Japan Bancassurance Survey RGA リインシュアランスカンパニー 日 本 支 店 RGA Reinsurance Company Japan Branch

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1 Japan Bancassurance Survey 0 RGA リインシュアランスカンパニー 日 本 支 店 RGA Reinsurance Company Japan Branch

2 Contents Introduction... About RGA... 6 RGA 0 Japan Bancassurance Survey... 7 Respondent Profile... 7 Executive Summary... 8 The Market... 9 Insurer Asset Size... 9 Bancassurance Market Premium... 0 Single Premium Annuities... 0 Single Premium Whole Life... Level Premium Products... Bancassurance Profitability Relative to Other Insurance Sales... 6 Operating Models... 7 Bancassurance Models... 7 Distribution... 8 Distribution and Sales Types... 8 In-Branch Sales... 9 Expansion Plans for Existing and New Distribution Channels... 0 Important Factors for Bancassurance Relationships... Size of Sales Force... Back-Office Support... Third-Party Service Providers... Bancassurance Products... 5 Transactional Advised Products and Embedded Products:... 5 Areas of Growth... 5 Product Approaches and New Product Development Drivers... 7 Product Development Input... 9 Product Gaps... 0 Company Product Portfolio Gaps... 0 Competitive Advantages in the Bancassurance Market... Sales and Marketing... Top Success Factors for Bancassurance Sales... Top Distribution Channels... Areas of Focus to Improve Sales... Planned Investment in Sales Channels... Marketing Methods that Generate Qualified Sales Leads... Sales Compensation... 5 Sales Training and Marketing/Wholesaler Support... 6 Bancassurance Training Offered... 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

3 Wholesaler or Marketing Staff Support... 6 Market Segmentation... 8 Bank and/or Insurer Brand Used to Market Insurance Products... 8 Current and Growth Customer Targets... 9 Channels Selling to Target Segments... 0 Unique Selling Proposition (USP) Factors... Predictive Modeling... 0 The Bank's Customer Demographics... Underwriting... Underwriting Approach by Channel... Underwriting Goals for Bancassurance... e-underwriting Solutions or Outcomes... Claims... Single Premium Product Claims... 5 Companies Considering Automated Claims Solutions... 5 Benefits of Technology... Risk Management:... 6 Risk Mitigation Arrangements... 6 Most Common Uses of Reinsurer Support and Projected Uses... 6 Projected Use of Reinsurancer Support... 6 Top Competitors... 8 Environmental and Regulatory Issues... 9 Future Risks/Concerns Facing Bancassurance Notice... 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

4 Introduction Bancassurance is a sizable, growing, and increasingly important distribution channel for protection products around the world. In Japan, bancassurance plays a crucial role in the efficient provision of much-needed life insurance to the broader market. This report presents the results of RGA s Japan Bancassurance Survey conducted in 0. The investigatory framework is based on a broad range of quantitative and qualitative questions that seek to define and benchmark Japan s bancassurance models and market. The many key findings summarized in this report provide valuable information and insights about the bancassurance market in Japan today, from distribution models and product development to market expansion plans and actionable information about sales processes and product offerings. We hope this report s findings prove useful to you. We wish to thank the 5 participating companies that made this research and report possible. Your contributions were crucial, and this research will enhance industry knowledge of this important channel and strengthen understanding of its many challenges and opportunities. We look forward to continuing to support your efforts to grow this exciting business. Sincerely, Yusuke Asai Chief Executive Officer and Managing Director RGA Reinsurance Company of Japan Japan Branch yasai@rgare.com RGA Japan Bancassurance Survey 0 Copyright 0, RGA

5 It is with immense pleasure that we present the results of the RGA 0 Japan Bancassurance Survey. This survey represents a new chapter in RGA s long involvement in bancassurance globally. The results come from a collaborative process between RGA and several significant players in the Japanese market. We are extremely grateful to all participants who gave generously of their time and information. The format and intention of this survey is to focus on those areas that are of strategic importance to insurers. We hope this has been achieved, and to this end would welcome any constructive feedback from participants on the value derived from this report. The bancassurance market continues to grow and mature as a significant business, providing much-needed financial security to individuals and to Japan, meeting client needs through diverse products and distribution channels. There are also challenges, both now and on the horizon. If this survey can in even a small way contribute to the further improvement of this industry, we will be delighted. Best wishes for the rest of 0. Yours sincerely, Greg Goodfliesh Senior Vice President and Chief Marketing Officer Global Financial Solutions, Asia Pacific RGA Reinsurance Company Japan Branch ggoodfliesh@rgare.com 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

