Is the bank insurance channel suspended? A 60% decrease in handling fees? The truth is like this
With the suspension of the bancassurance channel and a 60% decrease in bancassurance transaction fees, various news about the bancassurance channel has been circulating in the market recently.
For a while, the bank insurance channel was once again pushed to the forefront of the storm.
In fact, according to the information learned by First Financial from the industry, some insurance companies did indeed take down their banking and insurance products in the past two days. However, this was not due to the cessation of the banking and insurance channels, but rather due to the temporary removal of the new fee limit required by the "integration of reporting and banking" during the process of filing products and signing new agreements with banks. They will be re listed after the new agreement is completed.
"There is no transitional period for the 'integration of reporting and banking' this time, and it will be implemented immediately," a person in charge of a 'bank insurance' insurance company told a reporter from First Financial News. Compared to temporary delisting, the downward adjustment of the handling fee limit seems to be more nerve stirring for people in the banking and insurance channels. There are voices in the market that suggest a 50% or even 60% decrease in the handling fees for the bancassurance channel.
Several industry insiders interviewed by First Financial stated that the reduction in handling fees cannot be generalized because different insurance companies and banks have different agreements, products, and term structures. The previous ultra-high handling fees existed in some long-term products of certain bank channels, and banks can also reduce the impact on intermediary income by adjusting the term and structure of consignment products.
Partial delisting of banking and insurance products due to temporary "inconsistent reporting and approval"
"The products of several major insurance companies here are currently in a delisting state, and only three small and medium-sized companies' products are on sale." On September 19th, a reporter from First Financial consulted a joint-stock bank as an investor and received the above response from the customer manager.
The delisting of products from some major banks and insurance companies has also sparked speculation in the market about whether the banking and insurance channels are facing suspension. According to insiders from First Financial News, some of the company's products have been delisted due to temporary inconsistent reporting fees. They will be re listed after product registration and signing a new fee agreement with the bank.
The requirement for the integration of bank and insurance channel fees comes from the Notice on Standardizing Insurance Products for Bank Agency Channels issued by the State Administration of Financial Supervision last month. Among them, it is required that from now on, for products sold by companies through bank agents, when filing products, they should clearly explain the fee assumptions, fee structure, and commission limits in the product actuarial report in accordance with regulatory regulations. And each company should truthfully list the commission fees paid to the bank, and the actual fees such as commissions should be consistent with the filing materials.
For the existing registered banking and insurance products, the Notice requires all companies to supplement and submit information such as fee structure and commission limits before August 31st.
As for the commission ceiling, it also faces a certain degree of pressure drop under the irrational competition of rising transaction fees in some banking and insurance channels. According to industry self-discipline conventions disclosed by insiders, the commission limits for products with a 3-year, 5-year, and 10-year payment period are around 9%, 14%, and 18%, respectively.
"After completing the new product filing at the end of August, some insurance companies and banks have not yet signed the agreement for the new handling fee, and the existing products are still being sold according to the previous handling fee. This has caused 'inconsistent reporting and banking'. The above-mentioned insiders stated that several large insurance companies attended the exchange meeting last week, and strict implementation of the 'integration of reporting and banking' was emphasized again.". Subsequently, major insurance companies began to deploy and temporarily remove banking and insurance products that did not meet regulatory requirements, while other small and medium-sized companies were also following suit.
"I will deploy and remove our banking and insurance products that do not comply with regulations soon," the above-mentioned person in charge of banking and insurance told a reporter from First Financial in an interview.
The reporter from First Financial News also learned from the bank that some insurance companies are indeed in the process of gradually delisting their bank insurance products, but the process is inconsistent. A customer manager from a large bank in Beijing has stated that insurance products can still be purchased through bank channels, but the options will be limited, especially since September 21st when products from large insurance companies will be discontinued. However, another major bank stated that it has received specific suspension notices but will not be affected until the end of September.
