Nice Report by Deloitte

1. More than one approach
Alternative insurance
distribution models in
Asia Pacific
Global Financial Services Industry

3. Contents
2 Foreword
3 Trends in Asia Pacific insurance distribution
4 Alternative distribution channels in Asia Pacific
14 Innovations in marketing channels
16 Conclusion
17 Appendix
18 Editors
19 Key contacts
More than one approach Alternative insurance distribution models in Asia Pacific 1

4. Foreword
Insurance companies are making unprecedented entry into the capital markets, and to be competitive
insurers will need to revisit their business models to ensure they have the necessary products. Some
companies may choose to offer services beyond traditional insurance products by integrating financial
services into their organisations, while others may continue to focus on vertical integration with a wider
coverage across multiple geographic regions. With either strategy, it will be critical for insurers to enhance
their client interface and create an institutionalised approach that will help accelerate growth.
One of the key levers to growth is distribution, and to excel at it, insurers will need to adopt a new
mindset that sees distribution not as a cost centre, but as a profit centre and lynchpin of success. By
developing distribution-centric strategies that coordinate channels, insurers can use distribution to drive
differentiation and growth.
Distribution plays a large role in an insurance company’s operations, and it accounts for most of carriers’
non-claim/benefit costs. Insurance firms typically use a variety of channels to reach consumers, including
agents, brokers, direct phone and Internet sales, banks, and increasingly, worksite and employer-based
programs. Companies in many countries have largely shifted to online and direct channels, yet in many
other countries, face to face advice delivered by independent producers remains a vital component in
that mix, especially when it comes to meeting complex consumer needs with increasingly sophisticated
products.
This report examines emerging insurance distribution channels in the Asia Pacific region and highlights
that a ‘one size fits all’ model is not the best approach. Rather, a multi-pronged approach that factors in
country specifics, penetration rates, and cultural characteristics appears to be the most successful model.
With economic growth and creation of wealth in Asia continuing to outpace other regions, insurers need
to be well positioned with multi-channel strategies and products to capitalise on these opportunities.
David C. Pulido
Managing Director, Asia Pacific Deputy Leader
Global Financial Services Industry
Deloitte Touche Tohmatsu
2

5. Trends in Asia Pacific
insurance distribution
As Asia Pacific insurance markets are offering Knowledgeable insurers are also driving growth in
more opportunities for expansion, growth the Asia Pacific insurance market by customising
strategies for both multinationals and domestic products and distribution channels that highlight
insurers are becoming increasingly prominent. the unique local characteristics of each country
Currently, the majority of Asia Pacific insurance in the region. Rather than take a ‘one size fits
businesses are targeting high single-digit, and all’ approach, western multinationals, Asian
possibly double-digit, growth. Traditionally, multinationals, and large local institutions are
new business revenue growth has come from looking to the region’s diverse socio-economic
consumer investment-oriented products (product and cultural characteristics as avenues by which to
driven growth strategy). Agents are and will find the greatest growth opportunities.
continue to remain the dominant channel for
Insurance companies in Asia often look to
most companies and most markets across Asia,
other more developed markets for new ideas in
especially in countries like China and India where
capturing new consumers. Several innovations in
geography and infrastructure pose distribution
these markets include the use of social networking
challenges. However, forward thinking insurers
for customers and employees, advanced analytics
are leveraging distribution channels (distribution
and predictive modelling to identify consumers
driven growth strategy) as one way to capture the
and help build agent forces, and lastly, more
opportunities that exist in the fast growing Asia
targeted marketing focusing on a very specific
Pacific markets.
group of consumers such as female drivers. While
For some, this new growth has focused on these trends are beginning to come to life in the
targeting affluent customers, while others other parts of the world, insurance companies in
are finding new business opportunities in Asia Pacific are looking at different ways to grow
the microinsurance segments. Other areas market share.
of business growth are being found in cross-
selling with robust banking companies through
bancassurance, placing greater emphasis on
takaful insurance and other Islamic finance
products that observe the rules and regulations of Forward thinking insurers are
Islamic law, and using telemarketing and virtual
marketing as tools to introduce insurance products
to consumers.
leveraging distribution
channels as one way to capture
the opportunities that exist in
the fast growing Asia Pacific
markets
More than one approach Alternative insurance distribution models in Asia Pacific 3

