2007 Bancassurance Study South Africa

Bridging the Cultural Divide Between Banks and Insurers

2007 Bancassurance Study - South Africa

2007 RGA & C F Effron Company LLC

2007 RGA and C F Effron Company LLC All rights reserved. Printed in reference to a presentation originally prepared for RGA Reinsurance Company of South Africa, March 2007.

Table of Contents

. Foreword....................................................................................................................................... 4. Sponsors........................................................................................................................................ 5. Introduction.................................................................................................................................. 6. Executive.Summary...................................................................................................................... 7. Methodology................................................................................................................................. 9. Profile of Participants.................................................................................................................. 10.. Distribution/Partnership.. ........Key.Findings ........................................................................................................................ 18........ ........Analysis................................................................................................................................. 19...... Marketing.&.Sales.. . ........Key.Findings ........................................................................................................................ 29...... ........Analysis................................................................................................................................. 30.. Product.Design.. . ........Key.Findings......................................................................................................................... 37........ ........Analysis ................................................................................................................................ 38. Risk & Profitability . ........Key.Findings......................................................................................................................... 42. ........Analysis................................................................................................................................. 43. Administration.&.Operations.. ........Key.Findings......................................................................................................................... 45. ........Analysis................................................................................................................................. 46. Effectiveness . ........Key.Findings......................................................................................................................... 51. ........Analysis................................................................................................................................. 52. Contact Information for Questions about the Study .................................................................. 55. About Carmen Effron................................................................................................................... 56. . Notes.. .......................................................................................................................................... 57

Contents

2007 Bridging the Cultural Divide Between Banks and Insurers, South Africa 3

Foreword

Foreword

On behalf of RGA International, I would like to thank everyone who

participated in our 2007 Bancassurance Survey. Without your valuable contribution, the survey would not have been so successful. We believe that RGAs sponsorship of this survey demonstrates our interest in, and commitment to, your efforts in developing the South African bancassurance market. We hope you enjoy reading this report and that its results prove to be a useful resource. We look forward to continuing to support you in your efforts to grow this exciting business. Thank you.

Graham Watson SeniorExecutiveVicePresidentandChief MarketingOfficer, Reinsurance Group of America, Incorporated Chief ExecutiveOfficer,RGAInternational

We are pleased to present to you the results of the 2007 Bancassurance Surveyandbelievethatyouwillfindthisreportbothinsightfulandvaluablein running your business. Our aim is to provide clients with unparalleled service and expertise as we develop new ways to share our knowledge, experience and success. We trust that our research stands testimony to this and assists you in planning your future business prospects. If Icanseefurther,itisbecauseIamstandingontheshouldersof agiant- Isaac Newton Happy reading! Conrad Backeberg Managing Director RGA Reinsurance Company of South Africa Limited

I would like to thank RGA and RGA South Africa for their support and interest in working together to understand the differences between bank and insuranceculturesandtheireffortstohelpdefineamorerobustcommon culture. It has been a pleasure working with so many talented and dedicated people and I am looking forward to continuing the dialogue as we Bridge the CulturalDivideandfindnewandinnovativeanswerstoovercomethe obstacles that follow in this inaugural South Africa report. Carmen Effron, President C F Effron Company LLC Weston, CT USA

2007 Bridging the Cultural Divide Between Banks and Insurers, South Africa

Sponsors

SponsorsRGA. Reinsurance Group of America, Incorporated (RGA) is a recognized leader in the global life reinsurance industry. RGA, based in St. Louis, Missouri, provides clients with life reinsurance, risk management, facultative underwriting, product development and distribution, and capital-motivated reinsurance services. RGA.International. RGA International is responsible for expanding RGAs international operations into those new marketsthatprovidethebestopportunitiesforgrowthandprofitability. RGA International serves global clients in over countries through its headquarters in Toronto, CanadaandsubsidiariesorofficesinAustralia,Barbados,Bermuda,China,France,Germany,Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, Poland, South Africa, South Korea, Spain, Taiwan and the United Kingdom. RGA South Africa RGA Reinsurance Company of South Africa (RGA SA) supports all lines of individual and group life reinsurance business with both traditional and non-traditional solutions, with treaties in place with all the major life insurance companies in the region. R GASAspresenceinthefinancialservicescentresof JohannesburgandCapeTownprovidesa national footprint and ensures localized support to clients based in and around these cities.


Introduction

IntroductionIn2006,RGASAcompleteditsfirstbancassurancesurveybyprofilingmarketplayers,estimating marketsizeandexploringquantitiveaspectsof product,premiumandprofitability.ThisStudyexplores theculturalandperceptualissuesthatdividebanksandinsurersandisthefirstof itskindinSouthAfrica. It uses a statistical approach, including gap analysis techniques to quantify the cultural issues, using hard evidence to uncover and explore the qualitative issues banks and insurers must tackle to achieve success. TheStudyexaminesbothbankandinsurerviewsandisareflectionof bothof theiropinionsabout insurance distribution/partnership,.marketing.&.sales,.product.design,.administration.&.. operations, effectiveness and risk & profitability.Thefindingsemphasizemajorgapsbetweenbanks and insurers in their satisfaction and evaluate the elements needed to optimize their joint distribution relationships.Thisreportispresentedinaformatthathighlightstheanalysesandkeyfindsof eachof these elements. The Study is based on two questionnaires: one submitted to life insurance companies and another to banks. The questions are essentially the same, differing only in recognizing the institutions distinctive role in the bank-life insurer relationship. Questions encompassed life, annuities, capital disability, income protection, dread disease, impairment, and coupon-type execution-only products such as credit life, funeral and hospital cash insurance. The Study uses a framework for the analysis encompassing the following: It recognizes the differences in the answers to the same questions using gap analysis to determine the extent of the difference. It measures the distribution of the scores; i.e., the percentages of each score along a continuum of points from least to most. The relative rankings of attributes that describes for a particular question which element scored the highest down to the lowest. For certain questions we show the relative rankings, from highest to lowest, of attributes measured in those questions. It evaluates, compares, and contrasts the results based on both companies with common ownership as well as independent organizations. The Study shines a spotlight on the bank/insurer relationship to determine clues on behaviours that lead tosuccess.Italsoidentifiesweaknessesintherelationship.ThisStudy,moreover,highlightsuseful informationinfindingwaystosurmounttheobstaclesbetweenbanksandinsurers,preventingthem from functioning in an optimal manner. This Study only focused on business transacted within the life insurance industry.


Executive.Summary

ExecutiveSummaryThis Study explores the cultural and perceptual issues that divide banks and insurers. It uses hard evidence to uncover and explore the issues that banks and insurers must tackle to achieve success in what is becoming a highly competitive bancassurance market space. The following represent some of the more significantfindingsof theSurvey. A total of 2 questionnaires were completed, believed to represent more than 70% of the bancassurance market in South Africa. Intheanalyses,gapsof 0.8andlargeraredeemedveryand/orextremelysignificant. Of the participants, out of the 7 banks own an insurer while of 17 insurer respondents are owned by a bank; 3 of the banks and of the insurers have exclusive arrangements with their counter bank/assurer partner.Asaresult,theresultsarepresentedforallrespondentsunlessotherwiseindicatedasaffiliatedor non-affiliated(affiliatedbanksandinsurershavecommonownership).Thebankssharingcommon ownership with the insurers are the largest banks in the market. Banks view one-stop shopping as the premier reason to distribute insurance, while insurers see fee income as the most important reason for banks. Close to 3% of bankers and 3% of the insurers believe that customers are generally not aware that insuranceissoldthroughthebank.Thisisheavilyweightedtowardsnon-affiliatedparticipants,withonly 33% of these banks feeling that their customers were generally aware that they sell insurance products. Over 8% of the banks felt that insurance was strategically important and given serious economic support bybankmanagement,whileonly25%of theinsuresagreedwithanextremelysignificantgapof.1.3. Timely underwriting, and presumably claims underwriting given the guaranteed issue of credit life-type bancassuranceingeneral,theimportanceof brandandprofitsharingwerekeycriteriaforbankswhen choosing an insurance partner. On the other hand, insurers felt that good relationships with senior management in the bank were the most important when choosing a bank partner. Fromamarketingandsalesperspective,liftingthemaximumsumassuredforsimplifiedunderwritten products (incl. guaranteed issue) is seen as the number one issue for banks. Although similarly ranked in importancebyinsurers,banksaredissatisfiedwiththeabilityof insurerstoprovidethis. Stillwithmarketingandsales,thelargestgapwasextremelysignificantat1.4, showing the need to have the insurancedatabaseintegratedintothebankscustomerinformationfile.Theinsurersareawareof the problem as they rated their own satisfaction with this as low, with a 1.2 gap in importance versus satisfaction for them. Both bankers and insurers agreed that senior management was a very important factor in selling insurance to customers, with respective scores of 4.4.and.3.9; a small gap of 0.5. Bankers and insurers both ranked the use of call centres as the most effective sales channel. However, the highest hit rate was seen to be agents in the branches with a 36% hit rate for insurers and 21% for banks. They also felt that agents working with securities and investment groups had very high hit rates of 25% and 31%.for the banks and insurers respectively. Both bankers and insurers believe that the ease of the sales process is the most important element in product design.


