Distribution Debrief

Transcription

1 Distribution Debrief Insurance Market Update Asia-Pacific October to December 2010 Issue 22 (October to December 2010) Welcome to issue 22 of Distribution Debrief covering the fourth quarter of Kung Hei Fat Choi / Gong Xi Fa Cai to all our readers! As we publish this edition we are entering the Year of the Rabbit, and have seen some turbulent times in a number of countries around the world. We wish you all a peaceful and prosperous year For a number of years Agency has been the dominant distribution channel across Asia with Alternative Distribution an oft used term for insurers other channels. The last quarter has seen Bancassurance consolidate a solid position in a number of markets and Agency volumes slip, to the extent we may need to start asking ourselves, What IS Alternative Distribution? We aim to keep a close eye on this trend and are working with some of our clients to help them understand the implications for their Distribution and Business strategies. In Issue 21 we talked of increasing deployment of IT to enable direct customer interaction, particularly with iphone and ipad Applications. AXA s Empower ME App in Hong Kong provides the user with information and statistics to help them make informed decisions about a range of financial need areas, taking Point of sale Sales Aids onto the iphone platform. The fourth quarter of 2010 saw more launches of Direct online insurance in Singapore there are now 6 providers. ING s Financial Intelligence programme, Be Good at Money, is generating customer data to help the client with assessing their financial status and the insurer with deeper insights into customer psyche. Are we seeing the beginnings of a seismic shift in the use of technology at the front end? Are insurers capabilities more reflective Generation Y s high comfort levels with technology? Well, perhaps it is a bit early to really say, but the trend is certainly interesting promises to be another challenging year in our industry. The effects of recent regulatory developments and interventions, with the possibility of more to come, will certainly start to be felt more as the year unfolds. Consumer, and insurer, confidence is on the rise. Business volumes are looking more healthy than a couple of years ago. In this issue Markets China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand Vietnam Topic covered Contact details We are excited by these challenges and very much look forward to meeting them head on. We hope you continue to find the newsletter interesting and informative. We would particularly like to receive your feedback on how we can improve this document over time to increase its value to you. Steve Kean Director Products, Distribution and Markets, Asia-Pacific Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 1

2 China Business written by insurance intermediaries (including individual agents, agency companies, brokers, banks, and postal offices) reached RMB923.3 billion (USD139.6 billion) for the nine months ended 30 September 2010, up 27% compared with the corresponding period in This represented 82% of gross written premiums collected nationwide. The number of insurance agents reached 3,146,450 by the end of the third quarter in 2010, up 122,838 compared with the end of the second quarter. Gross premium income generated by agents reached RMB386.2 billion (USD58.4 billion) by the end of third quarter in 2010, an increase of 9% compared with the same period of 2009, accounting for 34% of total premium income. This included RMB279.8 billion (USD42.3 billion) of life premium income and RMB106.4 billion (USD16.1 billion) of non-life premium income, accounting for 37% and 36% of national life and non-life premium in the same period respectively. The premium income from insurance brokers reached RMB22.4 billion (USD3.4 billion) by the end of the third quarter, up 34% compared with the corresponding period of 2009, accounting for 2% of total premium. Life business contributed RMB2.6 billion (USD393 million), non-life RMB19.3 billion (USD2.9 billion) and reinsurance the remaining RMB0.5 billion (USD75.6 Million). The latest approvals for the opening of new provincial/city branches for both domestic and foreign companies are as follows: Life and health insurance companies Aviva COFCO AXA-Minmetals Cathay Life CIGNA CMC Life Huatai Life Manulife Sinochem Shin Kong & HNA Life Sino US MetLife Skandia-Guodian Life Branch Henan Zhejiang Tianjin Guangdong Hunan Xiamen Hainan Beijing Chongqing Insurance agents generated total commissions of RMB52.4 billion (USD7.9 billion) in the three quarters of 2010, an increase of 18% from the same period in Life agents generated RMB43.1 billion (USD6.5 billion) and non-life agents generated RMB9.3 billion (USD1.4 billion). General insurance companies Cathay Property and Casualty Chubb Property and Casualty Generali Property and Casualty Branch Guangdong Jiangsu Shanghai The number of bank branches and postal offices selling bancassurance products reached 137,315 by the end of the third quarter of 2010, up 30,686 compared with the end of second quarter of This included 108,895 bank branches (up 22,267 branches) and 28,420 postal offices (up 8,419 branches). By the end of September 2010, total premium