6. Alternative distribution
channels in Asia Pacific
Worksite marketing • Cost and convenience: Flexible underwriting
Worksite or workplace marketing is the and pricing guidelines are other factors
distribution of financial products at the necessary to sell insurance products successfully
workplace, paid for by employees, but facilitated through worksite marketing. Employees will
and endorsed by the employer. The success of buy policies at the workplace only if it provides
worksite marketing depends on the education them better value propositions than what they
and understanding of producers and customers, could find in the open market. Moreover, other
as well as employer cooperation and the features such as the convenience of payroll
cost effectiveness of products and enrolment deductions, timing, and relaxed underwriting
processes. Worksite marketing is a complex, restrictions play an important role in the
multi-stage process, therefore, it is not currently decision-making process.
prevalent in developing countries.
• Employers' cooperation: Strong employer
cooperation is a must for the success of
worksite marketing. Employees appreciate the
time and effort saved by having their employer
In order for worksite screen potential insurance advisors and
providers. Therefore, employer endorsement
marketing to be an effective has considerable influence on employee
participation rate.
distribution channel, a well- In order for worksite marketing to be an effective
distribution channel, a well-developed, well-
developed, well-regulated, and regulated, and well-educated insurance sector
needs to be present. Worksite marketing exists in
insurance companies in Malaysia, Thailand, Japan,
well-educated insurance sector Singapore and Australia, as well as some in India
(Tata AIG, HDFC Standard Life, ICICI Lombard,
needs to be present Kotak, and Reliance). Australia’s AMP Financial
Services indicated that broadening distribution to
include the workplace channel is one of its key
short-term priorities for 2010.1 Countries such as
Singapore, Hong Kong, and Taiwan are likely to
Its success depends on several factors: be markets in which this channel may experience
growth.
• Education: Insurers need to educate employers
and employees about the products and services In the future, expanding workforces in developing
available, as well as the benefits of worksite countries should not be ignored. According to a
enrolment. Moreover, insurers have to educate World Bank report, in the year 2000 developing
brokers and agents on the products offered countries accounted for 54 percent of the global
through worksite marketing and how to sell middle class, with Chinese nationals representing
them successfully. Brokers need clearly defined approximately 13 percent of this group. By 2030,
products and features, along with support developing countries are expected to be home to
material from insurance providers, to assist 91 percent of the global middle class, with citizens
in the process of educating employers and from China and India accounting for 44 percent.2
employees. Given the rapidly emerging middle class workforce
1 AMP Investor Report 1H 09,
in China and India and the sheer size of the
AMP Limited
potential market, worksite distribution should be
2 “Global Growth and
Distribution: Are China
considered by insurers as an alternative channel.
and India Reshaping the
World?", World Bank,
November 2007
4

7. Figure 1. Asia’s middle class growth outpacing other regions
Middle class, % of world income
East Asia and 2
3x
the Pacific 6.4
Eastern Europe and 1.3
Central Asia 1.9
Latin America and 2.7
the Caribbean 2.2
Middle East and 0.6
North Africa 0.7
0.1
South Asia 13x
1.3
0.3
Sub-Sahara Africa
0.4
0 1 2 3 4 5 6 7 8 %
Year 2000 Year 2030
Source: World Bank, 2007; Deutsche Bank Research, August 2009
More than one approach Alternative insurance distribution models in Asia Pacific 5

8. Figure 2. China and India driving middle for the sales and product-servicing within the
class growth boundaries of the products that the insurance
% of global middle class company is allowed to sell, and receives
commissions agreed upon with the partner in 100
100 6 accordance with regulations.
6
13
Traditionally, microinsurance is distributed through 80
microfinance institutions. However, insurers are
80
38 developing alternative approaches to reach a
wider customer base. In some cases, the insurer 60
60 works with a non-governmental organisation
(NGO) to identify and appoint microagents. The
microagents are generally women who come 40
87
40 from self-help groups. This model has proven to
be successful in India. Insurers are also turning
56 20
to retailers that sell goods and services to lower-
20 income households since retailers provide a more
extensive distribution network, as compared to
0
dedicated financial services providers, and can
0 distribute products at a lower cost. Retailers also
Year 2000 Year 2030 enjoy trust among lower-income households,
which is essential for selling financial products
Rest of the World China India
such as insurance.
Other channels that can be leveraged to sell
Source: World Bank, November 2007 microinsurance products include workers’ unions
and cooperatives, dairy boards, regional rural
banks, TV/direct sales, cell phones, burial societies,
Microinsurance and worksite marketing. Microinsurance relies
Microinsurance is insurance characterised by low somewhat on NGO presence and microfinance
premium and low caps or low coverage limits, institutions, therefore, this distribution channel
sold as part of atypical risk-pooling and marketing is going to be prevalent in developing countries
arrangements. It is designed for low-income where there is a large rural and poor population.
people and businesses not served by traditional Indonesia, Thailand, Vietnam, China and the
social or commercial insurance schemes. Philippines have emerging microinsurance
Microinsurance operates primarily through three distribution channels, with several of the world’s
different business models: partner-agent model, major insurance companies currently assessing
provider-driven model, and community-based/ market viability by operating pilot microinsurance
mutual model. programs in these areas. In India, Bajaj Allianz
The partner-agent model is widely used in covers more than 2 million people in rural areas
India, where a microfinance institute partners through microinsurance.3 Malaysian insurers,
3 India: A Microinsurance
Revolution, Allianz, June 2009 with an insurance company to provide health such as Etiqa4 and Takaful Ikhlas,5 have already
microinsurance. In this situation, the insurance introduced microtakaful schemes. Indications
4 Etiqa launches microtakaful
for cooperative members, company is responsible for decisions related to are that this distribution channel is an effective
ICMIF, March 2009
product development, sales, and services. The means to meet the basic insurance needs of
5 “Takaful Ikhlas extends insurers consult with the agent organisation while lower-income rural populations, and the need for
protection to poor farmers”,
designing the product, and maintain control microtakaful schemes to help alleviate poverty is
Prosper, Summer 2007, ICMIF
over the strategic operations that define the risk on the rise.6
6 “Takaful Insurers Urged
To Keep Premium Rates Low transfer mechanism. The agent is responsible
To Create Better Demand”,
BERNAMA, 5 November 2009
6