Executive.SummaryBanks and insurers are concentrating on credit related and insurance protection needs of their retail customers with less attention at the moment on long term care, estate planning and wealth transfer planning. The same is true for the small business customers where income protection is the most important need being addressed. Fifty-seven percent of banks said they were going to increase the scope and the number of products they plan to sell; no one is planning to decrease their scale of operations. This is also true for insurers where 77% are planning to increase both the scope and number of products available to the banks. Bothbanksandinsurersbelievethatitisimportantthatinsurancesalesareprofitabletothebank, profitabletotheinsurersandposeminimalrisktothebank,howevertheinsurersfeelthattheyaredoinga good job on these elements whereas the banks disagree. Seventy-one percent of banks say that the introduction of the National Credit Act has not effected their profitmargins,while50% of insurers believe that it has decreased their margins. Sixty-threepercentof insurersbelievethatdistributingthroughbanksismoreprofitablethanother distributionchannels,whilebanksareevenlysplitastowhethertheirdistributionismoreorlessprofitable than other banking products that they distribute. Banks and insurers seem frustrated by the same administrative and operational elements needed for sales andfulfillment;however,theinsurersratedallcategoriesmuchhigherinimportancethanthebankers. Lackof seniormanagementcommitmentinsidethebankwasseenbyinsurerstobeasignificantobstacle to selling insurance to bank customers; yet bankers did not perceive this to be a crucial obstacle, nor very important. Fully.94% of insurers versus.14% of banks felt that senior management commitment was an obstacle to selling insurance to bank customers.

8 2007 Bridging the Cultural Divide Between Banks and Insurers, South Africa

Methodology

MethodologyA total of 2 questionnaires were completed, believed to represent more than 70% of the bancassurance market in South Africa. Respondents were asked to assign a value from 1 to to their experiences and perceptions in various facetsof bank-lifeinsurerinteraction,withthedistributionof scoresgroupedintofivelevels:1(least), 2 (partial), 3 (neutral or generally), (more), and (most). Overall scores represent the combined results of the respondents and are shown in tables. Questions included various attributes from six general categories: distribution/partnership,.marketing. & sales, product design, risk & profitability, administration & operations, and effectiveness. Averaging participants responses produced a score for each category. Tabulating averages separately for banks and life insurers allowed a gap analysis to be performed. The gap score was determined by subtracting insurers scores from banks scores. The larger the gap between banks and insurers, the larger the cultural divide. If the insurers score is higher, the gap score is displayed in red. If the bank respondents score is higher, the gap score is displayed in blue. In a few instances, the colorsredorbluemaysimplybeusedtoreflectinsurerandbankresponsesratherthanrelativegaps;their use will be clearly indicated as such. The data presented is for total respondents unless otherwise indicated as affiliated or . non-affiliated. Affiliated banks and insurers share common ownership and based on feedback from participants, require careful treatment in our analyses. As a result, we show results for . affiliated and non-affiliated companies separately from overall results where they materially . differ. In such cases, such results are always shown on a lifted, yellow background as used for this.paragraph.. GAP definitions: 1.0ormoreisextremelysignificant 0.9to0.8isverysignificant 0.7to0.5issignificant below 0. is interesting


Profile of ParticipantsTo establish meaningful context, the Study analyzed participants share of the bank and insurance markets. One of the challenges in conducting this Study has been the different ownership models that exist betweenbanksandinsurers.Believedtoinfluencethemeaningfulnessof theanalyses,resultsareshown overallaswellassplitaccordingtoaffiliationwheretheseresultsaredeemedsignificantlydifferent.

KeyFindings 17 insurers participated in the survey. 7 banks participated in the survey. % of the insurers and 71% of the banks use a combination of distribution methods. out of the 7 banks own an insurer, while 12 of 17 insurers are not owned by banks; 3 of the banks and of the insurers have exclusive arrangements. 13 unique insurers and unique banks participated. If a banks agency sales force is dedicated to one insurer and sells that insurers product exclusively, it is considered an agency force. If the banks agency sales force sells more than one insurers product, it is considered a broker. A majority of the market and in excess of 70% of the bancassurance market in South Africa is believed to be represented in this Study. For the purposes of this Study, the term bankincludestraditionalbanks,carfinancingcompanies and mortgage origination companies. Large and small banks participated, each representing 3% of responses. The small- to mid-sized insurers were the predominant participants, representing 3% of responses.


Profile of Participants

BankbySizeLess than R1.0 bn R0 bn to R bn Greater than R00 bn

InsurerbySizeLess than R1.0 bn R1 bn to R bn R0 bn to R bn R100 bn to R00 bn

Affiliated & Non-Affiliated1 The banks sharing common ownership with the insurers are the largest banks in the market.

AffiliatedBankbySize BankbySize

Non-Affiliated

R0 bn to R bn Greater than R00 bn

Less than R1.0 bn

InsurerbySize

InsurerbySize

Less than R1.0 bn R1 bn to R bn R100 bn to R00 bn

Less than R1.0 bn R1 bn to R bn R0 bn to R bn R100 bn to R00 bn

1

ninstanceswhereanalyseswereperformedaccordingtoaffiliation,theresultswillbeshownashere I onalifted,yellowbackground.Affiliatedinsurersandbanksshareownershipwitheachother,orsome other bank/insurer that may not have participated in this Study.


Profile of Participants ...............................................................................................

AnalysisChannels If a banks agency sales force is dedicated to one insurer and sells that insurers product exclusively, it is considered an agency force. If a banks agency sales force sells more than one insurers product, it is considered a broker. Participants are using multiple channels for bancassurance business. Consistent with the desire to work with more partners, the marketplace seems to be moving away from exclusivity.

% of the insurers and 71% of the banks use a combination of distribution methods. Sales through branch networks for the banks is the largest at 2% and 23% for insurers.


Profile of ParticipantsProduct Life products (credit, term, and whole of life) are the classes of business being sold through multiple channels. Branches are used to sell credit life, funeral plans, and retrenchment products. Brokers are used largely to sell capital disability, dread disease, and disability income products. Direct distribution is the channel for the most life classes of products and funeral plans.What classes of business are being sold through . each channel (number of Banks and Insurers . shown.respectively)


Profile of ParticipantsTime.in.Market. The length of time selling in the bank channelissignificant,with38%of insurers and 3% of banks indicating more than 10 years experience. Several insurers have entered the market in recent years, with 31% of insurers with 1 to 3 years experience in the bank channel.

