The Bancassurance Opportunity: The Business Case for Bancassurance in Africa

11 August 2014 Presented By Charmaine Scott

Head Bancassurance, Rest of Africa, Standard Bank Group African insurance Distribution & Bancassurance Conference

Bancassurance benefits are quite well known

Success rests on trust in the bank

Bank Non-interest income via insurance products

Country Increased GWP contributes to GDP growth

Enabling regulatory changes 1

Appropriate agreement between bank and insurance company is vital

Insurer Leverage Banks customers base

Customer Convenience of onestop shopping

More appropriate products

Impact of Insurance on the Economic Environment

2

Promotes economic activity:

Contributes to efficient capital accumulation:

Increases access to credit

Alleviates reliance on government aid

Source :What is the role of insurance in economic development, Lael Brainard, Zurich

3

Why Africa?

4



60 % of the Worlds uncultivated arable land



30% of the Worlds resources



11 of the Worlds fastest growing economies by 2017



Fastest growing working age population in the world

GDP growth for Sub-Saharan Africa is faster than other developing countries Real GDP growth % 9 8 7 6 5 4

Sub-Saharan Africa excl South Africa

3 2

Developing countries excl China

1

Sub-Saharan Africa

0

5

2005

2006

2007

2008

2009

2010

Source Africa Pulse Report, April 2014, World Bank

2011

2012

2013

2014

And Africa has some of the faster growing economies Real GDP growth in selected countries, 2013 •

The Sub-Saharan region of Africa is spread across 37 countries

•

Stretching from Nigeria in the west, Kenya in the east and South Africa in the south

•

11 of the worlds fastest growing economies by 2017

Sierra Leone Ethiopia Côte d’Ivoire Dem Rep of Congo China Mozambique Tanzania Nigeria Zambia Gambia Uganda Rwanda India 0

6

2

4

6

Source Africa Pulse Report, April 2014, World Bank

8

10

12

14

16

There are a number of factors driving this growth

The contribution from resources has nearly doubled over the last 10 years

7

Source Africa Pulse Report, April 2014, World Bank

Foreign direct investment has increased by 50% since 2005

Consumer spending close to a Trillion dollars

Mobile operator revenue over US$40 million

Mobile usage in many countries exceeds the global average 5148

GDP per Capita

34.5%

Mobile penetration

49.8%

31.0%

30.0%

1570

1452

808 Angola Pop 20.8m

Ghana Pop 26.3m

29.5%

529 Tanzania Pop 49.5m

Kenya Pop 44.2m

Nigeria Pop 172m

Access to basic services in Sub-Saharan Africa 15-20% Shared use of mobile accesses

8

31%

26%

Mobile

Financial services

Source: GSMA Inteligence, IEA, World Bank, MDI Analysis

33%

31%

Electricity

Sanitation

The Question….

Are the insurance markets in Africa leveraging off this Economic growth?

9

The average insurance penetration globally is around 7%, with South Africa ranking third highest in the World Insurance penetration

18%

•

Penetration is based on premium as a % of GDP

•

South Africa is extremely impressive at nearly 15% being the third highest overall insurance penetration in the world.

•

Why…? Probably because of lack of meaningful social security provision.

16% 14% 12% 10% 8% 6% 4% 2% 0%

Source Sigma World Insurance report 2010 10

But in most of Sub-saharan Africa insurance penetration is lower than the average

Kenya 3% Uganda 1% Tanzania 1% Zambia 1% Mozambique 1%

Ghana 1% Nigeria 1% Angola 1%

Zimbabwe 5%

Namibia 10% Botswana 3% Swaziland 2% Malawi 2%

South Africa 15% Lesotho 6% 11

If we could increase insurance penetration to the global average of 7% it means premium income increasing by 700%

Insurance Market size is relatively low across most subSaharan countries in Africa, especially life insurance $10bn $7bn

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43

$1 600 $1 400 $1 200 $1 000 $800 $600 $400

$200 $0

Current - Life

Current - Short Term

Source: Axco 2013 & Swiss Re – Insurance in sub-Saharan Africa 12

Axis

Bancassurance penetrations around the World Germany 20% United Kingdom 16% Italy 74% China 56%

USA 60 % Japan 9%

Mexico 14 %

India 25%

Brazil >50%

Chile >30 %

South Africa >30%

13

Source : Bancassurance around the World - LIMRA

Taiwan 63%

Penetration levels unpacked 100% 90%

•

Europe is considered the birthplace of Bancassurance and hence penetrations rates are still very high

•

Brazil, China, Korea and Taiwan have only aggressively started targeting bancassurance in the last 10 years.