6 About RGA Reinsurance Group of America, Incorporated (RGA) is a leader in the global life reinsurance industry, with approximately $.9 trillion of reinsurance in force and assets of more than $9.7 billion. RGA is one of the largest life reinsurance companies in the world and the only global reinsurer to focus primarily on life and health-related reinsurance solutions. RGA serves clients from operations in 6 countries, RGA s core products and services include individual life reinsurance, individual living benefits reinsurance, group reinsurance, health reinsurance, facultative underwriting, product development, and financial reinsurance. RGA Japan is also a pioneer in the development of innovative capital-motivated reinsurance and asset-intensive/annuity reinsurance solutions and provides expertise in claims and e- underwriting. RGA is known for expertise in risk assessment and capital management, innovative solutions, and our commitment to serving our clients RGA was rated Best Overall Life Reinsurer in the 0 Flaspöhler Survey (Direct Writers Evaluate Reinsurers/Life N.A.) by cedants the fifth consecutive time to have been rated best overall in this biennial survey. In 0 NMG Consulting studies ranked RGA # globally and in national and regional studies in Canada, Hong Kong, Indonesia, Italy, Malaysia, Mexico, Singapore, South Africa, Taiwan, Thailand and Vietnam markets on NMG s Business Capability Index. RGA was also recognized for innovation in Best Review s 0 Innovator s Showcase and in 0 and 0 Innovation Showcases, and was the winner of the Life Reinsurance Company of the Year award from 0 Worldwide Reinsurance Awards. In 995, RGA launched operations in Japan with a representative office in Tokyo. A few years later, RGA was the first foreign-based life reinsurance company in Japan to be granted a full license to operate. Today, RGA Japan, which is located in Tokyo s financial centre, has a team of more than 70 associates providing support to clients all over Japan. It has become the market-leading life reinsurer in the country, providing all lines of individual and group life reinsurance to support individual life and living benefits coverage such as critical illness, longterm care and disability. 6 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

7 RGA 0 Japan Bancassurance Survey RGA defines bancassurance as the distribution of insurance products sold through bank channels to a retail customer base. In 0, RGA conducted a survey of Japan s bancassurance market in order to gain insights into current bancassurance trends and practices. The survey targeted insurers that provide products to their banking partners. The life insurers contacted for this survey were each provided with the questionnaire in advance, to facilitate the compiling of the requested information. The survey was deployed online in October 0, and completed by 5 insurer respondents. RGA Japan hosted a client seminar in Toyko on February 7, 0 reporting the highlights of the survey findings. This report summarizes the findings of this survey, and reflects the responses received to all questions. Financial information reflects the Financial Year-end 0 (FY 0) results with a reporting period of April 0 to March 0. Respondent Profile The 5 respondents include insurance companies that have distributor partnership agreements with their banking partners, a typical distribution model for bancassurance in Japan. We believe these insurers are largely representative of Japan s total bancassurance market. RGA would like to thank all of the participants for their responses and insights into this important market, and all of the individuals who submitted responses on behalf of their companies and made this research possible. The following companies participated in the RGA 0 Japan Bancassurance Survey: Aegon Sony Life Insurance Co., Ltd. Aflac Japan AXA Life Insurance Company Cardif Assurance Vie Credit Agricole Life Insurance Company Dai-ichi Frontier Life ING Life Insurance Company Manulife Life Insurance Company Mass Mutual Life Insurance Company MetLife Alico Life Insurance K.K. Mitsui Sumitomo Primary Nippon Life PGFL Sumitomo Life Insurance Company T&D Financial Life Insurance Company 7 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

8 Executive Summary The Japanese bancassurance industry is a valuable one both to the companies that operate in it and the clients that benefit from the products and protection offered. It is an industry that has grown beyond the staple product - single premium whole life - due to market and competitive pressures, but also to more effectively meet evolving client needs. This survey explores many aspects of Japanese insurers engaged in bancassurance and answers key questions about the market s size, market share, products sold, distribution channels, challenges, and current strategic intent. There is a wealth of information in this report about the Japan market, and we believe the full value will be derived once you are able to assimilate the contents and consider the information in relation to your organizations. RGA will gladly engage with any participants wishing to further discuss aspects of this report. Highlights: In the Financial Year-end 0 (FY 0) results with a reporting period of April 0 to March 0, bancassurance annualized premium for single and level premium products received by respondents - which we believe to be representative of a large proportion of the Japanese bancassurance market - amounted to 58,77,955,000 (JPY). Annualized premium for single premium annuities and single premium whole life (SPWL) totaled 99,70,09,000 (JPY) for FY 0. SPWL products will continue to be a focus for bancassurers with reasonable expectations of profitability in the future. Japan s bancassurance market is product-driven (versus process-driven), and will remain competitive due to rate changes, low interest rates and changing product trends. Single premium products for retirement markets will continue to be mainstream; but the new initiatives are shifting focus to protection or level premium products. Bancassurers plan to train bank tellers and call centres to target the young family segment. Annualized premium for level premium products totaled 85,77,906,000 (JPY) for FY 0. Despite survey findings that indicate lower profitability relative to insurance products sold in other channels, bancassurance is still seen as a unique business. Insurers use the bank distribution networks and benefit from open access to bank customers. While face-to-face sales remains the dominant distribution method, as reflected in sales staff numbers and expansion plans, bancassurers are placing increasing importance on in-branch sales. Product quality, product features, commission levels and training are key elements of bancassurance success. Respondents highlighted a number of opportunities for the existing product offerings and features of single premium and level premium products. Opportunities were identified for bancassurers to use improved customers segmentation and predictive modeling to help streamline sales processes. Respondent plan to explore simplified underwriting using e-underwriting tools to promote level premium products. 8 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

