Bank guarantees the future
The formation of BEA Life in January this year was, in the view of managing director Patrick Wan Chi-tak, a logical necessity. Official statistics tracking the performance of the local insurance sector had shone a spotlight on the most significant market trends and, in doing so, left little doubt about the direction to take.
Specifically, the data compiled for 2006 by the Office of the Commissioner of Insurance confirmed that the life insurance sector in Hong Kong had seen consistently good growth over the previous 10 years. It had outstripped the rate of expansion in the general insurance sector, which, on average, had seen only single-digit increases.
In addition, the numbers revealed that the portion of premiums coming from investment-linked products was steadily expanding and that, in 2006 alone, the source of around 30 per cent of overall new business had been bancassurance. Essentially, this is the practice of banks marketing their own in-house insurance products to clients rather than distributing policies issued by third-party providers - mostly the major established international insurers.
For the BEA Group, the way forward was clear. They decided that subsidiary Blue Cross (Asia Pacific) Insurance, of which Mr Wan is also managing director, would continue to offer general insurance, specialising in travel and medical cover. But a separate entity would be set up to focus on life products. The stated objective was to reflect market trends, while also finding ways to capitalise on potential synergies in distribution, underwriting and back-office functions.
'The main reason for setting up BEA Life was to strengthen the group's wealth management services,' Mr Wan said. 'More and more people want a one-stop service to do banking, investments and take out insurance.' He added that the initial strategy was not only to focus on short to medium-term insurance savings products, but to ensure there was a 'comprehensive product suite' of investment-linked, whole-of-life and term options.
Already, 13 distinct choices were available, geared to different client requirements. Others would be introduced progressively in response to changing customer demand or prevailing market conditions.
Mr Wan emphasised that BEA Life was liable for death benefits and all other benefits arising, and the company was responsible for overseeing the performance of all investments. He also believed that the bank's more than 130 local branches and 'Supreme Gold' centres would give customers an easy point of access, and felt confident the new venture would create a broader range of career opportunities.
'With the bancassurance model, our staff are basically selling insurance as well as mortgages and other investments,' he said. 'We are offering product and sales training to keep them updated and polish their skills, so that they can deliver premium customer service.'
About 700 staff have qualified to act as insurance agents, many of whom have experience of selling Blue Cross life and non-life products. These will continue to be distributed through the bank network.
Future recruitment needs will, to a large extent, be tied to the corporate service pledge on turnaround times for answering enquiries and dealing with claims. While there were no immediate plans for extensive hiring, Mr Wan noted that any suggestion standards were slipping would prompt an increase in headcount in the appropriate areas. He was optimistic regarding the prospects for unit-linked insurance products this year, but pointed out that most individual policyholders were aware that returns from investment-linked products depended on choice and timing. It might therefore be necessary to keep a closer eye on related market movement than was the case for the more traditional savings-based plans.
Mr Wan said the priority was to 'expand business profitably' for both companies now under his direction. This entailed getting three essentials right - customer segmentation, distribution management, and the products on offer. It was also important to anticipate changes driven by the use of online platforms in order to strike the right balance between convenience and correct client understanding of specific policy terms and conditions, which often required personalised advice.
'But we are putting more effort into developing the direct client channel with the internet and call centre,' he said.
An acknowledged strength of Blue Cross had been its e-platform. This now offers a portal designed to provide a one-stop online service for agents and brokers to arrange new policy applications, confirm renewals, and track transaction inquiries. Another portal for group medical clients makes it possible to check claim history and status, and to review the current doctors' list.
General feedback indicated that facilitating internet usage had become a significant factor in generating new business, with last year recording a 120 per cent increase in travel-related premiums compared to 2006.
For the time being, Mr Wan expected direct clients to use the internet mainly for taking out travel insurance. This made sense because the policies were relatively simple and could be confirmed almost immediately. '[Our aim is] to put all suitable products on the internet for new applications or policy renewals,' Mr Wan said.