75%of affiliatedbankshavemorethan10yearsexperienceinthebankassurancemarketplace 60%of affiliatedinsurershavelessthan6yearsexperience Of thenon-affiliatedinsurers,50%havemorethan10yearsexperience


Profile of ParticipantsVolumes. Four banks responded that they sold over 100,000 policies in 200. With more insurers participating in the bancassurance market, they captured smaller levels of policies sold. The predominant number of policies sold by insurers ranges from 1,000 to 0,000. heaffiliatedbanksarethedominantproducers,allsellingmorethan100,000policiesannually. T

\\\

Annual.Premiums. In line with the number of policies sold, the insurers share of annual premiums were in the R1.0 million to R.0 million range (% of insurers responded). Only banks indicated their volume of annual premiums, with 2 indicating over R00 million in sales. Affiliatedbanksproducesignificantannualpremiumlevels. However,theyareproducingthisbusinessthroughbothaffiliatedandnon-affiliatedinsurers.


Profile of ParticipantsRecurring Life Premiums. Recurring annual premiums tend to be sold in smaller annual premium volumes, with 72% of insurers selling fewer than R million or less. Single premium annual volumes generate the largest amounts of premiums. Banks and insurers indicated total single premiums sales in excess of R20 million.

Non-affiliatedbanksdidnotrespondinprovidingdataforsinglelifepremiumbusiness.


Profile of ParticipantsPremium.and.Product Recurring annual premiums are generated through the sale of term life, living annuities, and mortgage credit life. inglepremiumbusinessisgeneratedbysalesof termlife,fixedannuities,collateralprotection, S and hospital cash/other health insurance.

Whole of life is the largest policy sold with an average sum assured of R2.3 million. Mortgage credit and lump sum disability are large premium volume products that also have large average sum assured values in excess of R1. million. Most insurers indicated that they still fully underwrite the majority of risks.Profile of your business sold through banks


Heading

Distribution/Partnership

This section explores the commitment to the bancassurance channel from both insurers and banks perspective, as well as the implications of the partnership between banks and insurers. Bank and insurer participants provided their outlook on the importance of forming optimal relationships and the key reasons to distribute insurance through the bank channel. Priortoexaminingeachfunctionindetail,participantsindicatedtheiroverallcommitmentandprofiled their existing partnerships with an opportunity to also discuss their ideal number of partners. The Study compared and contrasted the differences in bank/insurer perspectives on the importance of factorsdrivingtheirrespectiveaffiliations.

KeyFindings Banks view one-stop shopping as the premier reason to distribute insurance. Insurersconsiderfeeincomethemostsignificantreasonbanksdistributeinsurance. Usinginsurancetostrengthenandretaincustomerswasratedverysignificantbythebanks. 00%of theaffiliatedbanksconsiderthattheircustomersareatleastgenerallyawarethatinsurance 1 issoldviathebanks,while40%of affiliatedinsurersperceivethebankscustomersarenotaware. nly33%of non-affiliatedbanksfeltthattheircustomersweregenerallyawaretheysold O insuranceproducts,yet75%of non-affiliatedinsurersperceivedthebankscustomerswere aware that insurance was sold (more closely aligned with the overall view). When asked the best way to grow the bancassurance business: - More banks felt that any of the three methods could be generally effective. - More insurers felt that partnering with a third party was best. - verysignificantgapof 1.2 emerged with the banks scoring the effectiveness of TPMs much A higher than insurers. When asked which distribution elements help to form an optimal relationship between bankers and insurers, over 8% of the banks felt that insurance was strategically important and given serious economic support by bank management, while only 2% of the insurers agreed with a 1.3 gap. Working with 3 to partners is considered the ideal number of partners. Currently, 1 to 2 partners is the most frequent number of partners in operation. out of the 7 banks own an insurer, while 10 of 17 insurers are not owned by banks; 3 of the banks and of the insurers have exclusive arrangements. Of the 17 factors that a bank could use when targeting an insurer to work with, the highest score of . was given to the ability to provide timely underwriting decisions and reports. Next werecompanyreputationandbrand,andequaltothat,sharingintheprofitpotentialatascore of . for both. What seemed to be neutral was training quality and quantity, or the type and quality is at issue. Insurers felt that good relationships with senior management was the more important factor (.2) when deciding to work with a bank.


Distribution/Partnership Banks and insurers agreed that quarterly strategy and business planning meetings and then production goals and commitments were the number 1 and 2 reasons for a multi-year contract; however, they disagreed on the amount of money that should be spent annually on marketing and the need to create models or provide funds to understand the demographic opportunities within the bank with gaps of 1.2 and 1.1, respectively. The factors that drive banks to use third parties versus insurance carriers were product objectivity at83.3%andtheabilitytokeepfixedcoststoaminimum.

Analysis

Reasons for Distributing Banks and insurers had a choice of four attributes for determining the value and reasons banks distribute insurance. Banks view one-stop shopping as the premier reason to distribute insurance, while insurers see fee income as the most important reason. Usinginsurancetostrengthenandretaincustomerswasratedverysignificantbythebanks.

ffiliatedinsurersandbankssawthereasonsforofferinginsurancethroughabankinverymuch A the same way as the overall results suggest. However, the gaps increase in size. Insurers consistently feel the reason banks are distributing insurance is for fee income.

heaffiliatedinsurersperceptionsindicateanextremelysignificantgapwithbanksinthe T strengthen and retain customers and one-stop shopping reasons for distributing insurance.


Distribution/PartnershipCustomer.Awareness 71% of bankers and 70% of insurers believe that customers are at least generally aware that insurance is sold through the bank.

twouldappearthatamajordisconnectexistsbetweennon-affiliatedbanksandtheirclientswhen I it comes to raising the awareness of insurance inside the bank. 00%of theaffiliatedbanksconsiderthattheircustomersareatleastgenerallyawarethatinsurance 1 issoldviathebanks,while40%of affiliatedinsurersperceivethebankscustomersarenotaware. nly33%of non-affiliatedbanksfeltthattheircustomersweregenerallyawaretheysoldinsurance O products,yet75%of non-affiliatedinsurersperceivedthebankcustomerswereawarethat insurance was sold (more closely aligned with the overall view).


Distribution/PartnershipOptions for Growing Insurance Practice When asked the best way to grow the bancassurance business: - More banks felt that any of the three methods could be generally effective. - More insurers felt that partnering with a third party was best. - verysignificantgapof 1.2 emerged with the banks scoring the effectiveness of TPMs much A higher than insurers.

Forming.an.Optimal.Relationship. The participants were asked a series of questions on distribution to gauge how important insurance distribution really is to the bank compared to what the insurers think, and what are the key components of forming an optimal functioning relationship between the bank and the insurer. When asked which distribution elements help to form an optimal relationship between bankers and insurers, over 83% of the banks felt that insurance was strategically important and given serious economic support by bank management, while only 2% of the insurers agreed with a 1.3 gap.2

2

heuseof colorsBLUEandREDinthistablereflectbankandinsurerresultsrepectively,andnotthe T GAPSasdefinedelsewhere.


Distribution/Partnership heaffiliatedbanksareconsistentintheperspectivethatthedistributionof insuranceisstrategically T important, business managers view as key, and equally important as banking products. The banks perceive distributing insurance as a must, not nice to have. heaffiliatedinsurerstendtoagreewiththestrategicfitandisreasonablysupportedwithin T thebanks,howeveranextremelysignificantgapof 1. emerges as equally important as banking products.

3

3

heuseof coloursBLUEandREDinthistablereflectbankandinsurerresultsrepectively,andnot T theGAPSasdefinedelsewhere.


Distribution/PartnershipSelection of Partners. Bank and insurer participants were each asked to indicate the number of trading partners with which they were currently working, as well as the number they felt was ideal. Working with 3 to partners is considered the ideal number of partners by the banks. Currently, 1 to 2 partners is the most frequent number of partners. out of the 7 banks own an insurer while 12 of 17 insurers are not owned by banks; 3 of the banks and of the insurers have exclusive arrangements.

Therearenomajordifferencesinresultswhensplittingtheanalysisbetweenaffiliation.


