Digital channels may displace half of Asia's insurance agents
The number of insurance agents in Asia could halve over the next three years as digital sales take over their commissions and experienced agents approach retirement, according to Aviva CEO Mark Wilson. This comes as new Chinese regulations are making it harder for those living in the mainland to buy insurance from agencies based in Hong Kong to prevent excessive outflows.
Digital to replace Asian insurance agents: Aviva CEO

Bloomberg





Aviva PLC CEO Mark Wilson said the number of insurance agents in some of Asia’s most developed markets could halve over the next three years as digital sales start to eat into their commissions.

The agents, used by some mainlanders to avoid capital controls, have been a key driver of earnings for insurers in Asia, including in Hong Kong, where people have flocked to buy policies.

Wilson, a former CEO of Hong Kong-based AIA Group Ltd, said numbers would also fall as more experienced agents approach retirement age.

His comments contrast with those of competitors including Prudential PLC, which generates about half of its earnings in Asia, much of that from its 500,000-strong agency force.

“Most of the Asia growth story has been on the back of agency,” Wilson said in an interview at Aviva’s headquarters in London. “The agency era in a lot of those markets is now over; you have extraordinarily high commissions and an aging agency force.”

Aviva, which does not rely on agents to sell its products in Asia, competes with both AIA and Prudential in seven markets in the region including China, Hong Kong and Singapore.

Wilson, a 50-year-old New Zealander who has spent 14 years working in Asia, said it is “ripe for disruption.”

That should lower costs and boost profits for insurers in some markets, including Singapore, Panmure Gordon & Co analyst Barrie Cornes said.

A typical commission for the first five years of a 20-year life insurance contract in Hong Kong could be anywhere from 100 to 160 percent, industry figures show.

Consultancy firm EY said the average age of an agent in Asia is about 45, with the most successful senior agents closer to 55.

In China, agents face an additional threat. Regulators are making it harder for mainlanders to buy insurance from an agent in Hong Kong, where there are 59,000 registered, to try and prevent them from moving money there.

Capital outflows from China reached US$1 trillion last year, according to Bloomberg Intelligence estimates.

Still, not everyone in the industry agrees that agents’ days are numbered.

Prudential, the UK’s largest insurer, said at an investor day in London earlier this month that it had ramped up its recruitment in the region.

AIA, which operates in 18 countries, has more than 5,600.

Aviva has stepped up its investment in technology, opening a “Digital Garage” in Singapore to help it sell insurance directly to customers online.

Wilson is also betting that financial advisers will increasingly replace agents as sellers of insurance.

The UK company, which lost its bancassurance deal with Singapore’s DBS Group Holdings Ltd last year, launched a financial advisory firm in the city-state in July. It started with 280 former insurance agents who can sell Aviva products and those of its competitors.

They cost Aviva 10 percent of what they had offered to pay DBS to sell policies, Wilson said.

In Singapore, “we are becoming the home for mature agents who have 20 years of experience and want more freedom and independence,” Wilson said.

Older agents in Asia “don’t want to be in tired pyramid agency structures,” he added.

There is also a high turnover of younger advisers who have lost enthusiasm, EY said.

Even so, Wilson is not looking to “put a lot of capital” into the region that accounts for less than 10 percent of Aviva’s operating income.

The CEO has repeatedly said he would only do smaller deals after buying Friends Life Group Ltd last year.

Still, that did not stop his appointment of Chetan Singh as head of mergers and acquisitions this year from fueling speculation that Aviva might have bigger ambitions.

Singh previously led deal-making for financial institutions in Southeast Asia for JPMorgan Chase & Co.

While Wilson has reduced Aviva’s markets to 16 since joining in 2013, some businesses, including Taiwan, Spain, Italy and Friends Providential International might still be put up for sale.

The company operated in 28 markets in 2011.

“I will sell as much as I buy this year,” he said. “Everyone assumes that I will go and buy stuff in Asia and I haven’t. I’m pragmatic.”