1. Rise of Bancassurance An Asia experience
International Insurance Society
Taiwan, July 2008
David Fried
Group General Manager
Regional Head of Insurance
Hongkong and Shanghai Banking Corporation

2. Contents Global Drivers Aging population brings in opportunities
Bancassurance

3. Bancassurance is the fastest growing channel
Opportunities in Asia
Insurance markets in Asia are at different stages of development
China
India
Vietnam
Indonesia
Malaysia
Thailand
The Philippines
Macau
South Korea
Hong Kong
Taiwan
Singapore
Japan
Under penetrated
Moderately developed
Developed
Saturated
Bancassurance is the fastest growing channel

4. Current penetration of emerging markets
Why now?
Asia opportunity – paradigm shift in insurance spend as GDP’s hit threshold
Life premiums/GDP (%)‏
Potential
Taiwan (1978)‏
South Korea
Japan
(1976)‏
Australia
Philippines
Malaysia
China (1982)‏
Current penetration of emerging markets
India
Thailand
Vietnam (1996)‏
Singapore
Hong Kong (1990)‏
Indonesia
Real per capita GDP, US$ ‘000
* Data series of penetration start from 1970 unless specified. Real per capita GDP in log scale.
Source: Swiss Re Economic Research and Consulting 4

5. Emerging Markets comprise 10% of world premiums – skewed to Life
Top 10 Countries = 87% of Life Market
US$0.33tn
Life
Top 10 Countries = 64% of GI Market GI
Worldwide premiums $3.5trn
Growing at 6.1% - $210m p.a.!
58% Life, 42% General Insurance
75% premiums in US/EU 5

6. Insurance investment needs Bank (Credit) Products
Evolving customer needs: a Golden Opportunity for Banks Older customers have different financial needs
Financial needs map
Client time
Wealth
Youth
Mature
High
Low
Insurance investment needs
Bank (Credit) Products
Over 50’s possess 70% of all financial assets
These individuals and their assets need protection (insurance) and investing – no longer borrowing
Ageing is [accelerating] this shift as old borrowers de-leverage
Equally applicable in Developed and Emerging Markets
This “sea change” too big an opportunity to miss and should build on HSBC credit credentials

7. Why now? People are aging
Percentage of total population aged 60 years or over in 2050
… but will have increased significantly in many countries by 2050
Source: UN Population Ageing 2006 7

8. Bancassurance - catching on globally..
France: the largest bancassurance market, 62% of new premiums in 2005 earned through bank networks (favourable legislation, taxation)*
USA: legislation allowed insurance sales through banks but the expected revolution hasn’t materialised (low awareness, low growth)*
UK: with 20% total premiums collected, bancassurance lags in market penetration (dominance of IFA sales force)*
China: >30% of new business from bancassurance (heavily biased by SP products)*
Sth Korea: since regulatory changes in 2003, bancassurance has exploded. New Business Apr through Jan 2007 accounted for 46%collected premiums (heavily biased by SP roducts)*
HK: 38% bancassurance weighted penetration in (legislation, low interest rates, bank expertise)**
Others: Vietnam circa 0.5% penetration in 2005,
Indonesia circa 20% in 2004 up from 5% in 1998
Malaysia circa 45% in 2005.*
Watson Wyatt Data

9. Bancassurance – a growing success in Asia
New Premium from bancassurance as a percentage of total New Premium:
47% (unweighted premium)‏
Nil
S. Korea
26%
Singapore
37.5% 1%
Taiwan
48% 6%
Malaysia
4.61% (15.4% in private sector)‏
Negligible
India
33.1%
15.1%
Hong Kong
33.9%
Less than 10%
China
New Life Insurance Premium
2005/06
1998
Source: various sources, Watson Wyatt and Swiss Re reports

10. Meeting Stakeholders Needs
A three-way all-win solution
Maximising business performance and potential
One-stop shop,
holistic solutions
Customers
A tool for deepening banking customer relationships & driving NFI
A new distribution channel in addition to the traditional Agency & Direct
Bank
Insurer 10

11. Global product (Credit Cards)‏
Integrated bancassurance defines where customers are
Global Banking and Markets
Private Banking
Global
Institutions
HNWI
Corporate
Mass Affluent
Commercial Banking
Personal banking
SME
Mass Market
Global product (Credit Cards)‏ 11 11

12. Products align with different market segments
ADVISORY
The selling model(s) chosen impacts product, distribution channel, staff selection and training, marketing, sales processes and support etc
5. Advisory
NEEDS BASED
4. Advanced standalone
Sales complexity increases
3. Simple standalone / packaged
2. Co-incidental
As per ‘Advanced Stand- alone’ but formal recommendations made
TRANSACTIONAL
2. Co-incidental
Whole life
Endowments
Complex riders
Critical Illness
Income Protection
Unit Linked Life
Annuities
1. Targeted outbound for simple products
Personal Accident
Home Contents
Travel
Basic Term
Mortgage Reducing Term (cross sales for Fire buildings and contents)‏
Creditor on Credit Cards
Motor (with car loans)‏
Accidental Death
Personal Accident
Hospital Cash

13. Key is distribution…. Underwriting automatically follows
Manufacturing
Client/insured 1 2 3 4 5 6 7
Invest-ments
Channel
Brand
Product
U/W
Claims
Admin
General Insurance
15%
65%
10%
Life, Pensions & Investments (LPI)‏
45%
15%
10%
30%
Return on Equity
(ROE)‏
>20%
~10%
>30%
Banks
Develop expertise, understanding and models
Beauty parades, developing JVs and exclusive relationships
Seeking value creation rather than just fee income
Starting to see the value in manufacturing – and building their own
Insurers
Support and relationship building with banks
Understanding of banks and their needs
More internal support, blueprints, regional or global academies within companies
Benchmarking against the competition 13

14. Diary management booking
Align tasks performed with channel functionality
A bancassurance model leverages ALL distribution channels for different stages of the sales cycle
Lead generation
Qualify sale
Diary management booking
Close sale
Post sales service
Account management
Branches      
Internet      
Telephone      
F2F (FPM’s)‏         
Good OK
Poor 14 14

15. Different Bancassurance Models
Integrated
Bank
Insurer
Agents
Agents to place at bank branches
Mine on bank’s client base - telemarketing
No agent at branches
Bank’s RMs to sell
Non - integrated
Bank
Insurer
Bank
Insurer
Broker’s model
Partnership - Leads referral from bank on commercial business; brokers to recommend business
Bank
Broker 15

16. Thank you Q & A