9. Figure 3. Households with access to financial services
Fraction of households, %
<20%
20-40%
40-60%
60-80%
>80%
No data
Source: Journal of Banking & Finance, November 2008; Deloitte analysis
In China and India, multiple types of Due to the very nature of microinsurance
microinsurance are being marketed and sold to having low premiums, low coverage limits,
farmers and members of rural and low-income and low margins, insurers should appreciate
communities. These policies are tailor-made the financial risks and administrative costs of
and multi-level to fit the specific needs of the writing microinsurance. A key component of
customer, including crop, livestock, machinery, microinsurance is corporate social responsibility,7
and property insurance, in which an individual and there are many leading insurance companies,
farmer pays a small sum for extensive insurance such as Bajaj Allianz,8 offering or participating
coverage. However, there is also group, or in microinsurance programs where profitability
’village’ coverage, in which an entire village can is not the only driver. Despite the challenges
be covered by a single custom made plan, which of developing a profitable product at such low
usually involves monthly membership fees. The margins, by developing products specific to the
village is allotted an umbrella amount of coverage needs of low-income customers it is possible for
for all the inhabitants to use. Basic life insurance insurers to sustain profitability while achieving
policies are also sold. In India, mobile offices are social responsibility objectives.
being utilised. For example, Alegion Insurance
Broking Ltd has been using vans as retail shops 7 Protecting The Poor:
A Microinsurance
to sell insurance products cost effectively in small Compendium, International
towns and villages. Labour Organization, 2006
8 “India: A Microinsurance
Revolution”, Allianz, 16 June
2009, http://knowledge.
allianz.com/en/globalissues/
microfinance/microinsurance/
miocroinsurance_life_gupta_
bajaj_allianz.html
More than one approach Alternative insurance distribution models in Asia Pacific 7

10. Telemarketing payments. The partnership gives the insurers
Telemarketing is the process of selling, promoting, access to the telecom companies’ distribution
or soliciting a product or service over the networks, while the telecom companies gain
telephone. In the insurance industry, telemarketing detailed information on customers and an
is a widely used direct marketing channel. In some opportunity to increase customer loyalty. 9
parts of the world telemarketing has been used in
Both life and non-life insurance products are
the insurance industry for decades, but it is now
sold through the telemarketing channel. In some
emerging as a prominent alternative distribution
countries, such as Australia and South Korea,
channel in many developing Asian countries.
telemarketing is more prevalent in selling non-life
There are several advantages of telemarketing insurance products. In South Korea, telemarketing
over other direct marketing channels. The most is the main channel of distribution for personal
significant is that it involves human interaction, lines products. This channel is popular in some
which facilitates two-way communication areas, however, telemarketing is challenging in
and gives immediate feedback. Moreover, a that it lacks the face to face interaction that more
telemarketing agent can handle a large number of easily facilitates the selling of complex insurance
customers in a day, which makes it a cost effective products. For this reason, telemarketing tends to
and productive marketing medium. be used more as a medium of lead generation in
the sales process.10
Telemarketing is ripe for emergence as an
alternative distribution channel in countries with Although telemarketing has seen success in
high telephone usage. Along with rapid economic some markets in Asia Pacific, insurers should
growth, tele-density in China has increased appreciate the challenges of a telemarketing
rapidly and insurers view telemarketing as a cost based strategy, which include difficult market
efficient direct marketing channel. However, penetration, varying regulatory platforms across
regulations in China limit the products that can the region, and competition from dominant
be sold in this manner, and the regions in which market leaders. Nonetheless, for several insurers in
they are sold. Telemarketing has also emerged in Asia, telemarketing represents a large component
Indonesia, Vietnam and Thailand as insurers look of their new business and there is growing interest
to innovative ways to insure new customers. in this distribution channel.
Innovative Filipino entrepreneurs have pursued a
creative business model by persuading telecom
companies to bundle sales of mobile phones
with special life insurance policies that are easy
to understand and have low monthly premium
9 FSI Market Analysis -
Philippines, Deloitte Touche
Tohmatsu, 2009
10 Telemarketing and Call
Centers in U.S., IBISWorld,
2008
8

