The insurance sector on the mainland is staring at a key policy move as the China Banking Regulatory Commission (CBRC) has proposed to ease the tight grip on bancassurance. Easier rules will enable insurers forge better linkages with banks to market insurance products, boosting a key sales channel. That said, the insurers need to bear in mind that the policy relaxation could be a double-edged sword.
A draft proposal on broadening the bancassurance channel has been circulating recently among financial and insurance institutions as authorities are seeking industry opinions, the Securities Daily reported. Under the draft rules, insurers are required to lift the ratio of saving-oriented insurance and low-risk plans in their sales through banking channels. Meanwhile, the CBRC for the first time intends to allow insurance practitioners to station their sales agents in bank branches.
Despite strict supervision, bancassurance has become the most compelling channel for insurers to spur sales. For example, Foresea Life Insurance, which was set up only in February last year, saw its premiums income in the first ten months this year surge to about 11.47 billion yuan (US$1.88 billion), from just 273 million yuan in 2012, thanks to overwhelming sales in bancassurance.
Other insurers dependent on bancassurance channel such as Huaxia Insurance, Tianan Life Insurance and Sino Life also recorded buoyant new business growth, Beijing Business Today noted. Now, if agents are allowed to station themselves at bank branches and offer advice to people, policy sales through bancassurance are expected to see a bigger leap going forward.
That said, it is too early to say what benefit the wider sales channel can bring in for insurers in the end. Saving-oriented insurance and low-risk plans are often low yield and thus hardly alluring when compared to bank wealth management products. If insurers want to dig deeper into bancassurance, they will have no choice but to inflate the yield so as to boost the sales of saving-oriented insurance and low-risk plans. That could ultimately dent the insurers’ profitability.
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