income from bancassurance (including products sold via bank counters and postal offices) stood at RMB391.9 billion (USD59.3 billion), up 41% compared with the same period of 2009, accounting for 35% of premium income. This included RMB320.2 billion (USD48.4 billion) from bank branches and RMB71.6 billion (USD10.8 billion) from postal offices. The remainder of the business is sold through other channels such as auto dealers, airline counters and at railway stations. Agency companies generated total premium income of RMB35.7 billion (USD5.4 billion) by the end of the third quarter, up 52% compared with the corresponding period last year. Life business accounted for 29% and non-life the remaining 71%. ICBC has confirmed it will invest RMB1.2 billion (USD181 million) into AXA-Minmetals Life, taking a stake in the company, while shareholdings of existing shareholders AXA and Minmetals are to reduce to 27.5% and 12.5% respectively. CNInsure Inc. has signed a strategic partnership agreement with China Continent P&C Insurance. Pursuant to the agreement, both parties will work closely on product distribution, development of customised products, data sharing as well as outsourcing of claims adjusting services. China Guodian Corporation and another four companies are preparing to set up Changjiang Property and Casualty Insurance. China Guodian Corporation will be the majority shareholder with about of capital. China Life has signed a comprehensive strategic cooperative agreement with Beijing Municipal Government to take part in the social development of the capital city. China Life has also signed a strategic cooperative agreement with China Unicom to further expand the finance and insurance business in the fields of communications and e-commerce. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 2

3 In order to develop group life insurance solutions for multinational corporation employees in the China Swiss Life global employee benefit network, China Life has signed an agreement with Swiss Life. Fubon Life Insurance Company Limited, a subsidiary of Taiwan's Fubon Financial Holding and Nanjing Zijin Investment Holdings Co., Ltd. signed an agreement to build a joint venture life insurance company, headquartered in Nanjing and is reported to invest RMB800 million (USD120 million). Huahui Life Insurance has been approved by the CIRC with registered capital of RMB1.5 billion (USD227 million). It is funded by 6 domestic companies including Shenyang Coal Trade Group Corporation. The company will be based in Shenyang. Shandong International Trust and Investment Corporation and German ERGO Insurance Group initiated a joint venture life insurance company. The venture will be headquartered in Jinan of Shandong Province. Hang Seng Bank has indicated that it is looking for a partner to enter the insurance, asset management and securities industries. The talks between Standard Life and Bank of China ( BoC ) have broken down. Under the proposed deal with BoC, Standard Life s current 5 stake in joint venture Heng An Standard Life would have reduced to 25%. Ming An Insurance has been bought by six companies for RMB1.54 billion (USD233 million). The buyers include Meilan International Airport Co., Ltd. The seller, Tai Ping Group, booked over RMB900 million (USD136 million) on the deal. New China Life has signed a strategic cooperation agreement with Taiwan MJ Health Management International Holding Company to develop comprehensive health and insurance cross-industry cooperation. In the next three years, they plan to jointly establish 34 health management centers and the investment is expected to exceed RMB1.5 billion (USD227 million). China Construction Bank has increased its shareholding of Pacific Antai from 5 to 51% following the sale of CPIC s shareholding. China Life (Taiwan) holds 19.9% of the company s shares, with the rest of the shares held buy domestic companies. It is also reported that the company will change its name to CCB Principal Life Insurance. Sunshine Life has signed a comprehensive business cooperation agreement with China Postal Savings Bank. Regulators to further strengthen compliant sales and risk management of bancassurance business for commercial banks. Recently CBRC issued a notice on further strengthening compliant sales and the risk management of bancassurance business to more effectively protect the interests of bank customers. The main focus of the notice is summarised below (some of these were covered in our previous Newsletter): Commercial banks should conduct bancassurance operations on a transparent, fair and unbiased basis, so as to fully protect customers rights and interests. They should fully inform customers of the characteristics, attributes and risks regarding the insurance products and may not mislead the customer. Banks should not misleadingly sell products by means of prize giving, lucky draws, rebates, or giveaways of material objects or insurance policies. Commercial banks should not mix insurance products with saving products, funds, and wealth management products, they should simply compare the return on insurance products to the above mentioned products, they should not overstate the returns on insurance products. The notice also stresses that commercial banks should