9 JPY ( ) The Market: Please note: throughout this report, all graph colors have been randomized and do not represent any particular company. Insurer Asset Size In this report, the 5 survey participants are categorized by total asset size (as of March, 0). Four respondents have assets of trillion or less. Two insurers have assets between trillion and trillion. Four respondents - the largest group have assets of between trillion and 5 trillion. Three insurers have assets between 5 trillion and 0 trillion. The two largest insurers have assets of between 0 trillion and 55 trillion. The majority of the participants have approximately years of experience in bancassurance. These companies launched their bancassurance operations following the Financial Services Agency s (FSA) gradual deregulation that removed barriers between banks and insurers. Total Asset Size of Participants (as of March, 0) 0 trillion - 55 trillion 5 trillion - 0 trillion trillion - 5 trillion trillion - trillion trillion or less 0 Number of companies 5 Respondents 9 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

10 Bancassurance Market Premium: In this report, Japan s bancassurance market is represented by the companies that reported premium for our survey. The total reported annualized premium of 58,77,955,000 (JPY) was for FY 0 for both annuity and protection products. We believe this sample of companies represents a substantial proportion of Japan s bancassurance market. Single Premium Annuities Eleven companies responded to this question total reported annualized premium for single premium annuities was 6,6,67,000 (JPY). Share by Company of Total Respondent Premium for Single Premium Annuities ( Respondents) 6,6,67,000 JPY.0%.0% 5.8%.0%.%.%.0%.8% 8.% 9.8%.% The majority of survey respondents reported selling single premium annuity products. Of these, 6 sell foreign currency-denominated fixed annuities, and another 6 sell variable annuities. Five respondents indicated they sell Yen-denominated fixed annuities. Single Premium Annuity Products Foreign currency-denominated fixed annuity Variable annuity 6 6 Yen-denominated fixed annuity Respondents 0 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

11 Single Premium Whole Life For single premium whole life products (SPWL), 8 companies responded, reporting total FY 0 premium of 5,755,76,000 (JPY). Three of the respondents comprised larger shares of the reported SPWL premium, producing between 7.7% and 5.7% of the total. Share by Company of Total Respondent Premium for Single Premium Whole Life (8 Respondents) 5,755,76,000 JPY 9% 5.7% 5.7% 9.9% 7.7% 8.% 0.%.6% Total respondent premium for single premium annuities and whole life is 99,70,09,000 (JPY) for FY 0 including respondents for annuities and 8 respondents for SPWL. Single Premium Whole Life Products Single premium whole life 7 Foreign currency-denominated whole life 5 Single premium medical whole life Respondents Eight respondents indicated that they sell SPWL products. Seven sell SPWL policies, 5 sell foreign currency-denominated whole life, and three respondents (the smallest group) sell single premium medical whole life. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

12 Number of Policies (JPY) The question about top-selling single premium bancassurance products received 0 responses. Eight identified SPWL as its top-selling premium product, followed by 6 responses for variable annuities and three for fixed annuities. Another product identified as a top-selling single premium bancassurance product is foreign currency-denominated whole life, with responses Ten respondents reported that their top-selling single premium products are SPWL, variable annuity, fixed annuity and foreign currency-denominated whole life products. These 0 companies sold 59,000 policies through bancassurance, with annualized premium totaling 6,867,09,000 for FY 0. The average premium per policy for the top-selling single premium products was,66,000 (JPY). Based on the survey data, insurers are relying on top-selling products, and their revenues are not diversified. Top Selling Single Premium Products Foreign currency-denominated fixed annuity Foreign currency-denominated whole life Whole life hospital cash Foreign currency-denominated variable annuity 80,000,000,000 70,000,000,000 60,000,000,000 50,000,000,000 Whole life Variable annuity Fixed annuity Top Seller 0 Respondents 6,867,09,000 Second Top Seller Third Top Seller Annualized Premium for Top Selling Single Premium Products in FY 0 Top Selling products 0 Respondents Number of Policies Sold for Top Selling Single Premium Products in FY 0 65,000 6,000 6,000 59,000 59,000 57,000 55,000 Top Selling products (0 respondents) RGA Japan Bancassurance Survey 0 Copyright 0, RGA