The person in charge of the above-mentioned banking and insurance emphasized that this is a temporary delisting, not a suspension of the banking and insurance channels. Once the product filing and the signing of the new bank agreement are completed, the existing products will resume listing.
The duration of temporary delisting depends on the speed at which insurance companies sign agreements with banks. "The situation varies from bank to bank, and if it's fast, the new agreement should be released quickly. If it's slow, the process may take several weeks or even more than a month," said the person in charge of the bank and insurance.
Industry insiders analyze that the temporary delisting of existing products may have a controllable impact on large life insurance companies with diverse channels, while it may have a certain impact on non bank insurance companies with single channels.
The impact of pressure drop fees on geometry
From the pricing composition of insurance products, it includes net premiums, additional premiums, etc. Among them, commissions, training fees for bank personnel, incentive fees, etc. are all included in the additional premiums. If the final actual sales expense rate is higher than the predetermined additional expense rate at the time of product pricing, there will be a cost difference loss, which is obviously not conducive to the long-term sustainable operation of insurance companies.
For large insurance companies that used to excel in agent channels, due to the pains of agent team reform in the past two years, the banking and insurance channels have begun to rise. Taking China Taiping Insurance as an example, the 2022 annual report data shows that the premium for new insurance business in its banking and insurance channels increased by 332% year-on-year, and the proportion of banking and insurance channel premiums in total premiums increased by 10.01 percentage points from 3.52% in 2021 to 13.53%.
And with the increasing efforts of insurance companies in the past two years, there has been a high actual sales expense rate in the banking and insurance channel transaction fees. From the semi annual reports of listed insurance companies this year, it can be seen that the handling fees and commission expenses have almost all shown a double-digit year-on-year growth trend, which is to some extent higher than the increase in premium income. According to industry exchange data released by a media outlet, in the first four months of this year alone, personal insurance companies saw a year-on-year increase of over 43% in their bank insurance channel transaction fees.
"Some insurance companies and banks' total to total 'agreement fees are not high, but some banks'' split to split 'agreements in certain regions and some' small accounts' given to some bank sales personnel have pushed up the actual cost rate," said the person in charge of the above-mentioned banking and insurance channels.
The most direct injury caused by the drop in transaction fees for the bancassurance channel this time is the intermediary business income of the bank, after all, the current consignment insurance business has become a new growth momentum for the bank's consignment business. Especially since last year, under the influence of fluctuations in the capital market, investor confidence has recovered slowly, and most banks have performed poorly in their wealth management and fund sales businesses in the first half of this year. In contrast, at the time of the conversion of life insurance reserve interest rates, there is strong demand for some insurance products, which has become an important support for the bank's revenue performance.
Data shows that in the first half of this year, the top growth in net income from handling fees and commissions were mostly from urban rural commercial banks with lower business bases. Several banks mentioned the positive impact of insurance business growth, which to some extent offset the decline in wealth management and fund sales services.
So, how much impact will this fee drop have on the bank's intermediary income? Multiple banking industry researchers have analyzed that the impact of fee rate adjustments on bank collection needs to be analyzed on a specific basis, as there is a greater potential for a reduction in products with long-term payment deadlines. However, there are differences in the sales structure of various banks, so there is still uncertainty about the specific reduction ratio.
According to the comprehensive understanding of First Financial, some banks do have actual expense rates exceeding 40% or even as high as 50% for some long-term products, but the overall proportion is relatively small; There are also joint-stock companies with a five-year insurance premium sharing rate of about 23%. If the upper limit of the fee rate of about 14% for the five-year period is followed according to the industry self-discipline agreement mentioned above, the impact will be about 40%; In addition, some insurance companies have stated that the actual transaction rates are not high, and the impact this time is limited. These insurance companies are more concentrated in "bank insurance" companies and some insurance companies with exclusive banking cooperation agreements.