Distribution/PartnershipChoosing.a.Partner Banks and insurers were asked to rank the factors they would consider important in choosing a partner within a bancassurance relationship. Of the 17 factors that a bank could use when targeting an insurer to work with, the highest score of . was given to the ability to provide timely underwriting decisions and reports. Next wascompanyreputationandbrand,andequaltothat,sharingintheprofitpotentialatascoreof . for both. What seemed to be neutral was training quality and quantity or the type and quality is at issue. Insurers felt that good relationships with senior management was the more important factor, .2, when deciding to work with a bank. A few insurers felt that sharing a common customer base and how successful the bank is are the most important factors; this is what other refers to in the chart below.

Bank

Insurer


Distribution/Partnership Thereareonlyafewminorvariancesbetweentheaffiliatedandnon-affiliatedresponses. Theoveralleconomicsof workingwithinsurerswasrankedhigherbyaffiliatedbanks.

Bank

Insurer


Distribution/PartnershipMulti-year Contracts. Our Study explored the services banks would expect and insurers would be willing to provide if there were opportunity for multi-year contracts or potential for a preferred partnership. Thirteenserviceswereexaminedcoveringmarketing,profitandrisk-sharingmotivations,and administrative needs. Banks and insurers agreed that quarterly strategy and business planning meetings and then production goals and commitments were the number 1 and 2 reasons for a multi-year contract; however, they disagreed on the amount of money that should be spent annually on marketing and the need to create models or provide funds to understand the demographic opportunities within the bank with gaps of 1.2 and 1.1, respectively.

Theaffiliatedbanksandinsurerswerecloselyalignedin7outof 13services. newareasemergedproducingextremelysignificantgapsof 1.0 to 1.3: sales bonuses, full-time 3 embedded trainers, and cash payments for marketing. Please see chart on next page.


Distribution/Partnership

henon-affiliatedbanksandinsurershavethegreatestdifferenceinwillingnessandexpectations, T with10outof 13servicesgeneratingextremelysignificantgapscores Dedicated wholesalers were not considered necessary by the banks, producing the largest gap in perception of 2.3. The banks should examine the level of resources being committed to these services.


Distribution/PartnershipDistribution Channels - Used by Insurers Insurers were asked what distribution channels, other than banks, they were using to sell their products. Insurers use a number of different distribution channels. Independent agents are the largest alternative distribution channel used by 82% of insurer participants. Agency force is the second-most popular alternative with % of insurers using this channel. This tendstosupportthetheorythatwhilemanybankshavedevelopedspecificproductsforthebank channel, for many insurers, banks are just another channel and not necessarily an equal partner or their most important distribution channel. This still has implications for the products sold through banks, as many insurers may apply the same product/process to the bank channel as their primary distribution channel.

. Used by Banks - Third-party Marketers vs. Insurers. The factors that drive banks to use third parties versus insurance carriers were product objectivity, at83.3%,andtheabilitytokeepfixedcoststoaminimum.


Premium.and.Product.(contd.).

Marketing.&.Sales

This section explores the opinion of banks and insurers on the importance of marketing, how it should be deployed and who should be responsible for the effort. A review of the effectiveness of sales techniques, sales support and the types of lead generation that work within the bank are investigated. Questions regardingtheefficacyandtimeof platformpersonneltomakeasalearealsoreviewed.

KeyFindings anksrankedtheabilitytoprovidesimplifiedunderwritingforproductsuptoR300,000insum B assured as the most important element, ranking it number 1 with a score of .7. The insurers alsorateditmostimportantandaresatisfiedwiththeirabilitytoprovide,whilethebanksare dissatisfiedfor;asignificantgapinsatisfactiontoimportanceof 1.0 is measured. The next most important element was point of sale underwriting and the ability to link insurance product recommendations to clients needs based planning tools, each rated at .3. Banks were dissatisfiedwithinsurersabilitytoprovide,withverysignificantgapsof 0.7 and 1.1, respectively. helargestgapwasextremelysignificantat1., showing that the need to have the insurance T databaseintegratedintothebankscustomerinformationfiletofacilitatesalesandavoid redundant entry of data was a very sore point with the banks and insurers are not supplying them with this service very well. The insurers are aware of the problem as they rated their own satisfaction with this as low, with a 1.2 gap in importance versus satisfaction. Referrals from the branch is ranked by the banks as the most effective way to generate the most qualifiedleads.Cominginaclosesecondwasout-boundcallcentreandreferralsfromclient relationship managers and private bankers. Insurers disagreed and felt that the call centre was most effective and then independent brokers, a very big disconnect in perspective. Banks ranked the ability to provide insurance as part of the process of providing banking products the most effective manner to distribute insurance, coming in at .1; however, emerging asaclosesecondat4.0wasthedevelopmentof asalesstructureforallfinancialproducts.The insurers disagreed and thought that joint ventures between a bank and insurance company were themosteffective,showingasignificantgapof 0.7. Access to the banks client base is rated very important by the banks at .7, and much less so by theinsurersat3.1;anextremelysignificantgapof 1.6inimportance.Howevertheinsurersare verydissatisfiedwiththeirabilitytoaccessandshowitwithanextremelysignificantgapof 1.. Both bankers and insurers agreed that senior management was a very important factor in selling insurance to customers, with, respectively, a score of . and 3.; a small gap of 0.. Bankers and insurers both ranked use of call centre sales as the most effective, rating it .0 and 3. respectively, however the highest hit rate was seen to be agents in the branches with a 3% hit rate for insurers and 21% for banks. They also felt that agents working with securities and investment groups had a very high hit rate of 2% and 31% for banks and insurance sales respectively. The least effective sales method is seen to be the Internet, e.g. MySpace, or portals.


Marketing.&.Sales 7% of insurers felt that cold calling from the bank database was the most effective method to determine leads for direct mail, while bankers found referrals from either mortgage, credit extensions or other bank products at 2% to be the most effective lead generator. There is a big disconnect between the time insurers think it takes for platform personnel to make thesecondsaleafterthefirst,withinsurerssaying46%doitafteroneweekandthebankssaying 8% do it after one week. The banks indication that the average time for the next sale is short is consistentwiththelargevolumeof policiessoldnotedintheprofilesectionof thisreport.

Analysis

Marketing.&.Sales.Factor..Scores.in.Optimal.Relationship anksrankedtheabilitytoprovidesimplifiedunderwritingforproductsuptoR300,000insum B assured the most important element ranking it number 1 with a score of .7, or most important. Theinsurersalsorateditmostimportantandaresatisfiedwiththeirabilitytoprovide,whilethe banksaredissatisfiedforasignificantgapinsatisfactiontoimportanceof 1.0. The next most important element was point of sale underwriting and the ability to link insurance product recommendations to clients needs based planning tools, each rated at .3. Banks were dissatisfiedwithinsurersability toprovide,withverysignificant gaps of 0.7 and 1.1, respectively. The largest gap was extremely significantat1., showing that the need to have the insurance database integrated into the bankscustomerinformationfile to facilitate sales and avoid redundant entry of data was a very sore point with the banks, and insurers are not supplying them with this service very well. The insurers are aware of the problem as they rated their own satisfaction with this as low, with a 1.2 gap in importance versus satisfaction.


Marketing.&.SalesDistribution Effectiveness. Banks ranked the ability to provide insurance as part of the process of providing banking products the most effective manner to distribute insurance coming, in at .1; however, emerging asaclosesecondat4.0wasthedevelopmentof asalesstructureforallfinancialproducts.The insurers disagreed and thought that joint ventures between bank and insurance company is the mosteffective,showingasignificantgapof 0.7.

Lead-generation Marketing. Referrals from the branch, is ranked by the banks as the most effective way to generate the most qualifiedleads.Cominginaclosesecondwascallcentreandreferralsfromclientrelationship managers and private bankers. Insurers disagreed and felt that the call centre was most effective and then independent brokers, a very big disconnect in perspective.