13 Level Premium Products Five companies sell level premium protection products through banks, and reported total combined bancassurance premium of 85,77,906,000 (JPY) for these products in FY 0. Compared to single premium product figures, level premium products have a lower bancassurance market share. Share by Company of Total Respondent Premium for Level Premium Protection Products (5 Respondents) 85,77,906,000 JPY 7.9% 6.%.%.5% 0.0% Level premium whole life products account for approximately 90% of all bancassurance business in Japan. A total of 7 respondents indicated selling level premium medical products. The most commonly offered products were: cancer (6 respondents); whole life hospital cash benefits (5 respondents); critical illness policies (two respondents) and hospital cash benefits (one respondent). Level Premium Medical Products Cancer 6 Whole life hospital cash benefit 5 Critical illness Hospital cash benefit Respondents RGA Japan Bancassurance Survey 0 Copyright 0, RGA

14 The second most popular level premium products provide a death benefit. Four of the 7 respondents reported selling level premium whole life, three sell term life, and three offer income protection products. Two respondents offer between two and three types of death benefit products. Level Premium Death Benefit Products Whole life Term life Income protection 0 7 Respondents Critical illness Level Premium Group Credit Life Products Cancer Death 0 Respondents Japanese insurers also distribute group credit life products through banks. Two survey respondents reported selling critical illness, cancer and death coverage under their level premium group credit life portfolios. With respect to non-life level premium products, one respondent indicated selling personal accident coverage. Another respondent reported selling an individual annuity (level premium savings vehicle) through its bancassurance partner. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

15 (JPY) The top-selling level premium bancassurance products indicated by the 6 respondents to this question were: whole life hospital cash ( responses); whole life (two responses); and individual annuity products (two responses). Income protection and term life products each received one response indicating it as a top-selling product. Education endowment and cancer also received one response each, indicating second top-sellers for level premium products. Top Selling Level Premium Products Whole life hospital cash Whole life Individual annuity Income protection Term life Education endowment Cancer Top Selling Product Second Top Seller Third Top Seller Respondents Four of these 6 respondents provided annualized premium numbers for their top-selling level premium products, which totaled 7,75,76,000 (JPY) in FY 0. The level premium products that ranked as the second best selling products by two respondents earned a total of,6,000 (JPY) of annualized premium. The third ranked top-selling products (not included in the graph below), earned,8,9 (JPY) annualized premium in FY 0, as reported by two respondents. 8,000,000,000 6,000,000,000,000,000,000,000,000,000 - Annualized Premium for Top Selling Level Premium Products 7,75,76,000 Top Selling product ( respondents),6,000 nd top selling ( respondents) In FY 0, total annualized premium reported for the three top-selling level premium products whole life hospital cash, whole life and individual annuities was 7,76,0,600 (JPY). 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

16 Bancassurance Profitability Relative to Other Insurance Sales Profitability rankings indicate the importance of bancassurance sales compared to other lines of business in which the insurers operate. When examining responses weighted by premium, it becomes clear that for the majority of bancassurers business is seen as either equally profitable or less profitable. Of the 5 respondents to this question, only indicated that bancassurance as more profitable than sales through other channels. Two respondents provided premium information which had a total of.% of weighted premium. The third respondent did not disclose premium information. Six respondents, accounting for 5% of respondent premium, saw bancassurance products as equally profitable. And another 6 participants, representing 6.7% of respondent premium, indicated that bancassurance is less profitable than other insurance sales. The equal split of 6 respondents for equally profitable and less profitable may indicate product challenges for Japan s bancassurance market. Respondents reporting bancassurance as equally profitable offer protection products, while those that responded less profitable primarily sell single premium products. As Japan s bancassurance market is non-integrated (meaning the banks through which insurers distribute do not own, or are not owned by, the insurers), a vast difference exists in profitability rankings from other countries. South Africa and Australia both use integrated models, and RGA s surveys in these two countries found that integrated models tend to be more profitable, due to an alignment of interests between the banks and insurers. While the exact reasons for lower bancassurance profitability were not explored in this survey, we believe it was most likely affected by increased competition, lower commissions, and market volatility due to the global financial crisis. More profitable Equally profitable Profitability Weighted by Share of Total Respondent Premium Less profitable.% 6 Respondents Respondents provided premiums 5.0% 6 Respondents 5 Respondents 6.7% Single premium saving products have been a good and reasonably stable business for most Japanese bancassurers. However, few are successfully selling level premium protection products. Respondents should consider whether this represents an untapped market opportunity. 6 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

17 Operating Models: Bancassurance Models The majority of Japanese bancassurers use one of two distribution models: Distributor Partnership The bank is an intermediary, offering products of more than one insurance company. Strategic Alliance The bank sells product(s) from only one insurance company. In Japan, insurers mainly use one model to distribute multiple bancassurance products. The dominant model is the distributor partnership. All 5 respondents selected this model and many have multiple bank partners for bancassurance distribution. Of the 5, one also distributes group insurance embedded in bank products, and another uses the strategic alliance model for bancassurance distribution. Bancassurance Distribution Models Distributor partnership Strategic alliance Other: Group Insurance embedded in Bank Products Respondents Japan s bancassurance models are comparable to the United States. In the United States distribution is through an open architecture system. Banks can sell multiple insurance products from multiple providers in branches through financial consultants. This is similar to Japan s model of bank tellers, sales representatives and insurance planners selling insurance at banks. Other established markets in Europe, South Africa and Australia use an integrated distribution model for bancassurance, where either the banks own and operate the insurers or vice versa. The bank can only sell the products of the insurer that owns (or is owned) by the bank, and the insurer can only distribute through the bank. The bank and insurer share aligned target markets, sales targets, and so forth. 7 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

