Though the bancassurance business model that is common in Europe never caught fire in the United States as analysts had expected in the late 1990s, insurers such as AIG and MetLife say they are making a variation of it work in the Far East.
American International Group Inc. says it has a 26.4% share of insurance product sales in Japan and distributes through 95% of the country's banks. MetLife Inc., though much smaller, more than doubled its shares of premiums sold in Korea and China during 2005. The companies depart from the European model in that they do not own the banks doing the distributing.
Bancassurance is a one-stop-shopping model under which "banker" and "insurer" become synonymous for customers who can meet all their financial services needs in one place.
"Bancassurance is just a natural fit in the Asian markets," said Stephan Rajotte, the managing director of MetLife International's Asia-Pacific region. "Traditionally, insurance companies sell through agents - and those agents only have access to a certain number of people - but everyone goes to banks."
Tetsu Hirano, the executive officer of asset management operations and bancassurance for AIG East Asia Holdings Management Inc., said banks are the best portal for distribution in Asia, especially in Japan.
"Japanese individual assets tend to remain in bank deposits, so banks have a huge opportunity to offer additional products and services to individual clients," he said. "This presents a real opportunity for banks in Asia. In the U.S., other broker-dealers and other financial companies have access to individuals, but banks are the first channel in Japan."
Mr. Rajotte said bancassurance is still a relatively new concept in Asia.
MetLife has had a presence in Korea and Taiwan since 1989, Hong Kong since 1992, and China's capital, Beijing, since 2004, he said. The company gained access to Japan and Australia last July when it bought Traveler's Life and Annuity from Citigroup Inc. MetLife only began distributing through banks in Hong Kong six or seven years ago, he said, and in Korea and Taiwan in September 2004.
AIG began distributing through Japanese banks in October 2002, Mr. Hirano said.
In 2001, 95% of MetLife's insurance distribution in Asia was through agents and 5% through banks and telemarketing. Today, 75% of its business is through agents, 20% through banks, and 5% through telemarketing.
"I see that growing much more, no question about it," Mr. Rajotte said. "In the next five years, I could see business through nonagency channels could be 50-50. I could see bancassurance accounting for 40% to 50% of our total business in Asia."
MetLife's effort has grown fastest in Korea, where its share of the channel reached 9% at Dec. 31, up from 3.7% at the end of 2004. His company continues to trail AIG, however, Mr. Rajotte said.
"They are doing very well in bancassurance," he said. "That is one company that is always a strong competitor in the Asian market." Mr. Hirano said AIG sells its products in 95% of Japan's 125 banks and has increased its share quickly in the past three and a half years.
Mr. Rajotte said the model has succeeded in Asia, by contrast with the United States, because Asian agents lack the stranglehold on the industry that those in the United States enjoy. "The agency sales force in the U.S. is almost like a union," he said. "They have slowed bancassurance development in the U.S. in a big way. That hasn't happened" in Asia.
Though Americans are besieged by mutual fund companies, insurers, and other financial institutions fighting for their business, he said, Asians have a strong affinity for their banks. Analysts agreed that banks are more dominant financial services distributors in Europe and Asia than in the United States.
"Banks essentially control most distribution of financial services overseas," said Kenneth Kehrer, the president of Kenneth Kehrer Associates, a Princeton, N.J., bank-insurance consulting firm.
In Spain, 70% of all life insurance sales are made through banks; in France, about 62%; and in Italy and Belgium, just under 60%, according to data from Fitch Ratings.
Mr. Kehrer said he has a lot of U.S. clients who are very interested to learn how and why bank distribution is so successful overseas. "U.S. firms are very interested to learn how firms in Japan, South Korea, and Latin America are having success with bank distribution," he said. "They have a highly productive sales force, but there has to be more to it than that."
Mike White, an analyst at Michael White Associates, a Radnor, Pa., consulting firm, said bank insurance distribution in the United States has been slowed by agent opposition. "The organization was effective for a long time in retarding the sale of insurance through banks, but I think that that is changing," he said.
Mr. Rajotte said MetLife's model for building bank distribution in Asia is all about simplicity. The company is offering relatively simple, commodity-like products that are easy to understand, he said.
"If you have a competitive rate, you get the business," he said. "It is very black and white."
Mr. Hirano said that to succeed in bank distribution insurance companies must be able to deliver a competitive product smoothly and easily. Most banks in Japan own their own insurance companies, he said, and it can be difficult for independent companies.
"By providing high-quality products with strong client services, you can gather share," he said. "You have to be able to maintain strong customer satisfaction."
In May, both insurers moved to expand in China. MetLife launched a joint venture with Shanghai Alliance Investment Ltd., and AIG received approval from the China Insurance Regulatory Commission to expand throughout the provinces of Guangdong and Jiangsu.
Mr. Hirano said 90% of AIG's sales in Japan come through banks.
MetLife has relatively small shares in most Asian markets - 2.3% in Korea, just 0.03% in China, about 0.6% in Taiwan, and 1.7% in Hong Kong as of the end of 2005 - but Mr. Rajotte said that bancassurance is helping it develop business.
U.S. and foreign companies are beginning to realize that relying solely on an agency sales force is expensive and limiting, he said, and insurers need to be more creative in terms of distribution to ensure that they do not lose customers to other financial institutions.
"I just feel that today, if I had a choice to go into a new country in Asia, even in Vietnam, Thailand, or Malaysia, in markets that are not as sophisticated as the U.S. or Hong Kong, I wouldn't start with agency distribution," he said. "It is too expensive. … We will not go into countries through agents because of the cost. Bancassurance and telemarketing make more sense for us."
In the telemarketing realm, MetLife has begun distributing through the home shopping network in Korea and Taiwan and plans a similar service in China. Mr. Rajotte said MetLife has generated 2,000 to 3,000 policies per month through the channel. Prudential uses infomercials to sell insurance in Korea.
"We want to make ourselves accessible to all clients whether they buy through banks, through the telephone, through agents, or through an infomercial," he said.
"Usually we say that Asia is behind the U.S. … , but when it comes to bancassurance and distribution, that just isn't the case," Mr. Rajotte said. "The U.S. eventually will have no choice but to move to more open ways of distribution."
He said clients in Asia are not yet demanding access to nonproprietary products but he knows the market will evolve in that direction.