Marketing.&.SalesFactors.in.Selling.Insurance. The ability to integrate insurance at the point of bank sales and access to banks client base were seen to be the most important factors in selling insurance to bank customers from the bankers perspective, and they are extremely disappointed in the insurers ability to provide it with 1.2 and 1.1 gap in importance and satisfaction. The largest gap in importance and satisfaction from the bankers perspective is in building incentive programs that work with anextremelysignificantgapof 1.. Access to the banks client base is rated very important by the banks at .7, and much less so by the insurers at 3.1; an extremelysignificantgapof 1. in importance however, theinsurersareverydissatisfied with their ability to access and show it with an extremely significantgapof 1.. Both bankers and insurers agreed that senior management is a very important factor in selling insurance to customers, with respectively a score of . and 3.; and a small gap of 0..


Marketing.&.SalesEffectiveness of Sales Methods. Bankers and insurers both ranked use of the call centre sales as the most effective, rating it .0 and 3. respectively, however the highest hit rate was seen to be agents in the branches with a 3% hit rate for insurers and 21% for banks. They also felt that agents working with securities and investment groups had a very high hit rate of 2% and 31%. The least effective sales method is seen to be Internet, e.g. MySpace, or portals.

Direct sales are most successful using the telephone call only method, with an indicated hit rate almost 3 times higher than the next method (insurer results). Using mail solicitation with a combination of follow up by mail or telephone were the next two successful direct methods as indicated by both banks and insurers. 3 insurers responded that SMS only (text messaging) produced a high hit rate at .3%.


Marketing.&.SalesLead.Generation. 7% of insurers felt that cold calling from the bank data base was the most effective method to determine leads for direct sales, while bankers found referrals from either mortgage, credit extensions or other bank products at 2% to be the most effective lead generator.

The view shared by both banks and insurers is that none of the methods are very effective at generating leads with scores at 3. (out of .0) or lower. Banks rated 10 out of the 1 marketing methods as ineffective with scores at 2.3 or below. Insurers were even more harsh, rating only 3 methods as effective, with call centre generating the most leads.


Marketing.&.Sales heaffiliatedbanksscoredreferralsfromthebranchandclientrelationshipmanagers/private T banker and telemarketing as the most effective marketing methods to generate leads. hecallcentrescoredaveryeffectivescoreof 4.4byaffiliatedinsurers,anextremelysignificant T gap from banks of 1.1. Referrals from client relationship managers/private bankers is considered by the banks (number 1 ranking) to be much more effective than the insurers (number 11 ranking), with a perception gap of 1..


Marketing.&.SalesSales.Momentum. There is a big disconnect between the time insurers think it takes for platform personnel to make thesecondsaleafterthefirst,withinsurerssaying46%doitafteroneweekandthebankssaying 8% do it after one week. The banks indication that the average time for the next sale is short is consistent with the large volumeof policiessoldnotedintheprofilesectionof thisreport.

hereisaevengreaterdivisioninviewbetweentheaffiliatedbanksandinsurersinhowlongafter T thefirstsalethenextoccurs,with50%of insurerscitingatwomonthormorewait. Allof theaffiliatebankscitedoneweekof lessbetweensales.


Product.DesignThe Study examines product availability as well as the needs that banks and insurers are trying to address with product and customization to achieve success in bank-channel selling. Both the importance and satisfaction of various elements are explored.

KeyFindings Both bankers and insurers believe that the ease of the sales process is the most important element in product design; .7 and .8 respectively. The insurers feel they are doing a better jobatprovidingthisthanthebanks,withasignificantgapinsatisfactionof 0.7. The variety and extent of product availability was seen as not important by the insurers, and they wereverysatisfiedwiththejobtheyweredoingat3.6,howeverthebankersdisagree,fora0.8 gap. anksfeltthatflexibilityof productdesign,proprietarydesignorco-brandingasadesignfeature B was the next most important element in forming an optimal functioning relationship, while the insurersdivergedandfeltthatprovidingsimplifiedunderwritingforproductsuptoR300,000in sum assured or equivalent capital amount (DI) was the next most important element. Banks and insurers are concentrating on credit related and insurance protection needs of their retail customers, with less attention at the moment on long term care, estate planning, wealth transfer planning. The same is true of the small business customers, where income protection is the most important need being addressed. Both banks and insurers are reaching out to the commercial customer to provide employee benefits,businesssuccessionplanningandloancover,whereloancoverisseenasbeingthemost important focus of the insurers. Both banks and insurers are addressing the private banking customers needs with disability being more of a focus of the insurers than the banks at the moment. 31% of the banks are focusing on medical needs of the workplace customers, and 0% of the insurers are concentrating on the protection needs of this group of customers. 7% of the banks said they were going to increase the scope and the number of products they were going to sell and 1% said they were going to stay the same with no one planning to decrease their scale of operations. This is also true for the insurers, where 77% are planning to increase both the scope and number of products available to the banks.


Product.Design

Analysis

Optimizing.Relationship.through.Product Both bankers and insurers believe that the ease of the sales process is the most important element in product design; .7 and .8 respectively. The insurers feel they are doing a better job at providingthisthanthebanks,withasignificantgapinsatisfactionof 0.7. The variety and extent of product availability was seen as not important by the insurers, and they wereverysatisfiedwiththejobtheyweredoingat3.6,howeverthebankersdisagree,fora0.8 gap. anksfeltthatflexibilityof productdesign,proprietarydesignorco-brandingasadesignfeature B was the next most important element in forming an optimal functioning relationship, while the insurersdivergedandfeltthatprovidingsimplifiedunderwritingforproductsuptoR300,000in sum assured or equivalent capital amount (DI) was the next most important element.

ffiliatedbanksconsidervarietyandextentof productavailabilityandcasemanagement/underA writingsupportaremuchmoreimportantthantheaffiliatedinsurers,withextremelysignificant gaps of 1. and 1.2, respectively. The insurers should consider the level of resources dedicated to these product areas to better align with the banks.


Product.Design nallareas,thebanksaredissatisfiedwiththeinsurersabilityandsupportwithgapsrangingfrom I 1.0 to 1.7. Flexibility of product design, proprietary design, or co-branding as a design feature and ease of the sales process are two categories where the banks have huge levels of dissatisfaction with gaps of 2.2 and 2.0, respectively.


Product.DesignAddressing.Retail.Customer.Needs. Banks and insurers are concentrating on credit related and insurance protection needs of their retail customers with less attention at the moment on long term care, estate planning, wealth transfer planning. The same is true of the small business customers, where income protection is the most important need being addressed. Both banks and insurers are reaching out to the commercial customer to provide employee benefits,businesssuccessionplanningandloancoverwhereloancoverisseenasbeingthemost important focus of the insurers. Both banks and insurers are addressing the private banking customers needs, with disability being more of a focus of the insurers than the banks at the moment. 31% of the banks are focusing on medical needs of the workplace customers, and 0% of the insurers are concentrating on the protection needs of this group of customers.

Addressing retail customer needs


Product.DesignProduct.Development.Plans. 7% of the banks said they were going to increase the scope and the number of products they were going to sell and 1% said they were going to stay the same with no one planning to decrease their scale of operations. This is also true for the insurers, where 77% are planning to increase both the scope and number of products available to the banks.

0%of theaffiliatedbanksareplanningtodecreasethenumberof productsbutnotthescopeof 5 the insurance programs. 00%of affiliatedinsurersplantoeitherincreasethenumberof productsandscopeof the 1 programs or stay the same. Thenon-affiliatedbanksandinsurersbothplantoincreasetheirprograms.


Risk & ProfitabilityTraditionally, it is believed that the risk associated with credit life business, being the bulk of bancassurance sales in South Africa, is lower than with non-credit life business. In this section, and with follow-up studies, we will investigate the extent to which this holds true for credit- and non-credit life insurance sales made through banks.