11. Virtual marketing product and the customer is provided with the
As insurers attempt to increase brand awareness option to purchase complete insurance coverage
and drive sales, virtual marketing activities such direct from the phone or send a text message
as electronic kiosk stands, mobile advertising, to request more information and special offers.
and the Internet are emerging as alternative Customers can also request a call back for queries
distribution channels. Kiosk marketing is a direct and premium purchases.
marketing channel that is increasingly used in
Several insurers are partnering with
reaching a wider customer base. In a typical kiosk
telecommunications companies to utilise
sale, a customer enters basic information (such as
mobile phone sales as a distribution channel
name, gender, type of policy, and amount to be
for insurance. In Japan, Aioi Insurance and
insured) and the system generates a quote. The
KDDI Corporation, Japan's second largest
customer has the option to approve the terms and
telecommunications company, announced they
make a payment.
will establish a joint venture non-life insurance
The virtual nature of kiosks makes them ideal for company. Through the joint venture, Aioi aims to
selling complementary policies to existing services. expand its distribution channels to capitalise on
Examples of insurance solutions offered through the 30 million KDDI mobile phone subscribers,
kiosks include: and KDDI plans to expand its subscriber base by
offering insurance as part of its mobile phone
• Travel insurance terminals placed at airports,
services.12
seaports, and bus stations.
The Internet is also emerging as a distribution
• Motor insurance terminals placed at petrol
channel with significant potential for growth.
stations or service stations, enabling people to
Australia and South Korea both have high
renew their car insurance or get a new quote
populations of Internet users and this channel
while on the road.
will become more important as other Asia
• Health insurance terminals placed in hospitals. Pacific countries increase telecommunication
infrastructure and Internet usage. The Internet has
• Kiosks in shopping malls offering multiple life/
made substantial inroads in Australia as a viable
non-life insurance products.
insurance distribution channel, mainly because of
• Banks selling insurance products through ATMs. Generation X and Y’s expectation to fulfill their
Kiosks are helpful to reach customers who are needs online. Nonetheless, analysts suggest that
not connected to financial services like banks. the Internet is unlikely to become the primary
This number is very high in many developing insurance distribution channel because of the
countries, such as India, where flight insurance is complexities of insurance products. However, the
often sold in vending machines at airports. The Internet is a recommended channel to distribute
kiosk distribution channel is also likely to work simple or easy to understand products.13 In South
in countries with technologically-knowledgeable Korea, online car insurance operators are winning
11 Virtual Marketing, Deloitte
populations, such as Korea and Japan. more and more market share from traditional Development LLC, 2009
non-life insurers as a prolonged economic
12 “Japan's No.2 telecom
In addition to kiosks, mobile marketing has proven slowdown prompts drivers to prefer web-based provider in non-life joint
to be of value in increasing brand awareness as it insurers with cheaper premiums. In 2008, the venture”, Asia Insurance
allows an instant response. Compared to offline online auto insurance market grew by 10 percent. Review eWeekly, 5 February
2010
advertising, it provides a quantifiable measure of South Korean auto insurers, such as Samsung Fire
the success of the campaign. Mobile advertising 13 Life Insurance - Distribution
& Marine Insurance, are focusing on expanding channels across the globe,
campaigns are used for both life and non-life their presence in this rapidly growing online Investment and Financial
insurance products.11 Generally, a text message market.14 Services Association/
is sent to a customer informing them about the Deloitte Future Leaders
Award paper, 2007
14 “Insurers go online in
S.Korea; pressure on AXA,
Ergo”, Reuters, 24 Sep 2009
More than one approach Alternative insurance distribution models in Asia Pacific 9

12. Kiosk and Internet-based distribution channels can significant customer bases, reach, and established
be used to distribute simple products such as car trust among consumers in order to cross-sell
insurance, however, customers are often hesitant tailored insurance product offerings.
to purchase products such as life insurance online
In countries with high or growing Muslim
due to the higher financial commitment and
populations, such as Malaysia, Indonesia, and
product complexities. Many consumers, prior to
Thailand, banks are teaming up with insurance
completing the purchase, still prefer to discuss the
companies to provide an increasingly wide array of
product and its suitability with a financial advisor
Islamic finance and takaful products.
or sales agent. Insurers may be able to overcome
customers’ concerns by employing a strategy to In countries with large rural populations and
make financial advisors available through online agricultural economies, banks have helped
access on a 24/7 basis. to increase insurance penetration, providing
a trustworthy and cost efficient link to rural
Given the rapid increase of Internet users and
consumers, and an existing infrastructure and
mobile phone subscribers in Asia Pacific, virtual
community presence.
marketing will likely become a significant channel.
In addition, these channels are important to Examples from specific countries include:
insurers as sources of knowledge for consumers.
• In Indonesia several insurance companies, such
More and more people are using the Internet to
as Asuransi AIA and Prudential, are selling
research and learn about product options before
products in collaboration with banks. As of
purchasing insurance.
2008, 19 life insurance and 7 non-life insurance
companies had partnered with banks, selling
a total of 131 different products through 27
Bancassurance
banks.15
Bancassurance, selling insurance products
through a bank, is a distribution channel that is • Singapore’s extremely robust banking sector
prevalent in almost all countries in Asia Pacific. has allowed major local banks to aggressively
However, because banking systems vary due to increase the amount of insurance they cross-sell
different regulations and cultural norms that may to their banking customers. As of September
be country specific, bancassurance is capable of 2009, bancassurance accounted for 23 percent
taking different forms. In developed countries of the share of new insurance premiums.16
with relatively mature banking and insurance
• In Japan, the bancassurance channel was
industries, such as Australia, Japan, New Zealand,
introduced in April 2001 with some restrictions
South Korea, Taiwan, and Singapore, insurance
on the types of products sold. As of 2006,
companies are taking advantage of banks’
Bancassurance will continue to grow as a
distribution channel in Asia Pacific in the
15 The Report Indonesia 2008,
medium and long term
Oxford Business Group
16 “Life insurance industry
sees good increase in
third quarter sales”, Industry
Performance 2009,
Life Insurance Association
Singapore
10