Overall, the biggest change in this adjustment is that banks with different bargaining power in the past will charge consistent handling fees after unified adjustment. Therefore, in the past, banks with higher channel rate pricing and a larger proportion of sales revenue have been more significantly affected this time.
According to estimates from institutional sources, assuming that all rates are lowered by 30%, the impact on the revenue of the bank is about 0.2%, and the impact on profits is about 0.4%. Ping An Bank, China Merchants Bank, and others may be more affected, with expected revenue reductions of 1.1% and 0.3% respectively, and profit impacts of 2.7% and 1.3%. Assuming a 50% reduction in all rates, it is expected that the revenue of Dahang, China Merchants Bank, and Ping An Bank will be affected by around 0.3%, 1.8%, and 0.6% respectively, and the profit impact will be 0.7%, 4.5%, and 2.2%, respectively.
However, some securities analysts also believe that in daily cooperation, some banks do have inconsistent reporting due to "private fee hikes". However, in the first half of this year, when the supply of insurance policies is in short supply, the bargaining space of banks will also narrow. In addition, with the decrease in fixed interest rates in the future, the "fee hikes" will decrease due to supply and demand. Therefore, from a market perspective, the requirement of "integration of reporting and banking" has limited impact on most banks.
According to this year's semi annual report, among the listed banks with a high proportion of net revenue from handling fees and commissions, the main ones are state-owned large banks and joint-stock banks such as China Merchants Bank, Ping An Bank, and CITIC Bank. According to institutional calculations, according to 2022 data, the proportion of agency insurance revenue in the revenue of state-owned large banks is about 0.5% to 1.0%, while China Merchants Bank and Ping An Bank account for about 3.6% and 1.1%. In the first half of the year, Agricultural Bank of China, CITIC Bank, and others disclosed a significant increase in agency premiums in their semi annual reports, while Ping An Bank achieved a year-on-year increase of 107.2% in agency personal insurance income.
The above-mentioned institutions believe that after the reduction of transaction fees, banks can also reduce the impact by adjusting their consignment structure and exchanging quantity for price.
Regarding the impact of this rate adjustment on investors, several bank account managers have stated that it has no impact on investor returns, and the most direct impact currently is that they will not be able to purchase insurance products from banks in the short term. After the products resume listing, they will return to normal. But some account managers have also expressed uncertainty about whether the range of optional products will change in the future.
From Fee Competition to Product Competition
Guolian Securities stated that in the short term, requirements such as setting upper limits on commission fees for the bancassurance channel will to some extent reduce the profit margin for banks to sell insurance products on behalf of banks, which may have an impact on the enthusiasm of banks to sell insurance products. At the same time, with the re reporting and switching of products, it is expected to affect the short-term product supply to some extent. In addition, the demand for overdraft before the scheduled interest rate switch will have a significant impact on the premium sales of the bancassurance channel in the short term.
In fact, the premium of the banking and insurance channels in August has already experienced a significant decline under the comprehensive effect mentioned above. According to data from industry exchanges, the new monthly premium for bancassurance channels in August sharply decreased by nearly 60% year-on-year. The above-mentioned person in charge of the bancassurance channel predicts that the premium of the bancassurance channel in September will further decline on the basis of August.
However, in the medium to long term, Guolian Securities believes that reducing transaction fees will promote rational competition in the banking and insurance channels, promote the healthy development of the industry, and continuously improve the value contribution level of the banking and insurance channels.
Several industry insiders have analyzed to First Financial reporters that the reason for the drop in transaction fees is the irrational competition of transaction fees in the banking and insurance channels, and the reason for such irrational competition is actually the high degree of homogenization of banking and insurance products. The reduction in transaction fees this time is not only aimed at preventing the risk of interest spread loss on the investment side, but also at reducing the debt cost of insurance companies from the expense side. On the other hand, it also guides banking and insurance products from vicious competition in transaction fees to product competition, guiding insurance companies to further study how to design products and services more attractive, establish true competitive barriers, and improve their discourse power and bargaining power in channels.