18 Distribution: Distribution and Sales Types In Japan, face-to-face sales in the branches is the most widely used distribution model. All survey respondents indicated using bank tellers and in-branch sales representatives. Nine respondents also reported distributing insurance products through bank wealth management departments or trust divisions and another 6 distribute through mortgage sales representatives. The use of call centres was reported by two survey respondents. Call centres are becoming increasingly popular with bancassurers in South Africa and Australia, primarily for simplified and guaranteed issue products. Two respondents use third-party distribution for their bancassurance business. Online distribution was uncommon as it was only reported by one survey respondent. Bancassurance Distribution Models Bank tellers and bank sales representatives Wealth management or trust division Mortgage sales representatives Call centres (tele-sales) Third party distribution Online Respondents For bancassurance distribution, 5 respondents use only one model; two types are used by respondents, and more manage three distribution models. One respondent uses distribution types and one uses all 6 distribution models. The maturity of Japanese bancassurance operations generally correlates with the use of more distribution channels. 8 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

19 In-Branch Sales Bank tellers and sales representatives are the two predominant types of in-branch bancassurance sales staff, with all survey respondents indicating their use. Bank-employed insurance planners followed, with 0 respondents. Other types of in-branch staff in Japan include: wealth management advisors and private bankers, specialized insurance planners, mortgage representatives, insurance planners (employed by independent brokers), bank branch managers and business bankers. In-Branch Bancassurance Sales Types Bank tellers Bank sales representatives 5 5 Bank-employed insurance planners 0 Wealth management advisors/private bankers 8 Specialized insurance planners 7 Mortgage representatives 6 Insurance planners (employed by independent brokers) 5 Bank branch managers Business bankers Respondents In 0, RGA Japan conducted a Mystery Shopping Survey where bank branches were visited to observe insurance sales interactions. Bank tellers are often a customer s first point of contact in a branch, and thus are ideally placed to meet insurance needs, particularly through the use of simplified issue products. The mystery shopping survey found that most Japanese banks had increased the number of protection-type products offered. However, according to the 0 Bancassurance survey, many banks are still selling primarily single premium products such as savings and investment trusts. Single premium products, according to our mystery shopper survey, are the ones bank tellers are most comfortable recommending without being prompted. The amount of time spent on insurance consultations increased in 0 compared with 0, with improved consultations which included better quality explanations for insurance products. Some banks suggested customers could make appointments with insurance planners to advise them on protection products. 9 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

20 Expansion Plans for Existing and New Distribution Channels Thirteen respondents reported their company plans to expand bancassurance business through existing or new distribution channels to increase sales. Ten of these respondents plan to increase their inbranch bank teller sales force. This finding is aligned with the importance of faceto-face sales. Distribution Expansion Plans Bank tellers in-branches 0 Sales representatives 5 Insurance planners Tele-sales Internet Respondents These expansion plans could be a result of bank tellers access to younger customers and the bank s desire to maintain a larger sales force to sell accumulation-type products. Bancassurance sales representatives traditionally have focused on retirees and single premium products. Expanding the sales representative force was cited by 5 out of respondents. Two respondents reported expansion of their insurance planner sales force, and another two respondents plan to expand tele-sales. Only one respondent had plans to expand the Internet as a distribution channel. 0 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

21 Important Factors for Bancassurance Relationships Prior success in selling insurance Retail business capability Size of sales staff Bank customer demographics Alignment of target markets Brand Customer retention Number of branches Geographic locations Asset size of bank CRM capability at bank's POS Internet distribution capability Number of ATMs 77% 69% 67% 6% 6% 58% 50% % % % 7% 50% 8% 8% % 5% 5% % 8% 8% % % 8% 50% 67% 50% 7% % 8% 9% 0% 0% 0% 60% 80% 00% Most Important Moderately important Least important Respondents This section details what insurers consider as the most important factors for the success of their bank partnerships. The most important factors for insurers was the bank s ability to sell (i.e. whether the bank had a track record of in-branch sales representatives and planners successfully selling face-to-face to customers), and the strength of the bank s retail business capability, as evidenced by, among other things, a high level of customer service for insurance sales. This finding makes sense, given the insurer s reliance on the bank s distribution network. Internationally, RGA has found that customer knowledge is a requirement exhibited for partnerships in the affinity marketing space, which has strong similarities to bancassurance. Prior success in selling insurance was identified by 77% of the respondents as the most important factor for bancassurance relationships. Retail business capability was identified by 69%, and 6% indicated the size of sales staff as the most important success factor. An unexpected finding for this question was that % of respondents considered the asset size of bank, and % the number of branches to be important factors for bancassurance relationships; particularly in light of the importance of retail business capabilities which would include those factors. Additionally, only 58% of respondents indicated brand as a very important factor. This finding was surprising considering that Japanese bancassurance is conducted in an open architecture model, and for a bank to become a preferred insurance provider, insurer service and ease of doing business are key, along with offering a strong brand. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