13. bancassurance accounted for only 3.3 percent Wealth Management/Financial Advisors
of written life insurance premiums.17 Complete The importance of financial advisors (independent
deregulation occurred in December 2007, as well those tied to agencies and banks) to
which allowed insurers to sell all life insurance insurance industries in various countries is
products through the bank channel. A Celent growing. Japan, South Korea, Hong Kong, and
report indicates that by 2012 bancassurance will Singapore view trained financial advisors as
enable banks to capture between 20 percent an important distribution channel, especially
and 25 percent of new business in life products, since insurance is increasingly being viewed
between 5 percent and 15 percent in personal as an important component of an individual’s
non-life products, and approximately 80 percent investment strategy.
in annuities.18
Australia and New Zealand are both markets in
Insurers need to be aware of the risks in which the wealth management/financial advisor
structuring a majority of their distribution through channel is considered developed. Over the last
banks because ultimately they do not control 20 years in Australia, significant government
the access to the customer. In addition, the regulation has required that an employer makes
bank may terminate the insurance distribution contributions into an employee’s superannuation
agreement resulting in the loss of a bancassurance fund, based on a proportion (currently 9 percent)
distribution channel for the insurer. A strategy of of the employee's salary. As such, many people
partnering with multiple banks will broaden the need investment advice and seek financial
distribution and eliminate the risk of losing an planners. Insurers are partnering with wealth
entire channel. managers to develop innovative products that
allow retirees to invest prudently in order to
Another challenge for insurers is the lack of direct
achieve income levels that are sufficient to
control of sales personnel, which presents critical
address the future uncertainties associated with
problems such as production results, product
life expectancy, health care, market downturn,
strategy and mix, and staff motivation. Banks
and inflation.19 At the end of 2009, ANZ Banking
have many products to sell and insurance may not
Group purchased the remaining stake in its joint
always be a priority.
venture with ING Australia to strengthen its
Despite these challenges, partnering with position in insurance and wealth management.
banks offers insurers a ready customer base, (ING and ANZ merged their insurance and wealth
brand awareness, and established credibility. businesses through a joint venture in 2002).
Bancassurance will continue to grow as a Through the takeover, ANZ will become Australia’s
distribution channel in Asia Pacific in the medium third biggest life insurer and fifth largest retail fund
and long term. manager, with total funds under management of
A$45 billion and 1,700 aligned financial advisors.20
17 Seimei Hoken ni kansuru
Zenkoku Jittai Chosa, Japan
Institute of Life Insurance,
September 2009
18 Bancassurance in Japan:
Lessons from Europe and
the US, Celent, 2008
19 Insurance in Australia,
Australian Trade
Commission, September
2009
20 “ANZ buys rest of ING
wealth management
joint venture for $1.9bn”,
The Australian, 25
September 2009
More than one approach Alternative insurance distribution models in Asia Pacific 11

14. By 2013, Asia Pacific will likely overtake North Takaful
America with respect to high net worth individual Takaful is an Islamic insurance concept which
(HNWI) assets, mainly driven by China and India.21 is founded on Islamic muamalat (banking
As income levels increase in the region, along transactions), observing the rules and regulations
with the demand for more customised solutions, of Islamic law. The takaful industry is growing
wealth management services catering to HNWIs at a faster rate than the conventional insurance
are expected to feature more specialised insurance segment globally by 35 percent, and it is
products. This channel can offer significant increasing in popularity in countries with a
potential as the mass affluent populations of the sizeable Muslim population such as Malaysia and
Asian economies grow. This customer segment Indonesia.22 This fast growing industry offers
tends to fall below the target thresholds of private attractive and affordable products to consumers
banks, however, the segment desires special while being religiously and culturally appropriate.
treatment, quality advice and a degree of service
Malaysia is by far the largest market for takaful
above that of the normal agent. This segment
insurance in the region, and has one of the
has potential to grow significantly over the next
most stable and established takaful industries in
10 to 20 years and insurers are already creating
the world. Indonesia, Thailand and Brunei have
‘elite’ sales teams to target these customers.
considerably less by way of yearly contributions,
Banks already have strategies in place to provide
but the market is expected to grow steadily as
preferential treatment to HNWIs. Insurers will soon
awareness of products and benefits increases. The
implement similar strategies and utilise wealth
2004 tsunami in Thailand spurred industry growth
management/financial advisors to sell insurance
as the heavily Muslim populated area in the south
products to HNWI customers.
was underinsured and suffered business and
infrastructure losses.
Figure 4. Number of households with net Takaful insurance distribution channels face many
worth greater than US$1 million challenges, including:
In thousands
• Many Muslim customers remain sceptical of the
18,000 insurance industry, particularly of family takaful
411
409
product offerings. Educating consumers and
16,000 providing information about products is key
463
14,000
1,053 to addressing under-penetration and creating
980
demand for takaful products.
1,156
12,000
1,187 • Takaful operators are required to invest only in
10,000 Sharia-compliant (in accordance with Islamic
law) instruments, which lack fixed income
8,000 22
equivalents. The result can be an unbalanced
245 10,677
6,000 433 investment portfolio, which is sometimes
598
601 over-concentrated in more volatile equity
4,000 929
investments, illiquid real estate, and low-return
2,000 3,596 cash deposits.
0
Year 2007 Year 2017
Japan Australia Taiwan
21 “The world's rich part with
$7.9 trillion in assets”, Hong Kong South Korea
Finance Asia, 26 June 2009
Singapore China India
22 “Takaful: New Heights
Beckon”, Islamic Finance
Source: Barclays Wealth, 2008; Economist Intelligence Unit, 2010
Asia, June/July 2009
12

