BNP Paribas Sees Opening in Taiwan’s ‘Untapped’ Life Savings Segment

BNP Paribas Assurance is seeking growth in what it sees as an untapped segment in Taiwan's mature life market through an integrated distribution strategy that would adapt to increasingly sophisticated demand for a broader product range.

The strategic focus is not on product but market segment, said Xavier Guilmineau, chief executive of Cardif Asia, a life insurance unit of BNP Paribas Assurance.

Taiwan's insurance sector is evolved into one defined by market segments from one driven by products. Products need to be designed in joint effort with distributors to address market trends and customers needs, so a closer strategic alliance with partners is crucial, according to Guilmineau.

In April, BNP Paribas Assurance launched a life joint venture with Taiwan Cooperative Bank, Taiwan's largest housing loan provider with 6 million clients and 300 branches. In addition to branch networks, Guilmineau said telemarketing is also a channel to drive growth development.

The new company, BNP Paribas Assurance TCB Life Insurance Co., aims to generate NT$50 billion (US$1.6 billion) in premium by 2012, according to Guilmineau.

"Timing is good" for the roll out of this joint venture, he said. The French insurer sees opportunity to invest in the market, even though several foreign life insurers left Taiwan last year.

Taiwan Cooperative Bank and BNP Paribas Assurance hold a 51% and 49% stake in the life venture, respectively. The company offers diversified products including traditional life and investment-linked insurance.

The life insurer also offers a new generation of products such as retirement, wealth management and credit insurance, meeting demand in various market segments, according to Guilmineau. Housing loan insurance still has low penetration in Taiwan, but this segment has good potential to develop, riding on the French insurer's global position in credit insurance.

Distribution is Key

In Taiwan, Guilmineau said one out of four people is a customer of Taiwan Cooperative Bank. The new life venture provides a one-stop shop for customers to seeking a broader product range. Bancassurance is the key to support a market segmentation strategy to seek growth in Taiwan's mature life sector. The channel is a good way to capture the long-term savings segment by using the synergy with asset management and banking deposits.

Insurance companies have to adapt to the evolution of the Taiwan market, which is moving toward a more structured bancassurance model with joint venture partnerships among conventional multiple suppliers. In Taiwan, Guilmineau said bancassurance has room to expand from the current affluent segment to a mass market.

Taiwan ranked first in the world in 2008 with the highest insurance penetration, with premiums at 16.2% of gross domestic product, according to Swiss Re's annual sigma study. However, its insurance density as premium income per capita stood relatively low at US$2,788 in 2008, ranking Taiwan 20th worldwide. Because of this, insurers are seeking growth opportunities in untapped life new product lines (BestWire, March 2, 2010).

Taiwan's households have a high appetite for saving, creating opportunity for new product development in this category. Guilmineau said retirement savings and annuity products are popular in Taiwan, along with a growing demand for health insurance.

In the first three months of 2010, sales of new annuity insurance jumped 103.4% to NT$136.5 million in premiums, according to the Life Insurance Association of the Republic of China.

As an integrated channel with banking deposits, Guilmineau said bancassurance promotes the convenience of buying insurance for savings. In Taiwan, bancassurance was the biggest distribution channel for new life policies, representing 68.36% of total new life premiums. This channel collected NT$186 million in new life premiums in the first three months of 2010, according to the life association.

In a mature market, bancassurance could push the sales of increasingly diversified life products such as pension savings, wealth management and long-term care, given its saving-oriented customer base. In the past two years, Guilmineau noted banks had not faced much of a confidence issue as the sector was not disastrously affected by the global financial crisis in Taiwan.

In Asia, the French insurer is closely monitoring expansion opportunities with an eye on demographics and economic development in markets that would be suited for the bancassurance model. "We don't plan to open in every Asian country," said Guilmineau. New market development is important but it also needs to be consistent with business strategy in the region, he said.

The group continues to pursue a growth strategy in markets including Taiwan, India, Vietnam and South Korea -- countries that have scope for expansion. "We are keeping an eye on China and Indonesia," said Guilmineau. In the next few years, the company is looking for growth in selected new countries.

Asia represented 24% of total savings assets gathered by BNP Paribas Assurance in 2008, according to the insurance group's annual report. Globally, the group had 79% of gross written premiums from savings business and 21% from protection lines.

India, Taiwan and South Korea are among the major contributors to savings gross written premiums in terms of markets outside France, according to BNP Paribas Assurance's 2008 annual report. India saw a 60% rise in savings gross written premiums to 1.1 billion euros (US$1.4 billion). Taiwan and South Korea contributed 369 million euros and 301 million euros, respectively, in savings gross written premiums.

In Taiwan, BNP Paribas Assurance also operates Cardif Assurance Vie for life insurance and Cardif Assurance Risques Divers for nonlife business.

(By Iris Lai, Hong Kong bureau manager: [email protected])