22 ATMs and Internet distribution capability were ranked as the least important by survey respondents. This may be attributed to a preference for in-branch sales versus direct channels for bancassurance distribution. Generational changes in consumer demographics are beginning to influence consumer buying behavior and may alter the direction of bancassurance distribution. RGA has noted an increase in the use of direct sales for bancassurance in other markets such as Australia. Size of Sales Force Japan s commitment to bancassurance is clearly marked by the sheer number of salespeople employed to sell insurance through banks. Fourteen survey respondents have an overall bancassurance sales force of,9. (One respondent did not provide sales force numbers.) Wholesaler and marketing support staff represented the dominant group within the sales force by quite a margin, with out of 5 respondents indicating staff numbers averaging 99 people. The importance of product training and product support is highlighted here, which makes sense in a multiple-product distribution scenario. Interestingly, the second largest group was tele-sales agents, with an average of salespeople (reported by 7 respondents). This type of sales force may be a growth trend in Japan, considering these agents are generally located in call centres rather than in-branch interacting with customers in person. Insurance planners have an average of 5 salespeople, according to the two insurers that indicated employment of this sales type. Wholesaler/Marketing Support Staff Tele-sales Agents Insurance Planners Size of Sales Force 99* Support Staff * Agents 7 5* Planners * Average number Respondents RGA Japan Bancassurance Survey 0 Copyright 0, RGA

23 FTEs Back-Office Support The number of back-office insurance staff who support bancassurance, as measured in Full Time Equivalents (FTE), varied greatly among the respondents to questions on this topic. The average number among the respondents was 65 FTEs. It is remarkable to note the large differences in FTE numbers between insurers of similar size. These differences may be attributed to different business practices used; for instance, insurers dedicated only to bancassurance tend to have more back-office staff. This would appear to be due to the larger roles these staff members play in the implementation of bancassurance operations, and the size of their operations requiring more support solely focused on bancassurance. Number of Back-Office Support or less Respondents Insurers with multiple sales channels tended to have fewer dedicated back-office staff, since some of the functions are shared in common with other channels. There may also be differences in the functions performed by the back-office staff, as some may include education or sales planning. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

24 Third-Party Service Providers Third-party service providers are not widely used in Japan. Only 6 respondents indicated using such providers. This differs from other markets such as South Africa, where RGA has noted increasing use of third-party service providers such as reinsurers, external call centres, administrators, and consultants for customer insights and/or market analysis, which may be tied to overflow management or as a cost-savings measure. Five respondents specified they use third parties for policy administration and maintenance, data entry for application forms, and for call centres. Consultants for consumer insights and market analysis are used by two respondents. This finding is consistent with bancassurers indicating they want to know their customers better and increase their understanding of customer needs for bancassurance products. Third-Party Service Providers Third party administrators Consultants for consumer insights/market analysis External call centres One respondent reported the use of an external call centre for outbound calls to sell bancassurance products Respondents RGA Japan Bancassurance Survey 0 Copyright 0, RGA

25 Bancassurance Products: Transactional Advised Products and Embedded Products: For this survey, we examined number of policies sold and premiums for the following two product types: Transactional advised products insurance products that are sold with advice from licensed sales representatives or planners on a standalone basis, independently of any bank product. Embedded products insurance products that are sold bundled together or linked with bank products (e.g., group life and credit life). Fourteen respondents indicated they sell transactional advised products, via distributor partnership agreements with banks. Only one respondent sells embedded products such as group credit life products. Areas of Growth Single premium whole life is still viewed by Japan s insurers as important for future growth. Among these insurers, single premium variable annuities are a renewed focus for sales efforts. Whole life and medical whole will likely be the next product focus areas bancassurers. Two respondents selected other as the third most important, with one indicating products for the senior segment and the second, saving products without minimum guarantee such as investment trusts. As for new growth, two areas identified as the next product focus by respondents are critical illness and whole life hospital cash. 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

26 Top Areas of Product Growth Single premium whole life Single premium variable annuity Single premium foreign currency-denominated fixed annuity Whole life hospital cash benefit (level premium) Whole life (level premium) Term life (level premium) Critical illness (level premium) Income protection (level premium) Individual annuity (savings/level premium) Group life - Critical illness Most important Second most important Third most important Single premium medical whole life Other Single premium Yen-denominated fixed annuity Endowment (education) Respondents Seventy-three percent of respondents reported that their company planned to add enhancements to their current product offering. The most popular planned enhancements were adding products and/or product features as stated by 5 respondents. Other enhancements include improving the price competitiveness of products and refining funds. 6 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