15. • As with the wider Islamic financial services The small size of the market relative to the
industry, takaful continues to suffer from a total insurance market in countries which have
shortage of human resources with the requisite takaful products suggests that takaful is in the
expertise. This issue is considered more early stages of development and has significant
important in the Gulf Cooperation Council, but potential to grow. Although bancatakaful is an
Southeast Asian operators also acknowledge its important distribution channel, currently takaful is
continued importance. most successfully sold through agents and brokers
face to face as it presents the best opportunity to
• Lack of infrastructure in rural areas for
educate consumers.23
bancatakaful.
The takaful industry is still in its early stages
• Difficulty of agents reaching rural populations.
of development. The key opportunities exist
• In Malaysia, regulatory restrictions on foreign in articulating the value proposition of takaful
investments have also limited opportunities for products to both Muslim and non-Muslim
diversifications. investors. This will require further development
of the workforce and further education of
• Low barriers to entry due to minimum capital
consumers. In addition, bundling of takaful
requirements and aggressive pricing by
products with health and medical cover, saving
operators have increased competition in the
for retirement, education planning and overall
takaful industry.
wealth management objectives will assist in
In Malaysia, barriers for entry to the market are growing the market further. Harmonisation of the
lower than for conventional insurance, and tax Sharia interpretation of takaful products will help
incentives are also offered. Both Malaysia and to broaden the appeal and eliminate some of the
Thailand regulators do not require the use of a barriers to acceptance.
specific takaful model, only that the regulatory
body in charge of takaful be satisfied that the
business is Sharia-compliant. Non-life and family
(life) takaful are fairly equal in terms of sales
whereas life insurance dominates the non-takaful
insurance market.
23 sigma No 5/2008, Swiss Re
More than one approach Alternative insurance distribution models in Asia Pacific 13

16. Innovations in
marketing channels
Creation of innovative channels to
distribute insurance products is vital to an
insurer's growth and competitive
advantage because distribution is a critical
driver of new business
Marketing of insurance products continues to Direct Response TV (DRTV) is used to create
become more sophisticated and innovative, immediate consumer response to a company's
especially in the Asia Pacific region where a products and to provide a convenient channel for
combination of distribution channels often prevails potential customers to obtain more information
and the market is flexible enough to support more on insurance plans, as well as to buy the plans
exploratory methods of distribution. India’s shop- through telephone orders. DRTV has been
assurance trend, where insurance is sold through a successful distribution channel in the Asia
supermarkets and retail chains, is expected to Pacific region. Korean insurers have been selling
become an emerging channel due to its ability insurance products (labelled Homesurance)
to reach a wider customer base. For example, via infomercials directly to consumers since
Future Generali has introduced mallassurance to September 2003. CIGNA has launched successful
sell insurance through shopping malls, which is DRTV campaigns for its products in South Korea,
modelled on its successful mallassurance operation New Zealand, and Taiwan where it has seen
in the Philippines with the SM Group.24 Similarly, extremely enthusiastic responses. CIGNA’s growth
in South Korea, ING sells insurance via Tesco’s strategy for the near future includes expanding
very successful hypermarkets allowing customers the DRTV distribution channel to all countries
to sort out their personal insurance needs while where it has operations in Asia Pacific.27
24 “Your DTH vendor will sell doing the weekly shopping.25
insurance, too”, DNA India, Several insurance companies in the United States
21 March 2009 Japan’s unique business model of ‘insurance and the United Kingdom have already started
25 2007 Annual Review, shops’ located on busy streets and in shopping using social media, mainly to target Generation
ING Group malls is an innovative model that allows the Y, as a distribution channel for less complex
26 “About consumer to shop for insurance in much the same products. Although the social media platforms
thehokenshop” http://www.
way as other commodities, and it is becoming a are mainly used for marketing and customer
hokennomadoguchi.com/
about/, Life Plaza Holdings, popular way to distribute insurance products. As enquiries, content also includes agent locators,
2010 an example, Life Plaza Holdings has 143 insurance quote engines, and product information. In the
27 International Drivers of shops across Japan and has 40,000 visitors per United States, for example, GEICO has already
Growth, CIGNA year.26 been exploring the use of social networking sites
International, November
to support the marketing of motorcycle policies,28
2009
and New York Life is looking at social networking
28 “GEICO Goes Cruising for
Motorcyclists In Cyberspace;
to target Generation Y customers. New York Life
Networking Site Created believes that social media and the Internet will
to Hook Insurance play an increasingly critical role in the distribution
Customers”,
The Washington Post,
2 July 2007
14

