partnership strategies of individual banking institutions and insurance groups. Hence, further changes to the market status depicted by this report can be anticipated for the coming years.

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