27 Product Approaches and New Product Development Drivers Product Approaches The most popular product approach selected by 9 respondents is providing products designed specifically for their bank partners. Two respondents sell off-the-shelf products through bank channels and both design products for the bank and make off-the-shelf products available. Product Approach 9 Products are designed specifically for the bank Use off the shelf products Use both products designed for the bank and off-the-shelf products New Product Development Drivers In Japan, new product development for bancassurance is driven primarily by insurers wanting to match their competitors offerings. Customer research and distribution feedback were the next two most important drivers. New Product Indicators Competitor's offerings 5 Customer research 5 Distribution feedback Customer segmentation Customer feedback Current economic trends The bank determines the new products Top indicator Second indicator Third indicator Respondents 7 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

28 Product Monitoring: Feedback Programs Sixty percent of respondents stated that they have a structured customer feedback program in place. The most important source of feedback, selected by 6 respondents, is obtained through monitoring feedback from distribution channels and sales staff. The respondents had several methods of monitoring and measuring customer satisfaction. Some insurers receive feedback aggregated from their call centres, distribution channels, and wholesalers receiving feedback from branches and other distributors. Banks also directly give feedback to insurers. Feedback from distribution channels or sales staff Customer feedback Customer satisfaction surveys Claims/cancellation/lapse rate information Sources of Feedback Bank feedback 6 6 Top source 5 Second source One respondent 5 Respondents periodically measures and monitors the Net Promoter Score (NPS), which measures how likely it is that a consumer would recommend a company to a friend or colleague. Questionnaires inserted in billing documents are also used as a source of feedback, as part of policy maintenance. 8 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

29 Product Development Input The types of staff that provide regular input into bancassurance product development broadly reflects that insurers are responsible for training bank sales staff and providing sales support for the bancassurance products. The two most common types of staff providing input into product development are product development actuaries and marketing staff, reported by Staff Providing Product Development Input out of 5 respondents. The third most common type of staff providing product development input are sales staff members, Product development actuaries Marketing staff Sales staff with responses. There appears to be some support for product development from other functional areas including administrative/operational, IT and systems staff, as Other actuarial staff Administrative/Operational staff IT/Systems staff Claims assessors Underwriters well as claims and underwriting. 5 Respondents As noted in the previous section, insurers tend to identify new product needs based on their competitors offerings and customer research. Customer satisfaction monitoring occurs through feedback from the distribution and sales staff. 9 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

30 Product Gaps Sixty percent of survey respondents believe product gaps exist in the current Japanese bancassurance market overall. The identified product gaps in the market are long-term care, regular premium variable annuities, and in-kind services (in lieu of insurance benefits). Company Product Portfolio Gaps A little over half of the survey respondents - 5% - indicated they believe gaps exist in their own company s current bancassurance product portfolio. The identified gaps are: Level premium mortality products All level premium/simple protection products Fixed savings products Insurance products for corporate clients Long-term care products Fixed and variable annuities Yen-denominated variable annuities Foreign currency-denominated products 0 RGA Japan Bancassurance Survey 0 Copyright 0, RGA

31 Competitive Advantages in the Bancassurance Market The three key competitive advantages are: consistent delivery (8 responses), bank partnership (6 responses) and brand strength (5 responses). Training was also ranked important, with responses. Interestingly, considering Japan s product-focused bancassurance market, only three respondents identified competitive pricing as a top competitive advantage or differentiating factor. Top Competitive Advantages Consistent delivery 5 Brand strength Bank partnership Training Competitive pricing st Ranked Business retail capability nd Ranked Branches located nationwide Respondents Sales and Marketing: Top Success Factors for Bancassurance Sales The success factor viewed by respondents as most important for successful bancassurance sales is product quality/features, with a total of 0 responses. The other important factors included sales incentives, product marketing, retail business capability and training. These success factors contrasted with the top competitive advantages cited by respondents for their bancassurance operations, which ranked consistent delivery, brand strength, and the bank partnership as the three highest. Wholesaler or marketing staff support and variety of product offerings rank as moderately important, with 7 and 5 responses respectively. This is indicative of the need for insurers to provide banks with the tools and information to empower sales staff for the successful execution of bancassurance sales. RGA observed from the survey findings that Japanese bancassurers tend to focus more on differentiating products rather than on the sales process or product delivery. Based on this observation, it is not surprising that ease of the sale process and product integration at the bank s point-of-sale did not receive more responses. This finding is in contrast with other markets internationally, where the emphasis is placed on point-of-sale integration for bancassurance success. Executive buy-in was chosen as the top factor by only one of the respondents choosing that item. By contrast, executive buy-in was the most important factor selected in every other RGA Japan Bancassurance Survey 0 Copyright 0, RGA

