Singapore - CANADIAN insurer Manulife Financial Corporation's push for a bigger slice of the life insurance pie in this lucrative savings-rich region, particularly Singapore, will receive a boost with the help of ally DBS Bank.
Singapore is expected to "quickly" become Manulife's third largest business in the region, behind Hong Kong and Japan, now that the insurer has strengthened its multi-distribution strategy through an exclusive 15-year partnership with the local lender that started on Jan 1.
The deal took effect nine months after Manulife and DBS announced their US$1.2 billion (S$1.7 billion) regional bancassurance deal, and the insurer can now distribute life insurance products through more than 200 DBS branches via a 2,000-strong sales force in Singapore, Hong Kong, China and Indonesia, on top of the bank's Internet and mobile platforms.
Speaking to the media on Tuesday, Manulife's chief financial officer Steve Roder said the Asian region now accounts for more than 30 per cent of the insurer's earnings.
In the third quarter of 2015, more than 60 per cent of global insurance sales and over 70 per cent of new business value associated with those sales came from Asia, he said, adding that the bancassurance deal will significantly broaden Manulife's footprint in the region.
As to when Manulife will break even on this investment, Mr Roder said he expects the deal "to be accretive to earnings in the second year".
Typically, bancassurance products generate lower margins but achieve higher volumes, so the deal is expected to increase Manulife's 2016 sales significantly.
In Singapore alone, the insurer has come up with 13 new savings, retirement and protection plans, designed specifically for DBS customers, that will be sold across some 90 POSB and DBS branches.
While the majority of these products are exclusive to DBS, a few of them, including the high net worth Universal Life product, are also sold through financial advisers or agents, said Manulife Singapore CEO Naveed Irshad. He added that the bancassurance channel is expected to contribute more than 50 per cent of 2016 sales while the remaining sales will be split evenly between the financial advisory and agency channels.
In Singapore, the distribution of life insurance products through banks is the second fastest growing channel after financial advisers, while the traditional agency force has been on a downward trend.
Richard Vargo, regional head of bancassurance at DBS, noted that the lender's insurance premiums (annual premium equivalent) saw a 36 per cent compound annual growth rate (CAGR) from 2008 to 2014, which contributed significantly to the bank's consumer banking and wealth management income. For the first nine months of 2015, DBS generated a total of S$2.6 billion in the consumer banking and wealth management segment.
And the outlook for the bancassurance space seems rosy with a rising middle class and a rapidly ageing population, as pointed out by a survey conducted by DBS and Manulife on 6,000 pre-retirees in six economies: Hong Kong, China, India, Indonesia, Taiwan, and Singapore. It found that a large proportion of the Singapore population remains underinsured, with one in three residents aged 30-50 not having any life insurance coverage.
On Tuesday, the two allies added that they would co-fund up to S$100 million over the next 15 years to invest in digital technology including the enhancement of digital platforms, customer-facing engagement tools, and front-end sales and service systems.
Said Tan Su Shan, group head of consumer banking & wealth management at DBS: "We're now seeing a definite change from the Internet to mobile (devices). Everyone now accesses information and banking and wealth management tools from mobile phones, and that's why it's imperative for us to make the whole digital journey as seamless and as intuitive and as customer-centric as the physical journey."
This article was first published on January 6, 2016.
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