offer risk alerts by means of risk assessment, fitness evaluation, copying statements of risk alerts, and issuing risk notices, so that suitable products are sold to suitable customers. In principle, each outlet of a commercial bank could only sell insurance products of up to three insurance companies. If more than three companies are represented the outlet should adhere to prudential operations and report to the CBRC local bureau. Commercial banks should only be involved in bancassurance operations that are commensurate with the banks own resources and capabilities instead of beyond their own capabilities. The notice states that only banks staff with appropriate qualifications required for insurance agents can promote insurance products at banks outlets and banks should not allow salespeople from insurance companies to promote insurance products in the bank s outlets. CIRC introduced rules to strictly regulate incentive plans for insurance intermediaries: Insurance intermediaries can only offer equity incentives plans to sales employees who have worked at the current company for over two consecutive years. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 3

4 The equity incentive plan should not have any deceptive and misleading information, including exaggerating or promising some future expected returns, such as possible IPO. The plan should not lure salespeople to purchase additional insurance, or offer clients stocks or inappropriate benefits. CIRC further regulate the telemarketing and phone interview process in the life insurance industry. Insurance companies should conduct telemarketing insurance business strictly following CIRC regulations. Without prior approval, no agencies or individuals should conduct any telemarketing business. Insurance companies should choose one specific unified telemarketing number for all regions and cities by June Insurance companies and agencies should conduct telemarketing according to a strict control system for contact lists and should not call customers who have opted to be on a Do Not Call list. Insurance companies should strengthen telemarketing and phone interview management, set up clearly defined internal control systems, prevent the leaking of client s personal information to, and telemarketing by, other distribution channels. Hong Kong Based on the latest statistics from the Office of the Commissioner of Insurance (OCI) for 2010 Q3, the market share of the predominantly bancassurance companies (BOC Group Life, China Life, Hang Seng Life, HSBC Life) increased to 52% in 2010 Q3 (up from 47% in 2010 Q2) based on weighted new business premium. This is mainly due to a pick-up in non-linked sales from BOC Group Life and Hang Seng Life. In 2010 Q3, HSBC Life remained the top player, capturing 21% share of the market and dominating the linked business with 47% market share. BOC regained significant market share in 2010 Q3 from substantial non-linked sales and was ranked 2nd. China Life, with a significant reduction in non-linked business, dropped out of the top-five. On the distribution front, many of the major insurers are moving from brand awareness campaigns to thoughtprovoking advertising campaign, emphasizing the importance of good financial planning. Following on from Prudential s What s your number iphone application, AXA has recently launched its Empower Me iphone application. ING s Be good at Money campaign is also rolling out across Hong Kong. Hong Kong Market share of top five insurers in terms of weighted new business premium (2009 Q Q3) HKD4,565 m HKD5,698 m HKD7,254 m HKD7,736 m HKD8,419 m HKD7,856 m HKD9,083 m 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 AIA AXA Prudential (UK) HSBC BOC Others Source: Office of the Commissioner of Insurance (OCI) ACE has agreed to buy New York Life Insurance's Hong Kong and South Korean life operations for about USD425 million in cash. AIA launched its IPO in October and raised US$17.8 billion. Its parent company, AIG, plans to use some of the proceeds to pay part of the bailout from the US government. AXA China Region has just released an iphone Application "Empower me", a calculator that helps estimate the amount needed to achieve various financial milestones at different life stages. In addition, the application also broadcasts interview clips with some Hong Kong celebrities' wealth management experience. The application is available in Mandarin and English. ING has extended its global advertising campaign of "Be Good at Money" to pedestrian districts, targeting local clients in Hong Kong. This extension aims to reinforce ING's customer-focused initiative and its commitment to making finance easier for clients. Prudential started a brand campaign in Hong Kong and will be rolling it out across Asia over the coming year. The theme is built upon the company's "Always Listening Always Understanding", focusing on the importance of listening. Prudential Hong Kong has entered into an agreement with Citibank Hong Kong to form a new bancassurance platform. Citibank will act as general insurance agent to offer a comprehensive general insurance product line including personal accident & health protection and property & leisure insurance. Citibank customers can access these products from branches, via phone and online. The initial product set is the WeCare Health Series which provides health care protection needs. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 4

