Bancassurance Premium Revenue Plummets: A New Paradigm in the Insurance Industry

Bancassurance Premium Revenue Plummets

Recently, bancassurance premium revenues have significantly decreased in the insurance industry. The introduction of the new accounting standard IFRS17, which focuses on health insurance and other protection-oriented products, is a major factor behind this shift. This change has greatly impacted the sales channels and revenue structures of insurance companies. In this article, we will explore the reasons behind the decline in bancassurance premium revenues and the responses of insurance companies to this trend.

The proportion of bancassurance among insurance companies' major sales channels has been significantly declining. Major life insurers such as Samsung Life, Hanwha Life, Kyobo Life, Shinhan Life, Tongyang Life, and Mirae Asset Life saw their bancassurance premium revenues for the first quarter of this year drop by 27.5% compared to the same period last year, amounting to 3.645 trillion won. For non-life insurers, the decline was even more pronounced. Six major companies, including Samsung Fire & Marine, DB Insurance, Meritz Fire & Marine, Hyundai Marine & Fire, KB Insurance, and Hanwha General Insurance, saw their bancassurance premium revenues for the first quarter fall by 43.1% year-on-year, totaling 138.85 billion won.

Bancassurance, the practice of selling insurance products through bank branches, has been an important sales channel for insurers. However, since the introduction of IFRS17, which emphasizes profitability and service margin (CSM) through protection-oriented products like health insurance, interest in bancassurance has waned. This is because bancassurance typically has a higher proportion of savings and pension insurance products.

The rise of digital and online sales channels has also contributed to the decline in bancassurance's popularity. According to an industry insider, "It is much more profitable to use online channels for selling savings products without the need to pay commissions to banks." Consequently, Samsung Fire & Marine withdrew from the bancassurance market, ceasing new sales of long-term insurance products and only handling short-term products like fire insurance, which are minimal in volume.

On the other hand, some insurers continue to utilize bancassurance as a major sales channel. Insurance companies affiliated with the National Agricultural Cooperative Federation (NongHyup) have seen a significant increase in bancassurance sales this year. NongHyup Life Insurance collected 1.288 trillion won in premiums through bancassurance in the first quarter alone, which accounts for more than a third of the total premiums collected by the six major life insurers. This represents a 1216% increase compared to the same period last year. Similarly, NongHyup Property & Casualty Insurance recorded over 1 trillion won in premiums during the same period, marking a 1017% increase year-on-year.

NongHyup-affiliated insurers benefit from selling their products through a vast network of over 2,000 branches, including regional agricultural cooperatives and NongHyup Bank branches. Regional cooperatives with assets under 2 trillion won are exempt from the 25% rule, allowing them to prioritize selling their own insurance products. Insurers like Hana Life, which have strengths in bancassurance, are also actively leveraging this channel, though they are shifting their focus towards protection-oriented products in line with the new accounting standards.

The sharp decline in bancassurance premium revenues signals significant changes in the insurance industry. The introduction of new accounting standards and the expansion of digital sales channels present both challenges and opportunities for insurers. Companies are realigning their sales strategies to adapt to these changes, increasing the proportion of protection-oriented products. As the insurance industry continues to evolve, it is crucial for insurers to develop innovative approaches to better serve their customers. The industry's future trajectory will be closely watched as it navigates these transformative times.