BANCASSURANCE IN EUROPE

Transcription

1 BANCASSURANCE IN EUROPE

2 Also by Tobias C. Hoschka CROSS-BORDER ENTRY IN EUROPEAN RETAIL FINANCIAL SERVICES

3 Bancassurance in Europe Tobias C. Hoschka E. C. Research Fellow University ofoxford MSt. Martin's Press

4 Tobias C. Hoschka 1994 Softcover reprint ofthe hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph ofthis publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1994 by THE MACMILLAN PRESS LTO Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN ISBN (ebook) DOI / First published in the United States of America 1994 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y ISBN Library of Congress Cataloging-in-Publication Data applied for

5 v Contents Acknowledgements List of Tables List of Figures viii ix xi. Introduction 1 Chapter One: Why do Banks enter Insurance? Industry- and Firm-level Incentives 1. Bancassurance: the regulatory environment 7 2. The state of the European banking industry Entry of European banks into insurance: aggregate data Incentives for banks to enter life insurance: industry-level factors Demographic factors Economic environment Changing savings trends Tax treatment of life insurance Insurance penetration and saturation Growth performance of the insurance industry Incentives for banks to enter insurance: firm-level factors Synergy effects: a definition Economies of scale Economies of scope A comparison of synergy effects in life and general insurance Limits to synergy effects and a possible organizational response Conclusions 50 Chapter Two: How do Banks enter Insurance? Comparative Analysis of Entry Strategies 1. Entry strategies into insurance: an overview 56

6 vi 1.1. Strategic issues in financial services: the need for a modified approach Elements of a strategic plan for a bank entering insurance The chosen approach to the case studies De novo entry: starting from scratch TSB: setting a precedence in European bancassurance Credit Agricole's Predica Deutsche Bank's Lebensversicherung Barclays Bank Comparative summary of de novo entry case studies Co-operative distribution alliances: linking distribution channels BNP and UAP Dresdner Bank and Allianz Bank of Scotland and Standard Life Comparative summary of case studies of distribution alliances Joint ventures: sharing risks and profits RBS and Scottish Equitable Commerzbank and DBV Midland Bank and Commercial Union Comparative summary of case studies ofjoint ventures Mergers and acquisitions: integrating banking and insurance organizations Merger or majority acquisition NMB Postbank and Nationale Nederlanden Lloyds and Abbey Life Rabobank and Interpolis ll Comparative summary of case studies of mergers and acquisitions Key success factors for banks entering insurance: lessons from the case studies Pros and cons of alternative entry vehicles: is there an optimal entry route? De novo entry Strategic distribution alliances and joint ventures Mergers and acquisitions 120

7 vii 6.2. Customer segmentation and distribution approach to bancassurance Recognising customer needs for successful segmentation Distributional modes of integrating insurance services into the bank branch Devising an effective incentive structure for bancassurance Payment systems and incentives: a review of the literature Incentive structures in the context of bancassurance Conclusions 137 Bancassurance in Europe: Conclusions and Suggestions for Further Research 143 Bibliography 151 Index 171

8 viii Acknowledgements Undertaking research is never done without the help of others. I would therefore like to thank particularly Bimal Prodhan for many helpful comments and suggestions which have significantly improved this study. I am also very grateful to Ian Kessler and Keith Blois as well as Jacques Girin and Alain Jeunemaitre of the Centre de Recherche en Gestion at Ecole Polytechnique in Paris for hosting me as a visiting scholar and following my research with much interest. Finally, I would like to express my thanks to my editor at Macmillan, Giovanna Davitti, for her comments and assisitance which ensured the successful completion of this book. As part of the study, a range of personal interviews with firm officials was undertaken. These interviews informed both the general sections as well as forming the basis for the case studies. I am therefore very grateful to all those individuals who took the time to participate in the interviews and were helpful in the collection of data and information.

9 ix List of Tables Table 1.1: Regulations concerning distribution of insurance and banking products in the EC, Japan and the US 10 Table 1.2: Regulations concerning start-up and ownership of insurance products in the EC, Japan and the US 12 Table 1.3: Number of Branches in 8 EC countries from 1960 to Table 1.4: Entry activities of the largest 60 EC banks 20 Table 1.5: Tax treatment of life insurance in the EC 33 Table 2.1: Overview of case studies 61 Table 2.2: Contribution of TSB's insurance business to total profits from retail financial services 66 Table 2.3: Summary statistics for Deutsche Bank Lebensversicherung 74 Table 2.4: Profits ofbarclays FinancialServices Division from 1987 to Table 2.5: Summary table of de novo entry case studies; 78

10 x Table 2.6: Summary table of distribution alliances 88 Table 2.7: Summary table of joint ventures 99 Table 2.8: Analysis of profits after tax of Lloyds Abbey Life between 1988 and Table 2.9: Summarytable ofmergersand acquisitions 112

11 xi List of Figures Figure 1.1: Return on assets for commercial banks in the EC, Japan and the US from 1980 to Figure 1.2: Number of inhabitants per bank branch in 1989/90 17 Figure 1.3: Industry-level incentives for banks to enter life insurance 23 Figure 1.4: Population growth rates in the EC countries, Japan and the US from 1950 to Figure 1.5: Age structure of population in the EC between 1960 and Figure 1.6: GDP per capita in EC countries, Japan and the US in Figure 1.7: Inflation rates for EC countries, Japan and the US between 1985 and Figure 1.8: Gross savings rates of private households for 6 EC countries from 1970 to Figure 1.9: Analysis of monetary assets of private households in France from 1980 to

12 xii Figure 1.10: Insurance penetration in EC economies, 35 Japan and US in 1991; Figure 1.11: Average premium growth rates in life and non-life insurance for EC economies, Japan and US from 1986 to Figure 1.12: Examples of organizational structures according to product lines or customer groups 49 Figure 2.1: Alternative entry vehicles for banks entering insurance 59 Figure 2.2: Development of Predica's profits before tax from 1988 to Figure 2.3: New annualised premiums of Black Horse Financial Services and Abbey Life from 1988 to