KeyFindings othbanksandinsurersbelievethatitisimportantthatinsurancesalesareprofitabletothebank, B profitabletotheinsurersandposeminimalrisktothebank;however,theinsurersfeelthatthey aredoingagoodjobontheseelementsandthebanksdisagree,withsignificantdissatisfaction expressed at 0.7 and 0.8 gaps. Underwriting and risk sharing are more prevalent for the banks than insurers, with 71% participating in underwriting risk sharing and co-branding. Most of the insurers (%) use profitsharingandco-branding. 1%of thebankssaythattheintroductionof theNationalCreditActhasnotaffectedtheirprofit 7 margins, while 0% of the insurers believe that it has decreased their margins. 3% of insurers and 71% of banks provide specialized services to preferred banking clients. Only 2% of insurers support the banks to provide a free insurance review or other insurance incentives for preferred banking clients, while 7% of the banks have this service. 3%of theinsurersbelievethatdistributingthroughbanksismoreprofitablethanother 6 distribution channels, while banks are evenly split at 3% as to whether their distribution is moreorlessprofitablethanothers.


Risk&Profitability

Analysis

Risk & Profitability othbanksandinsurersbelievethatitisimportantthatinsurancesalesareprofitabletothebank, B profitabletotheinsurersandposeminimalrisktothebank;however,theinsurersfeelthatthey aredoingagoodjobontheseelementsandthebanksdisagree,withsignificantdissatisfaction expressed at 0.7 and 0.8 gaps.

Elements.in.optimizing.relationship.by.Risk.&. Profitability Category. Bank Scores Importance Satisfaction . 3.7 . 3.7 .3 3. 3.3 3. Insurer Scores Importance Satisfaction GAP . .2 0.2 .1 3.8 0.3 . .0 0. 3.8 3. 3.8 3. 0.0 0.0 Bank vs Bank vs Insurer Insurer Importance Satisfaction GAP GAP 0.0 0.5 0.3 0.1 0.1 0.5 0.1 0.2 0.5 0.2

Insurance sales pose minimal risk to bank Insurance sales are profitable to insurer Insurer provides effective sales support to bank wholesaling support, customer service and regulatory compliance) 3.7 Ability to design flexible risk arrangements through 3. reinsurance or other joint efforts

GAP 0.7 0.7 0.8 0. 0.0

Underwriting and risk sharing are more prevalent for the banks than insurers with 71%, participating in underwriting risk sharing and co-branding. Most of the insurers, %, use profitsharingandco-branding.Risk.Sharing-type.arrangements Bank Yes Underwriting risk sharing Co-branding Profit sharing Alternative risk transfer/cell captives Experience refunding Investment risk sharing Owned by the bank Marketing expense sharing 3 3 2 1 No 1 1 3 2 3 Yes 7 10 10 3 7 2 Insurer No 12 13 10 10


Risk&ProfitabilityRelative Profitability. 3%of theinsurersbelievethatdistributingthroughbanksismoreprofitablethanother 6 distribution channels, while banks are evenly split at 3% as to whether their distribution is moreorlessprofitablethanothers.Relative.to.other.products.sold.through.your.company,.distribution.sales.are: Banks More profitable Less profitable Having the same profitability 3 3 1 % Distribution 2.% 2.% 1.3% Insurers 10 1 % Distribution 2.% 31.3% .3%

1%of thebankssaythattheintroductionof theNationalCreditActhasnotaffectedtheirprofit 7 margins, while 0% of the insurers believe that it has decreased their margins. 3% of insurers and 71% of banks provide specialized services to preferred banking clients. Only 2% of insurers support the banks to provide a free insurance review or other insurance incentives for preferred banking clients, while 7% of the banks have this service.

Have.profit margins.increased.or.decreased.since.the.introduction of the National.Credit.Act? Banks No impact Decreased Increased 2 0 % Distribution 71.% 28.% 0.0% Insurers 7 1 % Distribution 2.% 0.0% 7.1%


Administration.&.OperationsTheadministrativefunctionsproducedawidegapbetweenthebanksandinsurers.Averysignificantor extremelysignificantgapexistedinmanyattributes,withinsurersfeelingmorepositiveabouttheprovision of services than banks.

KeyFindings

Banks and insurers seem frustrated by the same elements of the administration and operational elementsneededforsalesandfulfillment,howevertheinsurersinthisquestionratedallcategories much higher in importance than the bankers. Both banks and insurers rated the ability to integrate products into the banks procedures and systems at the point of sale as most important, . and .7, respectively. However, both are verydissatisfiedwiththeimplementationwithbanksshowingaverysignificantgapof 1.2 and insurers the same at 1.3. Insurers seem particularly aggravated with the banks customer database management expertise showingasignificantgapinsatisfactionof 1.1. Insurers felt that their ability to provide training to bank sales personnel was extremely important at a rating of .1, while the banks thought it was less important with a rating of 3.1. Insurers rated accreditation, new product rollout, and technology training at the point of sale to be more important than the banks and the banks seem sanguine about the execution of these elements of training. Bankers, however, were less content with the compliance and customer service training, showing a gap in satisfaction of 0.8,orverysignificant. Over 0% of the banks and close to half of the insurers have a concern about the number of well-trained agents that can be appointed at the bank. Banks and insurance companies agree that insurer relationship management, technology support, and application processing are insurance functions that the bank must own versus outsource. Additionally, they both agree that case shopping, advanced case design, contract appointing and wholesaling functions can be outsourced. 87% of the banks and 3% of the insurers felt that it was more to most vital that insurer relationship management should not be outsourced; 71% of banks and 0% of insurers felt that technology support should be owned by the bank; 7% of banks and 73% of insurers felt that application processing was more to most crucial to be owned by the bank.


Administration & Operations

Analysis

Optimizing.Relationship.through.Administration Banks and insurers seem frustrated by the same elements of the administration and operational elementsneededforsalesandfulfillment,howevertheinsurersinthisquestionratedallcategories much higher in importance than the bankers. Both banks and insurers rated the ability to integrate products into the banks procedures and systems at the point of sale as most important, . and .7 respectively. However, both are very dissatisfiedwiththe implementation with ElementsinoptimizingrelationshipbyAdministrativeCategory banks showing a very 5 significantgapof 1.2 and insurers the same at 1.3. Insurers seem particularly aggravated with the banks customer database management expertise, showingasignificantgap in satisfaction of 1.1. Insurers felt that their ability to provide training to bank sales personnel was extremely important at a rating of .1, while the banks thought it was less important with a rating of 3.1.45 4 3 1 3 2

Level of.Satisfaction

6 1

1

2

3 6 3

5 4

4

2

5

2

Level.of.ImportanceElements.in.optimizing.relationship.by.Administrative.Category. Bank.Scores Key Importance Satisfaction GAPProducts are integrated into bank's procedures and systems at point of sale, e.g. automated forms Integration of administrative process between insurer and bank sales personnel (e.g., electronic link between bank and insurer) Bank customer database management expertise Insurance compliance expertise Insurer provides accreditation solutions to bank sales personnel Insurer provides training to bank sales personnel

1

Key1 2 3 4 5 6

Bank vs Insurer Insurer.Scores Importance Satisfaction Importance Satisfaction GAP GAP GAP .7 . 3. 3. 3. .1 3. 3.0 2.8 3. 3. 3.8 1.3 1. 1.1 0. 0.0 0.3 0.3 0.5 0.2 0.2 0.3 1.0 0.2 0.2 0.5 0.5 0.9 0.8

1 2 3 4 5 6

. 3. 3.7 3.7 3. 3.1

3.2 2.8 3.3 3.0 3.0 3.0

1.2 1.1 0. 0.7 0. 0.1


Administration & OperationsTraining. Insurers rated accreditation, new product rollout and technology training at the point of sale to be more important than the banks and the banks seem sanguine about the execution of these elements of training. Bankers, however, were less content with the compliance and customer service training, showing a gap in satisfaction of 0.8,orverysignificant.Ongoingtrainingtobankpersonnel5

4

Level of Satisfaction

5 2 8 9 7 6 10 7 5 1 4 3 2 1

6

3

1

210

3

3

8

9

4

4

5

2

1

Ongoing.training.to.bank.personnelCustomer service Compliance New product roll-out Technology solution at point of sa le Existing product Accreditation Continuing education Back office Referral process counseling Advanced underwritingKey 12 3 4 5 6 7 8 9 10

Level of ImportanceBank.Scores Importance Satisfaction GAP Key 12 3 4 5 6 7 8 9 10

3.8 3.8 3.7 3. 3. 3.2 3.2 3.0 3.0 1.

