May 2013

Introduction to Non-US Life Insurance Products Distribution

By Rong Rong

It is no surprise the way life products are distributed varies by country. The reasons and incentives to buy life insurance are different due to culture, tax regime, marketing, etc. This article gives a brief introduction to non-U.S. life product distribution using two country examples, United Kingdom and China.

The primary U.K. life product sale channel are Independent Financial Advisers (IFA). An IFA provides advice regarding the most suitable product for a client, having a full understanding of the client’s financial background. They are the most successful distribution channel in the U.K. and account for the majority of the life insurance product sales. The recent Retail Distribution Review (RDR) prohibits insurance product providers from paying commission to financial advisers. The implementation of RDR helps customers to receive the best advice matched to their particular circumstances by a financial adviser. Bancassurance is another major life insurance distribution channel. It is an arrangement made between a bank and an insurance company to enable products of the insurance company to be sold through branches of the bank. U.K. insurers also directly sell life insurance products via their own writing operations, Internet and telephone. The bancassurance and direct sale life products’ experience is generally worse than IFA. There is also a growing trend for alternative distribution channels in the U.K. life insurance market. For example, one of the biggest U.K. supermarkets has successfully distributed 3 percent of the term market through online sales.

While life insurance products tend to be sold instead of bought, this is even more true in China. Customers are not familiar with life insurance and have lower confidence in the industry. The majority of life insurance products are initially sold via agents to family and friends. Many Chinese customers believe friends and family are the most important source of information for buying insurance products. However, there is a conflict of interest due to the “sell to family and friends” model. Insurance sold by agents show poorer experience compared to other channels. According to an Ernst& Young recent Asia-Pacific insurance survey, 55 percent of customers in China did little or no research before purchasing a life insurance product, but there is a market shift in customers' intentions to conduct more research in the future. This potential shift may grow alternative distribution channels in the Chinese life insurance market.

Even though similarities are found among different countries’ life insurance distribution, it is always important to understand customers’ unique purchasing behaviors and identify growing trends to be successful in distributing life insurance products in any country.

Rong Rong, FSA, CERA, MAAA, is assistant vice president, Swiss Re Underwriters Agency. She can be contacted at