5 The Insurance industry expressed its views opposing the government's plan to set up an independent insurance authority which would not have jurisdiction over insurance business conducted by banks. The consensus indicates that all customers should receive the same level of protection regardless of distribution channel. India According to a recent survey, Indians have better financial literacy levels than most others globally, and they rank second out of 10 leading nations in having a basic financial literacy level (55%), just behind the Japanese. The survey titled ING Consumer Resourcefulness Survey was said to have been carried out amongst 5,000 consumers across ten major nations including USA, Japan, Korea, Mexico and India. The survey shows that a whopping 84% of Indians prefer buying life insurance products as compared to 54% globally. India Distribution mix of the Individual New business ( ) (figure in %) India Distribution mix of the Individual New business of the top 5 private companies and LIC ( ) ,214 Crore Rupee 4,495 Crore Rupee 3,885 Crore Rupee 3,389 Crore Rupee 2,754 Crore Rupee 50,414 Crore Rupee ICICI Prudential SBI Life Bajaj Allianz Reliance Life HDCF Standard LIC Individual Agent Corporate Agent -Bank Corporate Agent -Others Broker Direct Selling Source: Annual report of Insurance Regulatory and Development Authority (IRDA) India Distribution mix of the Group New business of the top 5 players ( ) ,545 Crore Rupee 1,121 Crore Rupee 672 Crore Rupee 566 Crore Rupee 532 Crore Rupee 21,061 Crore Rupee SBI Life ICICI Prudential Birla Sun Life Bajaj Allianz Reliance Life LIC Individual Agent Corporate Agent -Bank Corporate Agent -Others Broker Direct Selling Private LIC Industry Total Individual Agent Corporate Agent -Bank Corporate Agent -Others Broker Direct Selling Source: Annual report of Insurance Regulatory and Development Authority (IRDA) India Distribution mix of the Group New business ( ) (figure in %) Private LIC Industry Total Individual Agent Corporate Agent -Bank Corporate Agent -Others Broker Direct Selling Source: Annual report of Insurance Regulatory and Development Authority (IRDA) Source: Annual report of Insurance Regulatory and Development Authority (IRDA) Following the regulatory initiatives to rein in the cost structure, several life insurance companies have decided to close down unviable branches. Data released by the Life Insurance Council indicate that the number of branches of private life insurers have gone down by 160 in the first six months of the current fiscal. While companies have pruned the number of employees by nearly 6,000, there was a drastic reduction in the agency force by 156,000 during the period. Clearly the urgency to revamp distribution is felt across companies. Aviva Life and Hyderabad-based Basix Group have renewed their existing contract to provide micro-insurance cover to customers of the latter till October Meanwhile, there are reports that Aviva Life has been slapped by a consumer forum with a fine of INR10,000 (USD220) for not refunding the premium amount to a customer within the free look period when demanded. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 5

6 Recognising the customer behaviour that life insurance buying is largely driven by tax considerations, Bajaj Allianz Life has launched an instant tax-calculator for mobile phones that will enable users to calculate their tax liability using their mobile handsets. Meanwhile, the company has signed an MoU with Punjab and Sind Bank to market its low cost insurance products to rural mass markets and economically weaker sections of the country through the bank s branches. It is also reported that Bajaj Allianz Life may terminate its partnership with SKS microfinance, a leading micro finance lending agency, which has been hit recently by large-scale defaults by micro loan borrowers. Cholamandalam MS General Insurance has launched an e-policy system which will enable its intermediaries, bancassurance partners and customers to access the list of all the policies generated online. All transactions will be real time and will be backed by secured channels. According to reports, Future Generali Life which principally employs mallassurance for distribution of its products, has registered an increase of 23%, month-on-month, in terms of lives covered and 25%, year-on-year, in terms of premium collection. There are also high profile marketing and branding initiatives by various life companies in their efforts to broaden the distribution reach. ICICI Prudential Life has appointed the film celebrity Amitabh Bachchan as its brand ambassador. The company has launched a set of television commercials involving the artiste to promote various life insurance plans. IFFCO Tokio General Insurance is planning to focus on rural and semi urban areas by setting up Bima Kendras or insurance support and service centres with the help of 36,000 farmers cooperative societies of its local partner, IFFCO. Meanwhile, there are also reports of selective expansion of sales force. ING Vysya Life has added 400 sales managers in the last four