Regulatory issues holding back growth in bank insurance

Citibank's deal with AIA proves a boost to industry growth, though most insurers face shortage of bank partners due to regulations

PUBLISHED : Tuesday, 04 March, 2014, 5:09am
UPDATED : Tuesday, 04 March, 2014, 7:05am

Bancassurance sales have been on the rise in Hong Kong but insurance executives say future growth is being restricted by regulatory issues.

While banks have branch networks that can sell insurance products for insurers, their scope is restricted by regulations, and some lenders stopped selling investment-linked insurance products in July after the Hong Kong Monetary Authority imposed disclosure requirements on banks selling such products.

Citibank will sell most AIA products under a bancassurance partnership beginning today, but will not sell investment-linked products.

AIA paid Citibank US$800 million in December in a deal that gave the lender the right to sell AIA's products to its 13 million clients across Asia for 15 years. Analysts estimate the deal will increase AIA's sales by 10 per cent a year.

Jacky Chan, chief executive of AIA Hong Kong and Macau, said the deal would deliver good growth in new sales despite HKMA restrictions. Besides Citibank, AIA also sells its products in Hong Kong through China Construction Bank, ANZ and Public Bank.

"Teaming up with Citibank is worthwhile because the bank has a strong customer base across Asia," Chan said. He said banks mainly sold deposit-like insurance products now but he believed their customers would accept other insurance products.

Chan said AIA would continue to expand its agency team - already the largest in the two cities, with 9,000 agents in Hong Kong and 1,000 in Macau.

"Agents remain our core sales channel," he said. "However, we have to provide other sales channels for customers who like to buy from banks, the internet or brokers."

Christine Lam, country business manager of Citibank global consumer banking, said: "Insurance products are important elements of wealth management. [AIA] products could meet our clients' needs in wealth management, retirement planning and estate planning."

Tay Keng Puang, managing director and chief executive of MassMutual Asia, said his company would also like more banking partners but they were hard to find. It now teams up with American Express in Hong Kong and four banks in Macau.

"The local regulations restrict every bank to selling products for up to two life insurance companies only," Tay said. "This limits the number of bank-insurance partnerships.

"Many banks have refused to sell investment-linked products since July due to the HKMA regulation."

Tay said MassMutual still relied on its agency team to sell, adding that it hoped to add another 600 agents this year.

Zurich Insurance dismissed all its 700 agents in Hong Kong in December and opted to sell through independent financial advisers.