Bancassurance Models. Around the World

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Bonnie Cooper
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1 Bancassurance Models Car dealers and manufacturers as distribution channels Around the World Presentation at the 5 th Annual Insurance Distribution Strategies Forum Vienna, October 17 th 18 th 2013 Finaccord Ltd., 2013 Web: info@finaccord.com 1

2 Agenda How important is the automotive channel for motor insurance? How large are the markets for creditor and GAP insurance and extended warranties in comparison? Should you distribute through manufacturer brands or dealers? What is the outlook for distributing insurance through the automotive channel? Finaccord Ltd., 2013 Web: 2

3 Questions for you Q1) Is the automotive trade in decline as a channel for distributing motor insurance in your market? [Yes / no] Q2) If yes, which other channels have gained share? [Select all that apply] online aggregators cashback websites automotive associations direct sales by insurers banks other channels (e.g. retailers) Finaccord Ltd., 2013 Web: info@finaccord.com 3

4 Automotive financial services research, European countries 1,350 dealers interviewed across Europe 30 to 40 manufacturer brands covering 99% of new car registrations per country Market size estimates Distribution analysis Finaccord Ltd., 2013 Web: 4

5 EUR 7.55 billion of motor insurance GWP originally sold through the automotive channel Personal motor insurance premiums originally sold through manufacturer brands and car dealerships (new plus in-force business), Europe, 2012 Automotive trade, EUR 7.55 billion, 7.5% Other channels, EUR billion, 92.5% Source: Finaccord Automotive Financial Services Model Finaccord Ltd., 2013 Web: 5

6 This channel accounts for 20% or more of premiums in some countries Personal motor insurance premiums originally sold through manufacturer brands and car dealerships (new plus in-force business), selected countries, 2012 Russia Norway 20.1% 23.0% Germany 10.2% Italy 5.6% UK France Ireland 0.0% 2.6% 2.1% Source: Finaccord Automotive Financial Services Model 0% 5% 10% 15% 20% 25% Finaccord Ltd., 2013 Web: 6

7 Dealers nearly always offer comprehensive motor insurance Maximum level of motor insurance coverage sold by dealers in Europe, % Liability only Non-liability only 80% 60% 40% Comprehensive Non-liability only 20% 0% Average (excl. Italy) Italy Comprehensive Source: Finaccord Automotive Financial Services Survey Finaccord Ltd., 2013 Web: 7

8 Creditor insurance, GAP insurance and extended warranty terms and definitions Creditor insurance: pays the balance or instalments of a loan or lease in case of death, disability or unemployment Restschuldversicherung oder Ratenschutzversicherung assurance décès, incapcité, invalidité, perte d'emploi GAP insurance: covers the difference between an insurance payout in case of complete loss and the outstanding balance on a loan or lease or price of a new car GAP-Deckung garantie perte financière Extended warranty: covers the cost of repair in case of mechanical failure after the factory warranty has expired erweiterte Garantie extension de garantie Finaccord Ltd., 2013 Web: info@finaccord.com 8

9 Creditor, GAP and extended warranties together are worth three quarters of the motor insurance market Value of four products sold through the automotive trade, in GWP and similar revenues (new and in-force business), 2012 EUR billion GAP 4 Creditor 2 0 Motor insurance Others Extended warranties Source: Finaccord Automotive Financial Services Model Finaccord Ltd., 2013 Web: info@finaccord.com 9

10 New business for these four products can exceed 2% of the value of all cars sold by dealers to private customers GWP and similar revenues (new business only) for motor, creditor, GAP insurance and extended warranties as % of value of new and used cars sold by dealers to private customers, 2012 Sweden 2.3% Germany Italy Spain 1.7% 2.0% 1.9% UK 1.4% France 0.9% Ireland 0.2% Source: Finaccord Automotive Financial Services Model 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% Finaccord Ltd., 2013 Web: info@finaccord.com 10

11 But there are major country differences again Negligible creditor insurance in Finland and Romania, and no new business in Ireland and the UK in 2013 No GAP insurance in six countries and negligible GAP insurance in another six Manufacturer brands provide extended warranties internally or through captives half of the time, restricting the market for external providers Finaccord Ltd., 2013 Web:

