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Bancassurance in Central Eastern Europe:Trends and Practices

Kyriakos Apostolides

Regional Vice President

Associate Distribution Networks & Direct Marketing

ALICO Central Eastern Europe

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ALICO: Best footprint at CEE

GreeceBulgariaRomaniaRussiaPolandCzech republicHungarySlovakiaUkraineLatviaLithuaniaSerbiaCyprus

A multi product, multi distribution vehicle, with proven track record, to deliver superior results, being an important income generator for the partner.

Presence in 13 countries with local dedicated expert teams, able for fast implementation of mutual plans with strong cultural local understanding of market trends and practices.

Over 100 partnerships in force.

Over 5.5M individual clients through current bancassurance relationships, with fast year on year growth pace.

All ALICO’s local insurance companies are financially sound, well capitalized and solvent well above industry standards, highly regulated entities.

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Country PopulationGDP per

Capita ($) 2007 2008 2009 2010

Greece 10.964K 32.005  4.0% 2.9%  (1.3)%  0.3% 

Bulgaria 7.929K 6.857 6.2% 6.0% (2.0)% (1.0)%

Romania 21.681K 9.262 6.2% 7.1% (4.1)% 0.0%

Russia 145.167K 11.807 8.1% 5.6% (6.0)% 0.5%

Poland 38.231K 13.799 6.7% 4.8% (0.7)% 1.3%

Hungary 10.198K 15.542 1.1% 0.6% (3.3)% (0.4)%

Slovakia 5.379K 17.630 10.4%  6.4%  (5.0)%   3.1%

Ukraine 48.241K 3.290 7.9% 2.1% (8.0)% (1.0)%

Czech Republic 10.230K 21.027 6.1% 2.8% (4.2)% 1.4%

Lithuania 3.484K 14.086 8.9% 3.0% (10.0)% (3.0)%

Latvia 2.377K 14.997 10.0% (4.6)% (12.0)% (2.0)%

Serbia 9.779K 6.782 6.9% 5.4% (2.0)% 0.0%

Cyprus  850K 32.772  4.4%  3.6%  0.4%  1.2% 

A Snapshot of CEE Region – The EnvironmentGDP Growth Rates

Source: International Monetary Fund, World Economic Outlook Database, April

2009Adverse short-term forecasts create the need for counterbalance strategies focused on non-core income fees

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Country2008 GWP

(€ ml)2007 GWP

(€ ml) vs. ‘07

Life& Non-Life

Insurance penetration

vs. GDP

Greece 5.310 5.216 2% 2.2%

Bulgaria 926 777 19% 2.7%

Romania 2.259 1.988 14% 1.8%

Russia1 25.961 20.433 27%  2.3%

Poland 14.205 12.209 16% 4.6%

Hungary 3.367 3.675 (8)% 3.1%

Slovakia 2.108 1.715 23% 3.1%

Ukraine 3.036 N/A N/A 2.5%

Czech Republic 5.132 4.886 5% 3.5%

Lithuania 576 564 2% 2.2%

Latvia 459 421 9% 2.0%

Serbia 589 565 4% 1.9%

Cyprus 690   N/A  N/A 4.1%

A Snapshot of CEE Region

Source: CEA, national supervisory authorities, insurance associations

Emerging Markets

2008 Life Premium (USD bn.) vs. 2007

Latin America and Caribbean 41 7.0%

Brazil 22 7.8%

Central & Eastern Europe 26 18.6%

Russia 1 (28.0)%

South and East Asia 164 19.0%

China 96 40.9%

India 49 0.2%

Middle East and Central Asia 8 9.3%

Africa 38 5.5%

Insurance Market (Life and Non-Life)

The Growth Potential

Source: Swiss Re sigma study “world insurance in 2008”

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Current Market Trends

• Slowdown of retail lending

• Wholesale funding / capital is scarce and costly,

affecting interest and investment income

• Major Fx fluctuations

• FI players under review of their strategy / plans

for growth / expansion / country presence / core

focus / size of balance sheet

Front line sales desks facing a new challenging

sales environment

• Non - interest income of rising importance

► Shift to deposit bundles/guaranteed

savings/segmented risk protection offers

► Engage in capital-hassle free models for non

interest fees to reach multi-income accelerated

growth dynamics.

► Provide Fx-Linked Savings/Cautious-conscious

choice / transparency.

► Create/deliver core business innovative proposals

using insurance as a smart tool on both sides of

balance sheet.

► Raise respective supportive field deliveries.

Leverage more on DM / Bundled approaches.

Renew focus on existing clientele.

► More focus on core and non-core income

opportunities (retention of core business & x-sell,

up-sell as antiattrition tools and income

generators) to maximize fees per client.

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Strategic choices:

Price

Innovation

Convenience/ effectiveness of execution

Segment and focus

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Bancassurance in Central & Eastern Europe

Bancassurance activity is fairly new within major CEE’s players. Many players have not built yet the necessary experience and know-how to generate income from insurance related business, based on a fully integrated model of sales.

