Independent or company advisors? The future of insurance
distribution in Central Europe 15 November 2010 Karel Vesel
Slide 2
2 2010 Deloitte esk republika What I will be covering today The
current state and the future of insurance distribution in CE Focus
on face-to-face advice Will independent advice prevail? Will
insurers manage to keep own distribution channels? The current
state in one country may be the gospel of the future in
another
Slide 3
UK
Slide 4
4 2010 Deloitte esk republika UK decline of the direct sales
force Until 1990s, for a long time the dominant sales channel A
sharp decline in the 1990s A number of insurers completely
disbandoned their DSF
Slide 5
5 2010 Deloitte esk republika Example Prudential UK 1991 -
2001: Gradual decline in size 13 Feb 2001: DSF restructuring
announced Just a small specialist force of qualified advisers to be
retained (target size 250) Source: Prudential UK
Slide 6
6 2010 Deloitte esk republika IFAs the new dominant UK sales
channel IFA = independent financial adviser Started after 1988
Since 2001-2, they deliver 50 80 % of total new business Typicallly
small, however often members of larger IFA networks
(regulatory/compliance reasons)
Slide 7
7 2010 Deloitte esk republika Why? Will we face this in Central
Europe? Specific development of UK regulation: 1986 Financial
Markets Act 1995 commission disclosure 2004 depolarisation 2013
Retail Distribution Review (Advisor Charging) Impacts often
dramatically different than expected Decline of the UK direct sales
force reasons?
Slide 8
Western Europe
Slide 9
9 2010 Deloitte esk republika Germany Life Non-life: car
insurance Zdroj: CEA Statistics N39, Insurance Distribution
Channels in Europe, March 2010
Slide 10
10 2010 Deloitte esk republika France
Slide 11
11 2010 Deloitte esk republika Italy Nadpis prezentace
Slide 12
12 2010 Deloitte esk republika Switzerland Nadpis
prezentace
Slide 13
13 2010 Deloitte esk republika Insurance distribution trends
(Western Europe) Distribution channels vary country by country Case
for independent channels (brokers): People like to receive
independent face-to-face advice Advisors like to give best advice
to their clients More dynamic and attractive for those looking for
quick career Negotiating power towards insurers (example: product
area) Case against independent channels (brokers): Commission bias,
no real independence (UK Retail Distribution Review) DSF decline
leads to lower access to financial advice (UK 3m) Insurers lose
link to their customers Insurers become dependent on external
distributors Internal channels: Often lower growth BUT Decline of
internal channels does seem to be a general rule
Slide 14
Central Europe
Slide 15
15 2010 Deloitte esk republika CE insurance markets size and
dynamics Life premium volume (in millions USD)Non-life premium
volume (in millions USD) Useful Tools Source: sigma, Swiss Re
Slide 16
16 2010 Deloitte esk republika Poland insurance distribution
Nadpis prezentace
Slide 17
17 2010 Deloitte esk republika Czech Republic life insurance
distribution No real statistics available Internal channels tied
agents / employees (40% ?) Still significant Insurers with large
portfolios like to use for campaigns Often low dynamics, stagnation
Brokers (40% ?) A very dynamic channel Dominated by a few large
MLMs strong negotiating power Bancassurance (20 % ?) Dominated by 3
big banks Single premium, highly volatile (product campaigns)
Slide 18
18 2010 Deloitte esk republika Insurance distribution trends
(Central Europe) Distribution channels also vary country by country
Pressure on internal channels Alternative channels (brokers,
bancassurance) grow faster Commission rates go up every year (200 %
+) Product and distribution innovations impact market dynamics
Slide 19
19 2010 Deloitte esk republika Internal sales force
effectiveness Emerging markets model: Large networks, high
recruitment Low investment in new recruits / the network (short
training, no licensing) Low productivity (monthly sales cases) Low
agent retention (most drop out soon) Developed markets model:
Recruitment lower, selection Higher investment in new recruits /
the network (training, licensing, IT sales tools) Higher
productivity Higher retention
Slide 20
20 2010 Deloitte esk republika Internal sales force - the
challenging transition Emerging markets model Developed markets
model ?
Slide 21
21 2010 Deloitte esk republika Conclusions and recommendations
Multi-distribution is or will be reality Brokers and/or
bancassurance likely to grow faster than internal channels A threat
or an opportunity for you? Internal sales channel Important for you
if you want to avoid dependency on third parties Must be efficient
Start making it efficient today
Slide 22
22 2010 Deloitte esk republika Contact Karel Vesel Deloitte
Central Europe E-mail: [email protected]
Slide 23
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Limited, a UK private company limited by guarantee, and its network
of member firms, each of which is a legally separate and
independent entity. Please see www.deloitte.com/cz/about for a
detailed description of the legal structure of Deloitte Touche
Tohmatsu Limited and its member firms. 2010 Deloitte Czech
Republic