In Taiwan's highly competitive insurance market, foreign insurers are increasingly tapping bancassurance as a means of reaching out to customers. The model, which involves the selling of insurance products through a bank's branches, provides a mutually beneficial arrangement to insurance companies and banks.
In September, Prudential, one of the UK's largest insurers, and London-based global bank Standard Chartered announced they would be extending their bancassurance collaboration to include Taiwan. The move will see Standard Chartered promote and distribute protection and savings products from PCA Life (Prudential's Taiwanese insurance arm) through its island-wide network of branches. The two companies have partnered on similar joint bancassurance operations in seven Asian countries since 1998.
PCA Life currently sells its products in Taiwan through E.Sun Commercial Bank, which has 114 branches and in which Prudential is a shareholder. Standard Chartered's Taiwanese network totals 86 branches, making it Taiwan's largest foreign bank in terms of network size after its acquisition of Hsinchu International Bank last year.
Bancassurance's role in the insurance market is growing and it now ranks as Taiwan's second largest distribution channel after traditional insurance agencies. In 2006, banks sold insurance products worth $5.6bn, well over double the figure of three years earlier at $2.3bn.
Several other bancassurance agreements such as Prudential's have been signed this year and include a joint venture between Aviva, the world's fifth-largest insurance group and the UK's biggest, and Taiwan's First Financial Holding Co (FFHC).
Under the arrangement, the new company, First-Aviva, will distribute its products through a bancassurance agreement with First Commercial Bank, a subsidiary of FFHC. With 187 branches, First Commercial Bank owns the second largest bank network in Taiwan.
First-Aviva will concentrate on developing long-term savings and pension products. Philip Scott, executive director of Aviva, cited the potential of the Taiwanese life insurance market, which is the fourth largest in Asia, and said that "prospects for future growth in the pensions market are particularly positive."
In the same year, bancassurance accounted for just over a third (35%) of the total first-year premiums on new contracts generated by Taiwan's life insurance market, according to the insurance bureau at the Financial Supervisory Commission.
Like First-Aviva, Prudential and Standard Chartered are eyeing the opportunities of the life insurance market. Their insurance products and services will place an emphasis on retirement products and planning. Another joint venture, announced in June between Dutch insurer Aegon and Taiwan's Taishin Financial Holding Co, will focus on developing life insurance and pension products.
With more than 7% of its population aged 65 or over, Taiwan is considered an aging society. The Council for Economic Planning and Development (CEPD) predicts that this percentage will rise to 14% and above by 2017. If predictions prove correct, Taiwan will have aged at double the average speed of other industrialised nations.
Another major player seeking to tap the phenomenon of a fast-aging population is HSBC Holdings, which last month launched its insurance unit HSBC Life (International) in Taiwan. HSBC Life aims to target the life insurance market with products that include family protection, long-term savings and retirement solutions.
"With aging becoming the most critical issue we face today, coupled with the change in demographics, people's need for protection and support in their children's education, their own health and well-being as well as retirement planning are increasing in leaps and bounds," said John Holden, managing director of HSBC Insurance in Taiwan. He pointed to statistics that show that the average sum assured in Taiwan is only NT$1.28m ($379,803), which he called low in comparison to NT$2.16m ($640,913) in Japan and NT$5.08m ($1.507m) in the US.
