Mention insurance to a private banker and the response is often less-than-enthusiastic. Whether because of the stigma associated with insurance products, or strict regulatory barriers that prevent a relationship manager (RM) from directly recommending an insurance solution to a client, the percentage of RMs in Asia that have indeed referred their clients for insurance solutions (and that client has gone on and purchased) is today less than 10%. More specifically, a recent Asian Private Banker survey found that for over 60% of RMs, the proportion of their current clients with life insurance policy holdings is less than 5%.
But times are changing. Against a backdrop of economic uncertainty, muted client activity, compressed private banking margins and an aging wealth pool, momentum is growing in the insurance solutions space.
Indeed, if the ‘traditional’ pillars of a diversified portfolio are equities, bonds, alternatives and cash, then an additional pillar could well be insurance in the sense that it is non-market correlated.
In Asia, the uptick in insurance sales via private banking channel is especially pronounced during 2015.
This year alone, converted private banking referrals for insurance solutions have ballooned by more than 40% in Hong Kong – an astounding figure when considering the relative maturity of Hong Kong’s insurance space. In Singapore, the growth in converted referrals has been more incremental at 8% over the first quarter, due in large part to regulatory hurdles and Indonesia’s tax environment.
These increases – particularly in Hong Kong – have been spurred on by an upsurge in interest among Mainland Chinese who are seeking life insurance solutions that provide some protection amidst persistent market volatility, with Universal Life finding particular favour amongst HNWIs due to the product’s investible savings component and the rising need for legacy planning as first generation entrepreneurs realise the importance of having a well-structured succession plan in place.
In 2015 alone, converted UL referrals from Asia’s private banks to brokers amounted to US$3.75 billion.
As a result, product providers are jostling to take advantage, and private banks are targeting an RM penetration rate of 50%.
No longer is the product space limited to a few major players. Since 2015, stalwarts such as Transamerica Life Bermuda, Sunlife Bermuda and AIA, have been joined by over ten other UL providers in the Hong Kong space alone, including Chubb, AXA and Bank of China Group Life Assurance among others.
Challenges remain, however. Many RMs are conditioned to investors’ typically transactional mindset, and so product pushing remains the mode du jour at the expense of deeper interactions that focus on long-term solutions. More specifically, there is a knowledge deficit (and a stigma) when it comes to insurance products: two-thirds of RMs polled by Asian Private Banker say that they require more detailed product knowledge in order to refer more clients for a life insurance policy. And, ultimately, insurance product is a source of revenue for private banks that are currently struggling to generate sufficient income, particularly when equities sales remain flat.
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