•

Mature countries like UK and USA have lower Bancassurance penetration rates

80%

70% 60% 50% 40% 30%

75%

74% 65%

63%

56%

20%

37%

10%

30%

25%

20%

10%

0%

Bancassurance contribution Source Sigma World Insurance report 2010 14

9%

4%

Four representative countries in more detail, reveal that South Africa and Brazil are similar in size, and both developing markets •

Insurance premiums and growth rates 2011 600 000

537 570

80% 70%

450 000

300 000

150 000

41 046

38 575

Korea (8)

Brazil (15) South Africa (3)

-150 000 Source: LIMRA, Bancassurance around the world, 2013

15

US Highest written premiums, although very low as % of

50%

GDP

20%

France (4)

•

•

30% 79 161

US (1)

affected by global crisis

60%

40% 174 753

France – mature market

Mature markets showing lower

growth rates •

Brazil and South Africa are

10%

both developing economies

0%

growing at the same pace (+/-

-10%

10%)

-20%

•

SA relatively mature yet growth rates are still high

The Korea Story 2003 – Bancassurance introduced to help distribute insurance at a lower cost.

 August

– Many banks, limited insurance distribution channels  Phased

in over the next 5 years from credit life - then to more sophisticated products

 2003

– 2010 insurance market grew by ave of 9.5% per annum

 Previously

it was growing at rates of less than 2%.

 Bancassurance

16

penetration 0.5% - 37% over 5 Years

Bancassurance - Market Maker or Market Taker GWP$16.5bn US$m - 2008 GWP $2.5bn US$m - 2003 Bancassurance , 25 , 1.0% Agency, 213 , 8.5%

Agency, 2 937 , 18%

Bancassurance, 6 171 , 37%

Employee, 850 , 34.0%

Solicitor, 1 413 , 56.5%

Solicitor, 5 940 , 36%

Even solicitors who lost market share as a % grew more than 4x over the period

Employee, 1 452 , 9%

Korea – growing the insurance pie, everyone gets a bigger slice 17

Is Bancassurance a “Fleeting Fad” or a “Solid Concept”?  Bancassurance

has not developed equally throughout the world

due to:

–Different models used –Maturity of the insurance market –Regulations and tax laws –Cultural preferences –Consumer education  But



18

it remains a popular channel of distribution around the world

Could Bancassurance be the key for Africa??

LIMRA: Bancassurance around the world

More now than ever before conditions are in place for Bancassurance in Africa

Regulatory Changes in progress, to align insurance and banking regulations

19

Emerging middle class of 300 million people and growing by 10million every year

Mobile banking already aimed at reaching 30% of population

Greater financial inclusion with over 300 banks in subsaharan Africa

19

Who wants the world when Africa is our oyster?

20

References

21



Takeuchi, Y and Schwartz, M; Bancassurance around the World, Limra, 2013



Brainard, L; What is the role of insurance in economic development, Zurich Re, Ernst &Young; Bancassurance: A Winning Formula; 2010



Gonulal, S; Goulder,N; Lest, R; Bancassurance: A Valuable tool for developing insurance in emerging markets



Leary, Patrick: Bank Life Insurance Study 2012/2013



Zurich Re; The role of insurance in the Middle East and North Africa



http://tips.thinkrupee.com/articles/bancassurance



http://www.lloyds.com/lloyds/about-us/what-we-do/what-is-insurance



http://www.scor.com/images/stories/pdf/library/focus/Life