3.0 3.0 3.2 3.3 3.0 3.3 3. 3.0 3.0 3.0

0.8 0.8 0. 0.3 0. 0.1 0.3 0.0 0.0 1.5

Bank vs Insurer Insurer.Scores Importance Satisfaction Importance Satisfaction GAP GAP GAP

3. 3.7 .1 .2 3. .0 3. 2. 3.2 2.3

3. 3.7 3.7 2. 3.7 3.8 3. 3. 2. 2.

0. 0.0 0. 1.3 0.1 0.2 0.0 0.6 0.3 0.1

0.1 0.1 0.4 0.6 0.2 0.8 0.2 0.1 0.2 0.8

0.5 0.7 0.5 0.4 0.7 0.5 0.1 0.5 0.1 0.6


Administration & Operations Over 0% of the banks and close to half of the insurers have a concern about the number of well-trained agents that can be appointed at the bank.

Thenon-affiliatedbanksandinsurersaresplitregardingtheirconcernof hiringwell-trainedagents. Affiliatedbanksandinsurersareuniversalintheviewof thedifficultyinhiringwell-trainedagents.


Administration & OperationsOwnership of Bancassurance Functions. Banks and insurance companies agree that insurer relationship management, technology support and application processing are insurance functions that the bank must own versus outsource. Additionally, they both agree that case shopping, advanced case design, contract appointing and wholesaling functions can be outsourced. 8% of the banks and 3% of the insurers felt that it was more to most vital that insurer relationship management should not be outsourced; 71% of banks and 0% of insurers felt that technology support should be owned by the bank; 7% of banks and 73% of insurers felt that application processing was more to most crucial to be owned by the bank. Importance of the.insurance.functions.the.bank.must.own.versus.outsource..

Pre-sales support Sales ideas Wholesaling Marketing material Case shopping Accreditation Contracting appointing Insurer relationship management Technology support Advanced case design Application processing Case management Underwriting Commission processing

Least 1 1.3% .7% 0.0% .7% 1.3% 7.7% 0.0% .7% 1.7% 1.% 1.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.7% 1.3% 0.0% 0.0% 1.7% 1.% 1.3% 30.8% 1.3% 21.%

2 0.0% 20.0% 28.% 13.3% 0.0% .2% 1.3% 2.7% 0.0% 38.% 28.% 28.% 0.0% 33.3% 0.0% 0.0% 0.0% 13.3% 0.0% 3.7% 0.0% 20.0% 1.7% 1.% 2.% 1.% 1.3% 1.3%

3 28.% 20.0% 28.% 2.7% 2.% 38.% 2.% 20.0% 1.7% 1.% 2.% 21.% 1.7% 1.7% 1.3% 7.1% 28.% 2.7% 0.0% 2.% 33.3% .7% 0.0% 38.% 0.0% 23.1% 0.0% 0.0%

7.1% 33.3% 28.% 33.3% 28.% 0.0% 2.% 33.3% 1.7% 23.1% 0.0% 21.% 33.3% 1.7% 8.7% 7.1% 7.1% 33.3% 33.3% 7.1% 0.0% 3.3% .7% 30.8% 28.% 7.7% 7.1% 28.%

Most 0.0% 20.0% 1.3% 20.0% 1.3% 7.7% 0.0% 13.3% 0.0% 7.7% 1.3% 28.% 0.0% 8.3% 0.0% 3.7% 1.3% 2.7% 0.0% 0.0% 1.7% 20.0% 0.0% 0.0% 1.3% 23.1% 1.3% 3.7%

Average Scores 3.9 4.3 3.9 3.7 3.8 3.7 3.4 3.4 3.3 3.4 3.3 3.5 3.3 2.5 3.3 3.2 3.2 2.8 2.9 2.8 2.8 3.0 2.7 3.5 2.5 2.4 2.3 2.7



Administration & Operations Theresultsof theaffiliatedbanksandinsurersareconsistentwiththetotalscores. One area of difference is wholesaling; the banks are evenly split as to whether it is a function to outsource versus own. All of the insurers believe the function can be outsourced. The other area is in technology support, where 100% of the banks feel it is important to own, yet only 2% of the insurers share this view. Importance of the.insurance.functions.the.bank.must.own.versus.outsource..

Least Pre-sales support Sales ideas Wholesaling Marketing material Case shopping Accreditation Contracting appointing Insurer relationship management Technology support Advanced case design Application processing Case management Underwriting Commission processing 1 2.0% 2.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 2.0% .7% 2 0.0% 0.0% 2.0% 0.0% 0.0% 33.3% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% .7% 0.0% 0.0% 0.0% 2.0% .7% 7.0% 0.0% 2.0% 33.3% 33.3% 2.0% 33.3% 0.0% 0.0% 3 0.0% 0.0% 0.0% 2.0% 2.0% .7% 7.0% 0.0% 2.0% 0.0% 2.0% 2.0% 2.0% 33.3% 2.0% 2.0% 0.0% 0.0% 0.0% 0.0% 33.3% 0.0% 0.0% 0.0% 0.0% 33.3% 0.0% 0.0% 7.0% 2.0% 2.0% 7.0% 2.0% 0.0% 2.0% 2.0% 2.0% 2.0% 0.0% 0.0% 2.0% 0.0% 7.0% 0.0% 100.0% 0.0% 33.3% 2.0% .7% 0.0% .7% .7% 0.0% 0.0% 7.0% 33.3%

Most 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 2.0% 0.0% 0.0% 2.0% 2.0% 0.0% 0.0% 0.0% 2.0% 0.0% 2.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 33.3% 0.0% 0.0%

Average Scores 4.0 3.3 3.8 4.0 3.7 3.8 3.3 2.0 3.3 2.8 3.3 2.7 3.3 3.3 3.3 3.3 3.0 3.8 3.0 3.0 2.8 3.3 2.8 2.3 2.8 2.0 2.7 2.5



EffectivenessThis section discusses the obstacles that impede the ability to both acquire and maintain quality distribution to the banks as well as to bank customers. Banks may think that having a highly trained sales force is necessary if life and health products are being sold in the traditional way. For much the same reason, both insurers and banks like doing business with bank trust and private banking divisions becausetheprocessfitsmoreneatlyintoanexistingapproachtosales.Bankerswantintegrationinto their systems and procedures, which by necessity means the product should be designed to be sold by a non-specialized or general salesperson.

KeyFindings

ackof seniormanagementcommitmentwasseenbytheinsurerstobeasignificantobstacleto L sellinginsurancetobankcustomersratedat4.3andshowedalargefissureinperceptionwitha gap score of 2.0, as the bankers did not perceive this to be a crucial obstacle, nor very important, rating it partially an obstacle at 2.3. The largest gap from the insurers perception is the lack of access to banks client base for data mining and lead generation with a gap between the bankers and insurers of 2.1; the largest gap in the study.

ackof institutionaltrustandconfidencewasseenbytheinsurerstobeimportant,whilethe L bankers felt that it was not, therefore there was a gap in perception of 1.. Lack of training support was also seen by the insurers to be problematic and again showed a gap in perception of 1.2,orextremelysignificant. The lack of wholesaler support showed an insurer gap of 0., and the failure to make insurance a preferred product and integrated into sales goals and rewards as well as the competition with other distribution channels are a source of frustration to the insurer with a gap of 0.7. These effectiveness gaps from the insurers perspective are quite important when the spread of the responses are analyzed. Fully % of the insurers versus 1% of the banks felt that senior management commitment was an obstacle to selling insurance to bank customers.