17. of its insurance products.29 Understanding the
needs of Generation Y is important because they
make up a large proportion of potential customers
in Asia, accounting for almost 50 percent of
China’s workforce30 and 40 percent of Malaysia’s
population.31 In India, half of the 1.15 billion
population is under 25 years old and Generation Y
is entering the workforce.32 Insurance companies
in India, such as Bajaj Allianz, have already
implemented social media platforms.33
Mallassurance seems to have the greatest
potential of these innovative marketing channels
because it offers convenience, reach, and personal
advice. In most large Asian cities, it is common
for people to visit a mall at least once a week.
Financial advisors are available for customers to
engage on a face to face basis for consultation
and finalising the contract.
Top performing companies in today’s global
economy continually develop and introduce new
products and services. Creation of innovative
channels to distribute insurance products is vital
to an insurer’s growth and competitive advantage
because distribution is a critical driver of new
business.
29 “Insurers Proceed on
Social Media, With
Caution”, Insurance &
Technology, 12 October
2009
30 “Reckoning with Chinese
Gen Y”, BusinessWeek, 25
January 2010
31 “Gen Y - technically savvy”,
The Star, 24 October 2009
32 The World Factbook - India,
CIA, 2009
33 “Bajaj Allianz unveils its
new brand campaign - 'Jiyo
Befikar'”, India Prwire, 24
June 2009
More than one approach Alternative insurance distribution models in Asia Pacific 15

18. Conclusion
The Asia Pacific region has dynamic and varied model and bancassurance, while the Generation
insurance markets. The countries referenced in X and Y populations in South Korea may be
this report are experiencing significant shifts in much more receptive to text message, Internet
population demographics, standards of living, and direct TV marketing, and kiosks. Similarly,
income, and education levels. Consequently, the religious considerations may dictate insurance
insurance industries do not follow a standardised distribution channels in countries with sizeable
model for effective distribution channels. Muslim populations (i.e. Malaysia and Indonesia)
Although the agency model has been and will in a way that they do not in other countries
remain a major distribution channel in Asia Pacific, (i.e. India). What is common, however, is the
insurers should combine channels in order to meet necessity of innovative and flexible approaches to
the needs of a socio-economically and religiously implementing distribution channels in all of these
diverse region. countries.
Several countries profiled in this report are
still considered developing nations, and thus,
The mix of distribution income disparities are often severely pronounced.
Combined with a fledgling regulatory framework,
indications are that insurance products will not be
channels is matched by the consumed in the same way or at the same rate
across the entire population of these emerging
diversity of the cultural, economies, or in ways similar to their more
developed neighbours. This is in sharp contrast to
more mature insurance industries in places such
infrastructural, and regulatory as Japan, Singapore, Taiwan, and Australia where
insurance penetration rates are much higher,
environments. It is evident that and a well-regulated and developed industry
has laid the groundwork for certain distribution
a 'one size fits all' model is not channels that may not be the most effective in
other countries. This is not to say that certain
distribution channels are simply off the table for
the best approach. specific countries or that one channel is the only
answer for others. Selling the same products
through the same channels is not necessarily
a recipe for capturing market share, and it is
prudent to diversify product offerings distributed
The mix of distribution channels is matched by through various channels.
the diversity of the cultural, infrastructural, and
Despite agents being the dominant channel in
regulatory environments. It is evident that a
the Asia Pacific market, opportunities exist for
‘one size fits all’ model is not the best approach.
alternative channels. Going forward, insurance
Rather, a multi-pronged approach that factors in
companies should decide where they can compete
country specifics, penetration rates, and cultural
most effectively, what their target market is, and
characteristics appears to be the most successful
where they will develop their distribution channels
model. Conversely, market segmentation and
and capabilities. Adapting distribution channels
the unique needs of customer groups appear to
to the unique characteristics of Asia Pacific
be dictating the distribution channel used in a
demographics, culture, and regulatory systems,
specific country. For example, the older population
innovating around product particulars and channel
of Hong Kong may do better with the tied agency
specifics, and combining approaches are all likely
to be successful strategies.
16

19. Appendix
Table 1. Distribution channel development by country
Agency Bancassurance Telemarketing Virtual* Worksite Micro Wealth Takaful
marketing mgmt
Australia Mature Mature Mature Mature Growing - Mature -
China Mature Growing Emerging Emerging Emerging Emerging Emerging -
Hong Kong Mature Mature Mature Growing Emerging - Mature -
India Mature Growing Growing Emerging Emerging Growing Emerging -
Indonesia Mature Growing Emerging Emerging Emerging Emerging Emerging Growing
Japan Mature Mature Mature Mature Mature - Mature -
Malaysia Mature Growing Emerging Emerging Emerging Emerging Emerging Growing
New Zealand Mature Mature Mature Growing Growing - Growing -
Philippines Mature Emerging Emerging Emerging Emerging Emerging Emerging -
Singapore Mature Mature Growing Growing Emerging - Growing Emerging
South Korea Mature Mature Mature Mature Emerging - Mature -
Taiwan Mature Mature Growing Mature Emerging Emerging Growing -
Thailand Mature Growing Emerging Emerging Emerging Emerging Emerging Emerging
Vietnam Mature Growing Emerging Emerging Emerging Emerging Emerging -
* Includes electronic kiosks, mobile phones, and Internet
Source: Deloitte analysis
More than one approach Alternative insurance distribution models in Asia Pacific 17