Getting the right partner with the right know-how is critical for success

A successful insurance partner is the one which:►Has a proven track record to deliver planned results.►Has expertise to support and is ready to invest in all distribution

channels (bundled, telemarketing and over the counter).►Designs the right distribution channel and best fit product sequence for

maximum results, being fully complementary to core strategies.►Provides long term customer security – min counter party risk.►Offers a transparent value added product palette to the end customer.M

eet

the

scor

ecar

d

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The Traditional Insurance Sales Model Customer acquired … Customer pays … Customer leaves

Prospecting Offer Acquisition Lapse

Embedded: Credit Life (cards)

In-branch: OTC

Direct: Outbound TM Inbound TM

One Offer One Product CancelsDies

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An effective Sales Model

Prote

ctio

n

IncomeEducationAssets

Health/MedicalSavings Life

Travel Accident

Investment

Time Deposits

Foreign Currency

Shares Trading/ Financing

Mutual FundsTra

nsact

ion

Lending

ATM

Phone banking

Current Accounts

Checking

Savings Accounts

Credit Card

Overdraft

Business Loans

Mortgage

Personal Loans

Prote

ctio

n

IncomeEducationAssets

Health/MedicalSavings Life

Travel Accident

Investment

Time Deposits

Foreign Currency

Shares Trading/ Financing

Mutual FundsTra

nsact

ion

Lending

ATM

Phone banking

Current Accounts

Checking

Savings Accounts

Credit Card

Overdraft

Business Loans

Mortgage

Personal Loans

Significant opportunities to embed insurance into banking services

Based on deep understanding/experience of partner’s strategy/needs.Create and implement a step-by-step approach on projects that match core business.

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An effective Sales ModelMultiple channels... Multiple Offers … base on a full Range of Products

Prospecting Offer based

on:Acquisition based on:

Embedded: Credit Protection

In-branch: OTC

Direct: Outbound TM Inbound TM Mail Inserts

Customer Service Calls (welcome, thank you, birthday, anniversary)

Data Base Marketing Customer Profiling Segmentation Product Customization Customer Relationship Management Predictive Modeling

Products: Credit Life Accident & Health Bill protection/Lifestyle Individual Savings Accident & Health

Products Broken Bones Critical Illness Female cancer Hospital Daily benefit Accidental death and dismemberment Pure endowment Term Life Savings top-ups

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Based on a lifecycle approach linked with customers’ evolving needs

Upgrade

Refe

rrals

Cross-sell

Reten

tion

React

ivati

on

Prospecting

Offer Acquisition

First Stage

Biggest financial impact and simple execution

Maturing

Expand and improve existing activities

State-of-the-Art

Continuous sales approach at all touch-points in the

customer’s lifecycle

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Based on a fully integrated approach• Build a fully complementary tailor-made marketing plan on partner’s needs and local strategy.

• Integrated approach across all sales channels for sequenced, tailored & timely offers supported by a fully dedicated expert local team.

• Based on full deployment of synergy projects, estimated fee income for the partner will potentially represent a significant profit component: min. 10% at 2nd year, best practice can reach 30% including Bundled offers, Direct marketing and Over the Counter sales model.

Ex-customers

Win-back programs

Calls

E-mailings

Mailings

SMS

on former customers

CA

NC

EL

AT

ION

HO

W?

WH

AT

?W

HO

?

Active customers

Loyalty / Retention / cross saleprograms

Welcome CallsActivation callsUp-sale offers

Cross-sell offersService calls opportunities

E-mailingsMailings

In-branch / POS offerBundled product offer

Retention unitMisses payment & lapse rescue

Prospects

Acquisition programs

AdvertisingInternet

MailingsInserts

Outbound calls

Inbound calls

Over the counter

SA

LE

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Distribution methods / touch points

Pro

duct

sequence

In / Outbound TM

Death/Disability Benefits

Hospital/SurgicalBenefits

Entry campaign/Welcome

Applicable to all

Traffic accident

Broken Bones

Female Cancer

Segmented

Branch / POS

Loan Upgrades protection

PPI bundled

A&H initial

coveragebundled

PPI cross sell

End of loan Proposal Life / Savings

products

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A customer-centric, multi-distribution, multi-product offering model

Bundled Product (Paid by Client) Direct Marketing

Bundled Product N.A.C.(No Additional Cost for Client)

Over The Counter Sales

Cardholders’ protection plans

Credit shield for credit cards

Consumer loans with insurance

Auto loans with loan insurance

Mortgage loan with loan insurance

Education fee loans with Life protection

Joint marketing initiatives to promote easy and inexpensive solutions tied to financial products

Special projects to enhance performance of banking products (e.g. welcome/activation telemarketing)

Product sequence designed to offer the right product to the right customer at the right time

Travel and Accident & Health cover for cardholders

Long-term savings products for retirement / education

Accident and Health products

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Partnerships: working models

•Open architecture (along with captives/reinsurers).

•A fully integrated bancassurance model (single provider).

•Joint ventures (joined shareholdings with FIs to serve a fully integrated tailor made approach).

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• Regular reports / reviews

• Sales/persistency reports (kpis)

• Database analysis / segmentation

• Claims management

• Market research / mystery shopping

• Ad hoc communication

• Penetration / revenue regular reports

• Quarterly strategic reviews

• Reciprocities

• Ad hoc communication

• Distribution

• Profit centers

• Legal / compliance

• Finance

• IT / Back Office

Managing Partnerships: Relationship managementMaximize Effectiveness/Interaction/Commitment

Teams Involved

Tools (Internal) Tools (External)

PartnerVendor

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Key success factors in model execution

• Understanding / speaking the language

• Dedicated-expert teams / territorial strength / cultural understanding

• Financial strength

• Global to local

• Budgeting / Monitoring / Incentivizing

• Priorities / Convenience