8%of theinsurersfeltthatcompetitionwithotherdistributionchannelswasasignificant 3 obstacle versus 8% of the bankers who deemed this a non-issue. 3% of the banks thought that generally or more often the failure to make insurance a preferred product was an obstacle versus 7% of the insurers who thought that it was more or most difficult,notquiteaslargeadivergenceof opinion. 71% of the banks and 2% of the insurers use a client relationship management system within the bank to manage banking and insurance details and information of the bank clients. 27% of the banks and 38% of the insurers have the applications for insurance integrated with the banking product sales process.


Effectiveness

AnalysisObstacles ackof seniormanagementcommitmentwasseenbytheinsurerstobeasignificantobstacleto L sellinginsurancetobankcustomersratedat4.3andshowedalargefissureinperceptionwitha gap score of 2.0, as the bankers did not perceive this to be a crucial obstacle, nor very important, rating it partially an obstacle at 2.3. The largest gap from the insurers perception is the lack of access to banks client base for data mining and lead generation with a gap between the bankers and insurers of 2.1; the largest gap in the study. ackof institutionaltrustandconfidencewasseenbytheinsurerstobeimportant,whilethe L bankers felt that it was not, therefore there was a gap in perception of 1.. Lack of training support was also seen by the insurers to be problematic and again showed a gap in perception of 1.2,orextremelysignificant. The lack of wholesaler support showed an insurer gap of 0., and the failure to make insurance a preferred product and integrated into sales goals and rewards as well as the competition with other distribution channels are a source of frustration to the insurer with a gap of 0.7.Obstacles.in.selling.insurance.to.bank.customers Failure to make insurance a preferred product (i.e., integrated into sales goals and rewards) Lack of sales person's time and shelf space for understanding and selling insurance Lack of time commitment to train bank staff on insurance Legislation and Compliance Lack of ability to effectively administer and manage pending business Lack of understanding in the bank of the products and underwriting process Lack of senior management commitment Competition with other distribution channels of the insurance company Lack of training support Lack of wholesale support Lack of privacy in the sales space Lack of institutional trust and confidence Lack of access to bank's client base (data mining & lead generation)

Bank Ranking 1 1 3 3 7 8 13

Scores 3.7 3.7 3.3 3.3 2. 2.8 2.3 2.1 2.0 2.0 2.0 2.0 1.8

Insurer Ranking Scores 1 . 3 .0 3. 3.3 3. 8 3. 2 .3 12 2.8 10 3.2 11 2. 13 2. 3. 3.

GAP 0.7 0.3 0.2 0.0 0.6 0.6 2.0 0.7 1.2 0.9 0.4 1.5 2.1


Effectiveness These effectiveness gaps from the insurers perspective are quite important when the spread of the responses are analyzed. Fully % of the insurers versus 1% of the banks felt that senior management commitment was an obstacle to selling insurance to bank customers. 8%of theinsurersfeltthatcompetitionwithotherdistributionchannelswasansignificant 3 obstacle versus 8% of the bankers who deemed this a non-issue. 3% of the banks thought that generally or more often the failure to make insurance a preferred product was an obstacle versus 7% of the insurers who thought that it was more or most difficult,notquiteaslargeadivergenceof opinion.

Affiliated Theresultsof theaffiliatedgroupareconsistentwiththeoverallresults.Bank Insurer Ranking Scores 1 . 1 . 7 3.2 3.8 3.3 2.8 11 2. 3.8 2.8 12 2. 3 .0 8 3.0 2.0 13

Obstacles.in.selling.insurance.to.bank.customers Failure to make insurance a preferred product (i.e., integrated into sales goals and rewards) Lack of sales person's time and shelf space for understanding and selling insurance Legislation and Compliance Lack of time commitment to train bank staff on insurance Lack of understanding in the bank of the products and underwriting process Lack of ability to effectively administer and manage pending business Competition with other distribution channels of the insurance company Lack of senior management commitment Lack of training support Lack of wholesale support Lack of access to bank's client base (data mining & lead generation) Lack of institutional trust and confidence Lack of privacy in the sales space Ranking 1 1 1 7 8 8 8 8 12 13

Scores 3.8 3.8 3.8 3.3 3.0 2.8 2.3 2.0 2.0 2.0 2.0 1.8 1.

GAP 0.8 0.8 0.6 0.5 0.3 0.0 0.3 1.8 0.8 0.5 2.0 1.2 0.5

Non-Affiliated Lack of understanding in the bank of the products and underwriting process and the lack of trainingsupportaretwoareaswherethenon-affiliatedinsurersnotedgreaterobstacles.Obstacles.in.selling.insurance.to.bank.customers Lack of sales person's time and shelf space for understanding and selling insurance Failure to make insurance a preferred product (i.e., integrated into sales goals and rewards) Lack of time commitment to train bank staff on insurance Lack of ability to effectively administer and manage pending business Legislation and Compliance Lack of senior management commitment Lack of privacy in the sales space Lack of understanding in the bank of the products and underwriting process Lack of institutional trust and confidence Competition with other distribution channels of the insurance company Lack of training support Lack of wholesale support Lack of access to bank's client base (data mining & lead generation) Ranking 1 2 3 8 8 10 10 10 13

Bank

Scores 3.7 3. 3.3 3.0 2.7 2.7 2.7 2. 2. 2.0 2.0 2.0 1.

Insurer Ranking Scores 3 3.8 2 .3 8 3. 3 3.8 3.3 1 . 13 2. 7 3. 3 3.8 12 2.8 3.3 11 3.0 3.8 3

GAP 0.1 0.8 0.1 0.8 0.6 1.8 0.2 1.0 1.3 0.8 1.3 1.0 2.3


EffectivenessClient.Relationship.Management. 71% of the banks and 2% of the insurers use a client relationship management system within the bank to manage banking and insurance details and information of the bank clients.

7% of the banks and 38% of the insurers have the applications for insurance integrated with the banking product sales process.


Contact Information

ContactInformationforQuestionsabouttheStudyCFEffronCompanyLLC,isaboutiqueconsultingfirmspecializingintheinsuranceindustryandis a recognized leader in the bank insurance industry, conducting leading market research in the bank insurancefield. RGA has hired C F Effron Company LLC to conduct a number of surveys in the international market. Carmen Effron can be reached at: C F Effron Company LLC 82 Lyons Plain Road, Suite 100 Weston, CT 0880 USA Phone: +1.203.22.2 Email: [email protected] Website: www.effroncompany.com Alternatively, please contact Andr Dreyer at: RGA South Africa 8th Floor, Letterstedt House Newlands-on-Main Newlands 7700 CAPE TOWN Phone: +27.21.70. Email: [email protected] Website: www.rgare.co.za


About Carmen Effron

AboutCarmenEffronCFEffronCompanyLLCisaleadingbankandinsuranceboutiqueconsultingfirm.Locatedin Weston,ConnecticutUSA,thefirmprovidesservicestoinsurancecompanies,banksandtheassociations of industriesintheUSA,EuropeandSouthAfrica.Thefirmsprincipalsandassociateshaveprovided specialistadvicetoover100institutionsinthefinancialinstitutionindustry.Theseservicesinclude but are not limited to the following: conducting primary research, strategic plan design, consulting on agency acquisition and integration, market entry and business modeling, sales process redesign, and expert testimony. For a compete review of services and capabilities, please visit C F Effron LLC website at http://www.effroncompany.com For questions or to have the Study results tailored to compare with your companys individual results, please contact Carmen Effron at +1.203.22.2 or via email at [email protected]. Alternatively, contact Andr Dreyer at +27.21.70. or [email protected].


Notes


Notes


Notes


2007 Bancassurance Study South Africa

Documents

rga south africa

rga c f effron company

behalf of rga international

foreword foreword

carmen effron

cultural divide

exciting business

reinsurance group of