months and has plans to add another 600 by March Following the lead by a few other companies, Kotak Life has launched online sales of a term insurance product. Insurers are now recognising the role of the internet channel as a tool to cut costs of distributor s commission. Mirroring its pan India expansion plan, the newly licensed L&T General Insurance Company has opened its first branch in Odisha, a key market in the eastern region. The insurer plans to expand its business and hopes to break even over a period of 5 to 7 years. MetLife has signed a memorandum of Understanding with the United Bank of India, under which it will offer credit insurance coverage to the latter s micro, small and medium enterprises ( MSME ) customers. United Bank of India has a corporate agency arrangement with Tata AIG Life for distribution of its products. The Tiruchi Circle in Tamil Nadu of Punjab National Bank is reported to have sold over 2,200 health insurance (mediclaim) policies of Oriental Insurance and occupied second place amongst the different circles of the bank, further increasing the profile of bancassurance within the bank. SBI Life has entered into an agreement with AP Online, a joint venture between Tata Consultancy Services and Andhra Pradesh government, for facilitating renewal premium payment by its customers through the 1,500 franchises of AP Online across the state of Andhra Pradesh. Star Union Dai-ichi Life has arranged with its equity partner Union Bank of India to establish a nation-wide distribution channel for its new product, Reverse Mortgage Loan-enabled Annuity Plan. The plan is targeted at senior citizens to raise mortgage loan from the Union Bank and simultaneously purchase a life annuity from the insurer. United India Insurance and the LIC Housing Finance Limited Financial Services, a fully-owned subsidiary of LIC Housing Finance, have entered into an agreement under which the former will distribute the latter's non-life products. United India will facilitate training, capacity building and technical expertise. In a bid to encourage life insurance companies to build a loyal agency force, the regulator is proposing to allow insurers to offer subsidised group life insurance cover to their agents. As per the current norms, no private insurer is allowed to offer group insurance cover to its own agents. Reportedly, under the structure proposed, a health cover of up to INR200,000 (USD4,391) and a term cover of up to INR300,000 (USD6,586) can be offered to agents who have completed over five years, at nominal premiums. Recognising the importance of distribution and the need for providing proper incentive to this activity, the Pension Fund Development and Regulatory Authority has recently raised the monetary incentive to distributors authorised to market the low cost New Pension Scheme ( NPS ). The fee paid to Points of Presence for enrolling each subscriber has been raised from INR50 (USD1) per subscriber to INR150 (USD3). The NPS was thrown open for subscription by general public in May 2009, and it is said to have so far attracted only about 10,000 subscribers. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 6

7 Indonesia Prudential retained its number one ranking, based on weighted new business premium. Allianz Life Indonesia has broken into the top-five insurers list with a significant increase in traditional product sales in the third quarter of 2010, overtaking Bumiputera, Sinarmas Life and Mega Life. AXA Mandiri Financial Services ranks in 4 th place. Indonesia Market share of top five life insurers in terms of weighted new business premium ( Q3 YTD) Rup 22,733 billion Rup 11,664 billion Rup 13,155 billion Rup 13,501 billion Q3 YTD Prudential Life Assurance Allianz Life Indonesia Bumiputera 1912 Axa Mandiri Financial Services Sinarmas Life Others Source: AAJI Allianz Indonesia is to expand its microinsurance products to rural areas by cooperating with partners such as rural banks, cooperatives and other micro finance institutions. Great Eastern Takaful, which is owned by a subsidiary of Singapore s Great Eastern Holdings Limited and Malaysia s armed forces cooperative, plans to enter the Takaful market in Indonesia in Manulife Indonesia plans to further develop the domestic insurance sector by forming a new direct marketing partnership with Macquarie Precision Marketing, a wholly owned subsidiary of the Australian financial institution Macquarie Group. Meiji Yasuda, the first Japanese life insurance company to enter the Indonesian market, has invested Rup100 billion (USD 2 billion) to acquire 5% stake of PT Avrist Assurance. The Capital Market and Financial Institution Supervisory Agency will revoke the working license of troubled insurance firm Asuransi Jiwa Bakrie after it completes its obligations to customers. Zurich Insurance Company Ltd has acquired 8 of PT Mayapada Life from Mayapada Group, which continues to have stake of the company. Bank Indonesia issued a Circular Letter No: 12/35/DPNP in an attempt to mitigate the risk of rampant products in bancassurance. It imposed the application of risk management by banks to protect customers' interests. Indonesian legislators have agreed to set up a new supervisory body for insurance, banking and other financial services. They