A report by market research
consultancy Finaccord reveals some surprising similarities and
differences in the kinds of insurance policy that are cross-sold
with financial products in different countries around the world.
Robin Arnfield talks to the report’s author.

Bar chart showing packaged insurance per payment card and bank account product by country, 2010A recent report
from Finaccord looked at the way insurance products are bundled
together with payment cards in 10 of the world’s leading and
emerging markets. For instance, Crime victim and dental insurance
are among the priorities in Brazil, while travel insurance and
creditor insurance are very popular in North America.

Finaccord surveyed 30 different
types of insurance and assistance policies and 5,600 card products
and bank accounts in 10 countries (Australia, Brazil, Canada,
China, India, Japan, Russia, South Africa, South Korea and the US)
for its Insurance and Assistance linked to Payment Cards and
Bank Accounts in Major Global Markets
study.

Analyst Simon Tottman, who wrote
the report, says that some US banks offer added-value bank accounts
providing packaged insurance or assistance benefits. However, none
of the 730 products surveyed in Brazil and the 385 products in
Canada included added-value bank accounts.

In Brazil, 91.5% of products
offering insurance or assistance benefits were credit or pay-later
cards, 7.4% debit cards, and 1.1% prepaid cards. This compared to
99.5% credit cards and 0.5% prepaid cards in Canada, and 94.7%
credit cards, 4.4% debit cards, and 0.9% added-value accounts in
the US.

In Japan, the most commonly found
example of niche cover is seat-belt insurance – a form of
accidental death/personal accident cover that applies when driving,
but only if the seat belt is worn, whereas in South Korea,
insurance policies for facial injuries and cosmetic surgery are
commonplace.

“Almost every aspect of the
provision of packaged insurance and assistance varies significantly
between countries – from the types of policies and their
penetration rates to the identities of the insurance and assistance
providers themselves,” says Tottman.

“This has helped shape an
intriguing competitive landscape where established global insurers
often find themselves competing on a surprisingly equal footing
with young, local ventures.”

The days of packaged insurance
being limited to a narrow range of fairly standard types of policy
(such as credit card payment protection insurance) are long
gone.

Product
development

Finaccord says that the average US
payment card has 4.59 insurance covers associated with it.
Three-quarter of the credit cards surveyed in Canada offer creditor
insurance covering life/permanent disability and/or temporary
incapacity/unemployment.

“Creditor insurance is also
commonly offered alongside payment cards in the US,” Tottman says.
“Yet most types of accident and health benefits are either
virtually or completely absent from the Canadian and US packaged
markets.”

A niche cover that is popular in
Brazil is dental insurance.

“Just 6.3% of Brazilian cards
surveyed offer dental insurance and assistance,” Tottman says.

“The big Brazilian banks have their
own insurance subsidiaries which underwrite the insurance products
packaged with their parents’ cards. But, for niche products such as
dental insurance, they will go to a third-party provider such as
OdontoPrev, a Brazilian dental insurer which works with many of the
major banks.”

Regional
variation

Some 85% of the 290 insurance and
assistance providers documented in the research are operating
solely within their own domestic market, with only a dozen global
insurance and assistance groups – including Allianz, Chartis and
International SOS – being active across three or more of the ten
countries analysed.

Tottman notes a feature of
Brazilian ‘domestic’ packaged insurance covers – for example, road
assistance – is that they often extend to neighbouring countries
such as Argentina.

“This compares to other countries
which we surveyed, where insurance covers provided with cards tend
to be restricted to the country in which the card was issued,” he
says.

These packaged insurance markets
are, of course, highly dependent on the payment card industries
themselves.

While US consumers are cutting up
their plastic in an effort to be less reliant on credit, South
Koreans are embracing payment cards in a very different way – by
sniffing them, as several leading fragrance manufacturers have
recently introduced scented payment cards. It is not yet clear
whether shoppers will be able to top up their card’s fragrance
online.

The numbers of payment cards
circulating in China, India and South Africa are experiencing
particularly high levels of growth.

In China, the number of credit
cards in issue is increasing annually by an estimated 47.4%,
whereas India’s debit card population has been growing at around
32.6% a year (figures quoted are compound annual growth rates for
the period 2006-2010).

“With payment card sectors in both
emerging and established markets continuing to evolve and gather
pace, the future of packaged insurance and assistance looks bright
and highly diverse,” concludes Tottman.

“The local and international providers behind these policies are
increasingly viewing it as a key distribution channel for their
products.”