20. Editors
Editors Malaysia
David Pulido Allan Low
Tel: +81 3 6213 1818 Tel: +60 3 7723 6469
dpulido@deloitte.com allow@deloitte.com
Karen Grieve
New Zealand
Tel: +81 3 6213 1162
Charles Hett
karen.grieve@tohmatsu.co.jp
Tel: +64 4 470 3866
Holger Kern charleshett@deloitte.co.nz
Tel: +65 6232 7210
hkern@deloitte.com Philippines
Diane Yap
Contributors Tel: +63 2 581 9053
Peter Firth dyap@deloitte.com
Tel: +1 212 436 5367
pfirth@deloitte.com Singapore
Mohit Mehrotra
Stephanie Gladstone
Tel: +65 6232 7216
Tel: +1 212 436 5172
momehrotra@deloitte.com
sgladstone@deloitte.com
Terry Mezger Taiwan
Tel: +852 2238 7264 John Chen
tmezger@deloitte.com.hk Tel: +886 2 2545 9988 Ext.1277
johchen@deloitte.com.tw
David Vicary
Tel: +60 3 7723 6572
Thailand
dvicary@deloitte.com
Niti Jungnitnirundr
Tel: +66 2 676 5700 Ext.5074
njungnitnirundr@deloitte.com
Editorial Board
Australia
US
Elaine Collins
Joe Guastella
Tel: +61 2 9322 7533
Tel: +1 212 618 4287
elcollins@deloitte.com.au
jguastella@deloitte.com
China
Duncan Spooner
Tel: +852 2238 7248
dspooner@deloitte.com.hk
India
C. K. Mohan
Tel: +91 44 6688 5000
ckmohan@deloitte.com
Korea
Jung In Lee
Tel: +82 2 6676 1312
junginlee@deloitte.com
18

21. Key contacts
Insurance Leaders Korea
Sung Ki Jun
Global/Regional
Tel: +82 2 6676 1127
Joe Guastella
sjun@deloitte.com
Global Insurance Leader
Tel: +1 212 618 4287
Malaysia
jguastella@deloitte.com
Margaret Kek
Hitoshi Akimoto Tel: +60 3 7723 6505
Asia Pacific Co-Leader mkek@deloitte.com
Tel: +81 3 4218 4858
hakimoto@deloitte.com New Zealand
Greg Haddon
Terry Mezger
Tel: +64 9 303 0911
Asia Pacific Co-Leader
ghaddon@deloitte.co.nz
Tel: +852 2238 7264
tmezger@deloitte.com.hk
Philippines
Diane Yap
Asia Pacific Tel: +63 2 581 9053
Australia dyap@deloitte.com
Caroline Bennet
Tel: +61 3 9671 6572 Singapore
cbennet@deloitte.com.au Kenny Young
Tel: +65 6530 5544
Stuart Alexander
kenyoung@deloitte.com
Tel: +61 2 9322 7155
stalexander@deloitte.com.au
Taiwan
John Chen
China
Tel: +886 2 2545 9988 Ext.1277
Terry Mezger
johchen@deloitte.com.tw
Tel: +852 2238 7264
tmezger@deloitte.com.hk
Thailand
Niti Jungnitnirundr
India
Tel: +66 2 676 5700 Ext.5074
Mani Bharadwaj
njungnitnirundr@deloitte.com
Tel: +91 22 6619 8580
mabharadwaj@deloitte.com
Vietnam
Hung Truong
Indonesia
Tel: +84 4 3852 4123
Riniek Winarsih
htruong@deloitte.com
Tel: +62 21 231 2879 Ext.3882
rwinarsih@deloitte.com
Japan
Hitoshi Akimoto
Tel: +81 3 4218 4858
hakimoto@deloitte.com
Kumiko Aso
Tel: +81 3 6213 3059
kumiko.aso@tohmatsu.co.jp
More than one approach Alternative insurance distribution models in Asia Pacific 19

22. Financial Services Industry Leaders Korea
in Asia Pacific Yun Ho Kim
Tel: +82 2 6676 1104
Regional
yunhokim@deloitte.com
Philip Goeth
Asia Pacific Leader
Malaysia
Tel: +86 10 8520 7116
Andrew Lai
phgoeth@deloitte.com.cn
Tel: +60 3 7723 6568
David Pulido andrewlai@deloitte.com
Asia Pacific Deputy Leader
Tel: +81 3 6213 1818 New Zealand
dpulido@deloitte.com Rodger Murphy
Tel: +64 9 303 0758
Karen Bowman
rodgermurphy@deloitte.co.nz
Southeast Asia Leader
Tel: +65 6530 5574
Philippines
karenbowman@deloitte.com
Avis B. Manlapaz
Tel: +63 2 581 9068
Country/Location
amanlapaz@deloitte.com
Australia
Warren Green
Singapore
Tel: +61 2 9322 5454
Prakash Desai
wgreen@deloitte.com.au
Tel: +65 6530 5585
pradesai@deloitte.com
China
Peng Cheng Wang
Taiwan
Tel: +86 10 8520 7123
Ray Chang
wangpc@deloitte.com.cn
Tel: +886 2 2545 9988 Ext.3029
Dora Liu raychang@deloitte.com.tw
Tel: +86 21 6141 1848
dorliu@deloitte.com.cn Thailand
Suttharug Panya
India Tel: +66 2 676 5700 Ext.5247
Sachin Sondhi spanya@deloitte.com
Tel: +91 22 6619 8600
sacsondhi@deloitte.com
Indonesia
Basar Alhuenius
Tel: +62 21 231 2879 Ext.3212
balhuenius@deloitte.com
Japan
Yukio Ono
Tel: +81 3 6213 3630
yukio.ono@tohmatsu.co.jp
Yoriko Goto
Tel: +81 3 6213 1372
yoriko.goto@tohmatsu.co.jp
20

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