decided that a board of commissioners for the new body would be vested with full powers by 1 January Malaysia Prudential regained the first place in terms of weighted new business premium in 2010 Q3. ING has gradually increased its market share, and was ranked in 2 nd place in 2010 Q3. Hong Leong Assurance has recovered its market share from the previous quarter and entered the top 5 insurers list in 2010 Q3. Mayban Life, one of the major players in 2010 Q2, has suffered a drop in market share to 9 th place from 5 th place. Malaysia Market share of top five life insurers in terms of weighted new business premium ( Q3) MYR2,899m MYR2,974m MYR3,664m MYR909m MYR1,008m MYR1,059m Q1 2010Q2 2010Q3 Prudential ING Great Eastern AIA Hong Leong Assurance Others Source: Life Insurance Association of Malaysia (LIAM) ACE, a US-based property and casualty insurer, has announced it is to buy Jerneh Insurance for MYR654 million (USD212 million) from Jerneh Asia and Paramount Corp, owning 8 and of the non-life insurance company respectively. The transaction is expected to close during the fourth quarter of Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 7

8 Alliance Bank Malaysia Bhd has entered into an agreement with American International Assurance Bhd to set up a joint-venture company, AIA AFG Takaful Bhd, which is expected to be in operation in the first quarter of Allianz Malaysia Bhd has received approval from Bank Negara Malaysia to commence negotiation with MNRB Holdings Bhd on the proposed acquisition of equity interest in Takaful Ikhlas Sdn Bhd. AXA Affin General Insurance Bhd will merge with BH Insurance Malaysia Bhd and operate as one entity starting January Best Re, a global syariah compliant reinsurance group, has invested MYR480 million (USD156 million) in Labuan in a bid to strengthen the country s position as an Islamic financial hub. Fairfax Financial Holdings Ltd. has reached a share purchase agreement with PacificMas Bhd., to acquire its entire stake in Pacific Insurance Bhd. in Malaysia for about USD64 million. Great Eastern Holdings Ltd plans to recruit more Bumiputera agents to further strengthen its agency infrastructure, especially in takaful services. Great Eastern Takaful Sdn Bhd (GETSB), a joint venture company between I-Great Capital Holdings Sdn Bhd, and Koperasi Angkatan Tentera Berhad, is to adopt a "Takaful for All" approach and provide comprehensive Takaful products and services for all Malaysians, including both Muslims and non-muslims. ING Insurance Bhd and Public Bank Bhd are to set up a joint-venture company for family takaful business in MAA Holdings Bhd. is reported to be in discussion with Zurich Insurance Co. Ltd. on the acquisition of its wholly owned non-life subsidiary, Malaysian Assurance Alliance Bhd. Prudential BSN Takaful Bhd has launched the PruBSN Ummah, a unique Family Takaful plan, designed to help Muslims follow their religious observances and at the same time provide them with saving and protection. Tokio Marine Life Insurance Bhd expects to secure MYR20 million (USD6.5 million) in sales from its new Opt- Income policy. XL Insurance Company has been granted a licence by the Malaysian Federal Territory of Labuan to underwrite business in and through the Labuan insurance market. The licence will enable XL Insurance to better serve its customers in the areas of property, construction, energy, casualty, specialty, and professional lines insurance. No news in this quarter. Philippines Philippine Life Insurers Association reported that it expects premium sales growth of 10-15% for The low insurance penetration rate of 14% is expected to improve through the joint public-private initiative offering of micro-insurance policies. Munich Re AG has launched a micro-insurance policy to protect cooperatives from extreme weather losses. No news in this quarter. Singapore Bancassurance showed strong growth in 2010 Q3, capturing almost one third of the market, measured by weighted new business. The tied agency channel continues to be the dominant channel with half of the market. Historically strong players such as Great Eastern Life has reported about a 10 increase, and NTUC Income has reported a 20 increase through its bank distribution in relative to 2010 Q2. HSBC Insurance s bancassurance channel accounts for more than 7 of total new business in 2010 Q3. Singapore Quarter-on-Quarter Weighted new business premiums by Distribution Channels (2009Q1 2010Q3) SGD237 m SGD324 m SGD444 m SGD559 m SGD388 m SGD393 m SGD473 m 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 Tied Agents Bank Distribution Financial Advisers Others Source: Life Insurance Association Singapore (LIA) Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 8

