The bancassurance channel generated NT$262.4 billion (US$8.77 billion) in first-year premiums in the first half of the year, shrinking 31 percent from the previous year, as major life insurers increased their reliance on sales agents to promote protection policies.
The strategy adjustment is positive for the sector, which has seen its topline inflate over the past decade, with sparse bottom-line improvement.
Bancassurance, a partnership between a life insurer and a bank whereby the former sells its products to the latter’s client base, accounted for 52 percent of first-year premiums during the period from January to last month, slowing from between 60 percent and 70 percent in recent years, according to the Life Insurance Association of the Republic of China (壽險公會).
The decline came after major life insurance firms steadily shifted focus back to protection insurance policies, which generate higher yields, but require more face-to-face time with customers to explain the policies.
Policies covering life, health and accident insurance accounted for 75.8 percent of Cathay Life Insurance Co’s (國泰人壽) first-year premium equivalent (FYPE) last year, up from 68 percent a year earlier, a company report showed.
Tied agents, who only sell the policies of one insurance company, made up 76.8 percent of sales, compared with 73.5 percent a year earlier, the report said.
Likewise, tied agents at Fubon Life Insurance Co (富邦人壽) generated 37 percent of the firm’s FYPE last year, rising from 33 percent in 2011, with traditional life policies making up 78.2 percent of total premiums, company data showed.
“Bancassurance will remain a significant sales channel for insurance companies, but may not play such a big role as in the past few years,” Peng Jin-lung (彭金隆), an insurance professor at National Chengchih University, said by telephone.
Such a trend bodes well for the sector, which has depended heavily on sales of quasi-savings policies to drive premium growth in the past decade, even though such products generate low profits and render insurers vulnerable to liquidity instability, Peng said.
Policyholders may terminate savings-like policies en masse if the central bank raises interest rates, the academic said.
The revenue from bancassurance should fall by somewhere between 45 percent and 55 percent since banks cannot replace sales agents, especially in the selling of long-term protection insurance policies, Peng added.
Sufficient coverage offered by such policies is important to society given the rapidly aging population, he said.
For the first six months, sales agents contributed NT$219.2 billion in first-year premiums, accounting for 43 percent, though total value declined 5 percent from the previous year, the insurance association reported.
However, seven of the top 10 life insurers derived more than 50 percent of their first-year premiums from the bancassurance channel, and bank staffers are getting better at selling protection insurance policies.
“The development indicates insurers with diversified sales channels will fare better whether they belong to a financial holding company or not,” Peng said.