32 bancassurance survey RGA has conducted globally in established bancassurance markets such as the United States, South Africa, Australia, India and the Middle East. Success Factors for Bancassurance Sales Product quality/features Sales incentives Product marketing Retail business capability Training support for sales staff Joint bank/insurer scorecard (KPIs) Executive buy-in Wholesaler/marketing staff support Product variety offered Buy-in at the branch level Top success factor Product integration at bank's POS nd success factor Sales targets rd success factor Ease of sales process Use of leads th success factor e-underwriting services Respondents Top Distribution Channels In line with the importance of face-to-face inbranch sales, the top distribution channel for transactional advised products, based on bancassurance premium, are for in-branch sales types. As reported by respondents, the top distribution channels for bancassurance are bank tellers, sales representatives and insurance planners. The next important distribution channels are wealth management or trust advisors (which are also in-branch sales). One respondent identified tele-sales as a top distribution channel and another company reported other as its second top distribution channel for those types of products. Top Distribution Channels by Premium for Transactional Advised Products In-branch sales (bank tellers & insurance planners) Wealth management or trust advisors Call centre (tele-sales) Other Top Distribution Channel nd Top Distribution Channel Respondents Note: there were too few responses to report on top distribution channels for embedded products. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

33 Areas of Focus to Improve Sales Three areas - product development and pricing, product training and market research and customer segmentation - are ranked by bancassurers as the most important areas of focus for improving sales. These three areas are to be expected from a hypercompetitive market such as Japan s and the need to offer attractive products to customers. An overall factor contributing to the importance of these improvement areas is the bancassurance product cycle, which is shorter than those of other distribution channels. As stated in the New Product Development Drivers section (page 7), every insurer must be aware of its competitors offerings and be able to match those offerings in order to stay competitive. Areas of Focus for Transactional Advised Sales Product development and pricing Product training Market research and customer segmentation Distribution Lead generation Marketing and advertising Underwriting 8 st Ranked nd Ranked rd Ranked Please note: responses to this survey were provided by insurers, and the opinions of their banking partners may differ. Customer service Respondents Planned Investment in Sales Channels Planned Investment in Sales Channels Bank Tellers 8 Sales Representatives 7 Outbound telephone calls Inbound telephone calls 5 Direct mail (post) Insurance Planners Increasing Independent Advisors Maintaining Direct marketing Internet sales (transactional web) Respondents Findings for this item are consistent with distribution and staffing trends. Insurers in bancassurance plan to invest more resources in their most developed sales channels, specifically bank tellers and sales representatives. Two respondents intend to allocate budget/resources to outbound telephone calls, and respondents are maintaining their current allocation. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

34 Although respondents did not indicate as an important sales tool, it is RGA s understanding that some Japanese bancassurers may move from traditional post to campaigns. None of the survey respondents reported any intention to decrease their investment in any sales channels. Marketing Methods that Generate Qualified Sales Leads Brochures in branches and branch signage are considered the most important marketing methods to generate qualified bancassurance sales leads. Seminars and workshops were also rated very important. Both of these methods help create warm leads as they engage existing customers about insurance and/or investment products of which they may not be aware. The branch-focused marketing methods respondents cited as generating the most qualified or best leads appear to mirror the sales channels with the most focus in Japan; that is, branches. ATM solicitations and mobile phones (e.g., SMS) were rated as not important by the survey respondents. These marketing methods were identified as notable new trends for bancassurance in South Africa in the RGA Bancassurance survey conducted in 0. Marketing Methods Generating Qualified Sales Leads Brochures in branches 9 Seminars and workshops 5 7 Branch signage (e.g., product posters and consultation review posters, etc) 8 Tele-marketing 6 Media advertising (TV and print) 7 6 Bank statement inserts/brochures Internet advertising 7 7 ATM Solicitations 7 Mobile phones (e.g., SMS) Very important Somewhat important Not important 5 Respondents Five respondents reported collecting data on marketing methods to establish their effectiveness. Another two respondents indicated that they collect marketing data only in specific channels. This is an area to be explored in subsequent RGA surveys. RGA Japan Bancassurance Survey 0 Copyright 0, RGA

35 Sales Compensation: In Japan, a standard practice for bancassurance sales compensation is for the banks to set compensation for bancassurance sales and insurers. Insurers, as a rule, do not have any direct control. Bank tellers and sales representatives are primarily paid by commissions and point-based compensation determined by the banks. Commonly, the commission level is established as a bonus-point compensation type for sales performance. The branch sales staff and the banks themselves are incentivized to sell bancassurance products by performance-based awards. More complex products may yield higher commissions. Insurers use several compensation methods, both standalone and in combination, for wholesaler commissions. The most popular method is commission or commission with a combination of other compensation types such as salary, point-based compensation (referring to accumulated points that affect bonuses) or bonuses. 5 RGA Japan Bancassurance Survey 0 Copyright 0, RGA