9 NTUC Income has overtaken Prudential (UK) and was ranked 1 st place in terms of weighted new business premium in 2010 Q3. Great Eastern took 2 nd place and has also reported a significant profit increase compared to the same period last year. Prudential (UK) saw its market share slip and was ranked 3 rd. AIA retained its 4 th position from 2010 Q2. Aviva has broken into the top 5, edging out Swiss Life. Singapore Market share of top five life insurers in terms of weighted new business premium (2009 Q Q3) SGD237 m SGD324 m SGD444 m SGD559 m SGD388 m SGD393 m SGD473 m 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 N Income GE Life Prudential AIA Aviva Others Source: Life Insurance Association Singapore (LIA) The Life Insurance Association (LIA) reported that the there is still potential for growth in the life insurance market, as the penetration rate was 5.1% in 2009, behind Taiwan (13.8%) and Hong Kong (9.6%). The government advocated life insurers to push the more affordable term or pure protection plans. The Life Insurance Association implemented a three-month public education programme with a focus on fact-finding before choosing a life insurance plan. It aims to promote financial health by radio campaign, online information and seminars. CompareXpress (launched in October) and Insure2give (launched in December) bring to 6 the number of online insurance providers. We previously reported on DirectAsia s launch, the other providers are Aviva, GE and NTUC Income. Great Eastern Life has launched a new endowment product Endowment 5 Plus. It is a 5-year premium term and 15-year benefit term product with an option to encash or to accumulate the annual payouts. The annual payout includes guaranteed cash and cash bonus. HSBC Insurance has signed a Memorandum of Understanding with Singapore Islamic Scholars and Religious Teachers Association to provide training to religious teachers to be certified as financial planners, enabling them to offer professional advice on takaful products. Tokio Marine Life plans to increase its agency force from its current 100 agents to 500 in three years as Tokio Marine Group has chosen Singapore as its regional base for expansion. Monetary Authority of Singapore (MAS) plans to set up an online registry for the public to check the status of any investment advisers. The financial advisers belonging to financial advisory firms would no longer require licensing. The industry has expressed concerns that this move may erode professional standards, particularly within the smaller financial advisory firms. South Korea Bacassurance remained the dominant channel in 2010 Q2, capturing 68% of the unweighted new business premium. The Solicitor, Agency and Direct channels contributed 23%, 7% and 1% respectively. The top 3 players, Samsung, Kyobo and Korea Life, continued to generate the majority of their new business from the Solicitor channel in 2010 Q2. Smaller foreign players like Prudential and New York Life, relied on the Solicitor channel. South Korea Unweighted new business premiums of General Account by Distribution Channel ( Q2) KRW 4,319 billion KRW 3,757 billion KRW 5,695 billion KRW 1,710 billion KRW 1,835 billion Q1 2010Q2 * Financial Year starts at Apr Bancassurance Solicitor Agencies Direction Source: Korea Life Insurance Association (KLIA) Samsung retained its position as the top player. The 2 nd place has always a tough competition between Kyobo and Korea Life. In 2010 Q2, Korea Life ranked second, followed by Kyobo. Shinhan s performance fell from 4 th place to 12 th place. Allianz took 4 th place by achieving similar sales volumes to 2010 Q1. Cardif improved its position to break into the top 5 insurers in Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 9

10 South Korea Market share of top five life insurers in terms of unweighted new business ( Q2) KRW 10,748 billion KRW 6,738 billion KRW 9,685 billion KRW 2,440 billion KRW 2,526 billion Allianz Taiwan Life s market share has decreased from 2010 Q2, and its ranking has consequently fallen from 6 th position to the 8 th position, in terms of unweighted new business premium. Taiwan Market share of top five life insurers in terms of unweighted new business ( Q3) Q1 2010Q2 * Financial Year starts at Apr Samsung Korea Kyobo Allianz Cardif Others TWD 752 billion TWD 855 billion TWD 925 billion TWD 275 billion TWD 300 billion TWD 332 billion Source: Korea Life Insurance Association (KLIA) Q1 2010Q2 2010Q3 Fubon Life Cathay Life Shin Kong Life BNP Paribus TCB Life China Life Others ACE Ltd has acquired New York Life s business insurance to expand its business in property and casualty insurance operations. Samsung Life Insurance, the largest insurer in Korea, announced that it is retooling its international business in a bid to bolster its presence abroad. The Korea-U.S. Free Trade Agreement will open up market opportunities for U.S. insurance companies to seek life and non-life business development in South Korea, where foreign insurers still have a small market share. South Korea is one of the top 10 insurance markets in the world, but foreign market share only stands at 3%. Taiwan Cathay Life and Fubon, equipped with strong agency networks and bancassurance partnerships, continued to dominate the life industry with a combined market share of around 56%, based on unweighted new business premium, in 2010 Q3. Fubon, now including ING Antai, has overtaken Cathay. Due to intense competition, Chungwa Post lost ground to relatively new players such as Cardif (ranked 6th) and BNP Paribus TCB Life (ranked 4th) and has dropped from 5 th place to 9 th place from 2010 Q2. BNP Paribus TCB Life, a new player in 2010 has positioned well with its strong banking network and marketing strategy, reaching the top 5 in less than a year. Source: Taiwan Insurance