12 The largest market also uses external underwriters the most Operating models used by car manufacturer brands for extended warranties, selected countries and European average (unweighted), 2013 External underwriter Internal / captive Other Germany Average France Denmark Source: Finaccord Automotive Financial Services Survey 0% 20% 40% 60% 80% 100% Finaccord Ltd., 2013 Web: info@finaccord.com 12

13 Should you sell motor insurance via dealers or manufacturer brands? Product sources used by car dealers for motor insurance, selected countries and European average (unweighted), 2013 Manufacturer / importer Dealer (non-tied) Both Belgium Germany Italy Average Russia 0% 20% 40% 60% 80% 100% Source: Finaccord Automotive Financial Services Survey Finaccord Ltd., 2013 Web: info@finaccord.com 13

14 Should you sell extended warranties via dealers or manufacturer brands? Product sources used by car dealers for extended warranties, selected countries and European average (unweighted), 2013 Manufacturer / importer Dealer (non-tied) Both Turkey Germany Average France Norway 0% 20% 40% 60% 80% 100% Source: Finaccord Automotive Financial Services Survey Finaccord Ltd., 2013 Web: info@finaccord.com 14

15 Distribution through independent finance houses A number of finance houses also distribute motor and GAP insurance plus extended warranties, as well as creditor insurance Germany: BDK and Santander Consumer Bank both have partners for GAP and motor insurance plus extended warranties France: Cetelem, CGI, Financo, GE Money Bank and Viaxel all have partners for GAP insurance and extended warranties Hungary: Erste Bank with Union for motor insurance Portugal: BBVA with MAPFRE for motor insurance Russia: Rusfinance Bank with Société Générale Strakhovanie for GAP insurance UK: Black Horse with Car Care Plan for extended warranties Finaccord Ltd., 2013 Web: info@finaccord.com 15

16 What is the outlook for distributing insurance through the automotive trade? RESULTS OF Q1) AND Q2) DISPLAYED HERE Finaccord Ltd., 2013 Web:

17 The competition from online aggregators Percentage of consumers taking out or renewing motor insurance through online aggregators, average of France, Germany, Italy, Spain and the UK, 2012 (unweighted) 50% 40% 30% 20% 22.4% 10% 6.9% 0% Renewals New buyers and switchers Source: Finaccord Aggregation Metrics Finaccord Ltd., 2013 Web:

18 Additional products in Europe Driver or passenger accident insurance Legal protection insurance Minor damage insurance Tyre insurance Vehicle contents Vehicle running costs insurance Window insurance (in addition to windscreens) Finaccord Ltd., 2013 Web:

19 Additional products in North America Wheel and tyre insurance Multiple levels of extended warranty major items only, e.g. powertrain minor items only, e.g. brake pads, headlamps, belts and hoses Excess wear and tear cover for lease contracts Finaccord Ltd., 2013 Web:

20 Questions for you Q3) Which type of product do you think has potential for growth? [Select all that apply] Cover packaged with motor insurance policies Cover packaged with finance and leasing Separate niche insurance products Finaccord Ltd., 2013 Web:

21 Any questions? Sources and related Finaccord publications: Consumer Automotive Financial Services in Europe Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine and the UK Consumer Automotive Financial Services in Major Global Markets Argentina, Australia, Brazil, Canada, China, India, Indonesia, Japan, Mexico, South Africa; South Korea, Taiwan and Thailand and the US Fleet Insurance and Assistance in Europe Road Assistance in Europe Finaccord Ltd., 2013 Web:

41 T Korea, Rep. 52.3. 42 T Netherlands 51.4. 43 T Japan 51.1. 44 E Bulgaria 51.1. 45 T Argentina 50.8. 46 T Czech Republic 50.4. 47 T Greece 50.

41 T Korea, Rep. 52.3. 42 T Netherlands 51.4. 43 T Japan 51.1. 44 E Bulgaria 51.1. 45 T Argentina 50.8. 46 T Czech Republic 50.4. 47 T Greece 50. Overall Results Climate Change Performance Index 2012 Table 1 Rank Country Score** Partial Score Tendency Trend Level Policy 1* Rank Country Score** Partial Score Tendency Trend Level Policy 21 - Egypt***