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Jun 2019

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Italy's banks take on insurance

Source: Asia Insurance Review | Mar 2019

An ageing population and struggling state finances could turn into an unlikely boon for Italy’s banks, which have turned to a growing market for insurance to brighten their prospects.
 
Intesa SanPaolo has marketed the move since June last year, splashing white and green ‘Bank Insurance’ stickers across its branches.
 
The country’s biggest retail bank is leading a push to cross-sell to Italians who have traditionally shunned protection against medical bills or property damage, relying instead on their wealth, generous public health and tight family networks.
 
That is changing, with shifts in society and state spending constraints expected to drive demand for P&C insurance, an opportunity Italian banks can ill afford to miss.
 
Battling loan losses and negative interest rates, Italian banks have also seen their asset management fees hurt by Italy’s latest economic woes, while technology is exposing the industry to outside competition in core areas such as payments.
 
They have now identified a new potential source of revenues. Non-life insurance premiums accounted for 1.9% of Italy’s GDP in 2017, compared with 3.3% in France and Germany, industry lobby ANIA’s data shows.
 
Excluding cars, where insurance is compulsory, premiums were 0.9% of Italian GDP versus 2.5% in Germany, even after the number of Italians with private health insurance more than doubled between 2010 and 2016, Milan’s SDA Bocconi Professor Mario Del Vecchio said.
 
“We can see that some of our customers keep excess cash on their current accounts for rainy days ... we want them to understand they could invest some of it to buy protection,” Intesa Sanpaolo insurance head Nicola Fioravanti said.
 
Although bank clients could find it useful to have a one-stop shop for both banking and insurance products, some have raised questions about the potential for cross-selling as people move increasingly to mobile and online banking, while disputed insurance claims could also sour customer relationships.
 
Intesa, which is already Italy’s biggest life insurer with EUR22.5bn ($25.5bn) in gross premiums, flirted with taking over top insurer Generali in 2017 but it is now targeting its 12,000 customers and investing EUR300m to move into segments like home and healthcare.
 
It has trained 220 specialists to steer the business and retool 30,000 staff, aiming to become a leader in non-motor P&C by selling three contracts a day in each of its 4,400 branches.
 
Its plan is to double the share of its clients who buy insurance products - known as its penetration rate - to 18% in three years’ time, boosting gross non-life premiums to EUR2.5bn from EUR400m in 2017.
 
“All insurers as well as other banks are watching Intesa’s moves very closely …There is room to expand the potential size of the market, it’s not a market share game,” said Boston Consulting Group partner and managing director Emanuele Costa.
 
Market shake-up
A top executive at another of Italy’s big banks said it could follow Intesa’s lead in a few years to serve its growing wealth management clientele better.
 
The potential opportunity is attracting investors including billionaire Warren Buffett, whose Berkshire Hathaway conglomerate has built a 9% stake in insurer Cattolica and last month won a tender to take over small Genoa-based Faro, which is being liquidated.
 
And Poste Italiane, which for years offered banking services through its network of almost 13,000 post offices, recently launched P&C policies to complement its life business.
 
Meanwhile BPER Banca, which has a deal to sell products of its top shareholder insurer Unipol, recently revamped its bancassurance division and hired a former Munich RE executive to lead it.
 
“It’s a natural move for banks looking to diversify,” said BPER’s Everyday Bank division head Diego Rossi. “The need to buy protection is not keenly felt but that can also change quickly. Frequent earthquakes in recent years have made related insurance products hugely successful.” A 
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