Institute (TII) ACE, a Swiss based insurer, is in discussions with New York Life regarding acquiring the latter s Taiwan business. Aviva announced that it will withdraw from the Taiwanese insurance market, due to difficulty in meeting the group's financial target. Mass Mutual has planned to dispose its 39% stake in the joint-venture, MassMutual Mercuries for approximately USD97 million, due to disagreement with its partner over listing the venture. AIG has agreed to sell Nan Shan Life to Ruen Chen Investment Holding, a local consortium owned by Ruentex Group, for USD2.16 billion. The Financial Supervisory Commission (FSC) issued five guidelines to be followed for the second-round bidding of AIG's Nan Shan Life. These five guidelines are: 1. promise to protect the rights and benefits of policyholders; 2. must abide by Taiwan law when raising funds for acquisition; 3. have the ability to run an insurance company; 4. have the commitment to operate Nan Shan Life in the long term; 5. have the ability to raise funds in the future to run Nan Shan Life. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 10

11 Financial Supervisory Commission (FSC) recently allowed the life insurers who sell foreign-currency insurance policies to raise overseas investment. As a result, 10 domestic life insurers are able to increase TWD50 billion (USD1.7 billion) in overseas investments. The regulator announced that any buyer of domestic insurance company, with more than 5 stake, must have the ability to fund the business for the next 10 years. Thailand No news in this quarter. Manulife Insurance expects first-year premiums and asset management to help drive its growth to 20-3 next year amid continued improvements in the economy and politics. Sompo Japan Insurance Co and Deves Insurance Co, the non-life insurers, have reached agreement to cooperate in designing joint products and using each other s network for distribution. Thai Life Insurance Co, Thailand s second-largest life insurer, is reported to have discussed with 2 medium-size banks to sell its insurance products, in order to accelerate its bancassurance business. Tokio Marine Life Insurance, the Thai operation of the largest Japanese insurer, has planned to expand its agency force and branch network in the pension business to cater to the growing aging population. The Revenue Department announced that a new law on tax deduction for buying pension policies is expected to be enacted in Vietnam The life insurance market in Vietnam saw robust growth of more than 25% in the first nine months of the year. Prudential and Bao Viet Life remain 1 st and 2 nd places respectively, in terms of unweighted new business premium. Dai-ichi Life has grown significantly, reaching 3 rd place from 6 th place, overtaking AIA and Manulife. ACE's market share dropped by 2% in 2010 Q3 and they dropped out of the top-five list in a highly competitive Vietnamese insurance market. Vietnam Market Share of top five life insurers in terms of unweighted new business premiums (2009Q Q3) VND 464 billionvnd 749 billionvnd 796 billion VND 912 billion VND 664 billionvnd 879 billion VND 934 billion Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 Prudential Bảo Việt Life Dai-ichi Life Manulife AIA Others Source: Association of Vietnamese Insurers Cathay Financial Holding, the largest listed financial holding company in Taiwan by asset, has received approval from the regulator to set up a property insurance unit in Vietnam. Fubon Life has announced that its fully owned unit in Vietnam, Fubon Vietnam Life Insurance Ltd Co. is expected to start operations in 2011 Q1. Generali, the Italian insurer, has received a preliminary licence to run life insurance operation in Vietnam. The Vietnam unit, wholly owned by Generali, is expected to start operations in 2011 Q1 and to be headquartered in Ho Chi Minh City. The Government has approved the administrative procedure simplification plan of the Vietnam Social Insurance (VSI). As a result, many of the improper procedures of the VSI were abolished. Vietnam's Ministry of Finance has finished drafting the amendments and supplements to the Business Insurance Law which was submitted to the National Assembly for approval. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 11

12 Contact details Towers Watson s Products, Distribution & Markets team is based in Hong Kong and Singapore. Please contact either of the consultants listed below if you need more information about our services. Steve Kean [email protected] Stephen Cotham [email protected] Hong Kong Suites , Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) Fax: (852) Singapore 135 Cecil Street #09-01 Singapore Tel: (65) Fax: (65) Distribution Debrief has been prepared by Towers Watson for general information purposes only and does not constitute professional advice. The information, opinions and projections contained in this Newsletter are derived from various sources and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals. Errors and omissions excepted. Currency rates as at 31 December Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson covers the length and breadth of India and operates from five offices in four cities. Copyright 2010 Towers Watson. All rights reserved. towerswatson.com 12