Bancassurance Under Scrutiny as Lloyds TSB Ditches In-House Insurer

Strategic Insights -

Lloyds TSB's decision to replace its in-house insurance operation, Lloyds TSB Life, with Scottish Widows has raised concerns about the future of bancassurance and the potential for customers to end up with products carrying different fees and commissions. The move has sparked scrutiny of the exclusive sale of life products by banks and building societies, with many failing to reach sales and market penetration targets. As the bancassurance sector faces intense competition, banks and building societies must decide whether to sell well-known brands in-house or opt for more restrictive investment choices.

Key Takeaways:

  • Lloyds TSB will replace its in-house insurer, Lloyds TSB Life, with Scottish Widows, citing the latter's better ratings and performance.
  • The bank's decision has raised concerns about the potential for customers to end up with products carrying different fees and commissions.
  • Lloyds TSB's in-house salesforce of 2,000 "advisers" and 800 "consultants" can only sell and advise upon the bank's own products, excluding Scottish Widows plans.
  • Many bancassurers have failed to reach sales and market penetration targets, and experts believe companies that do not participate in surveys are often those with poor performance.
  • Insurance experts recommend that potential Lloyds TSB Life customers should consider Scottish Widows as an alternative, as it has been rated better than Lloyds TSB Life.
  • The takeover also affects investors in Royal Scottish Assurance, Tesco Life, and Direct Line Life, which have their administration, compliance, and investment management outsourced to Scottish Widows.
  • Lloyds TSB's Abbey Life, a direct sales operation with a 1,600 commission-only salesforce, will remain a standalone operation.

Statistics:

  • Lloyds TSB Life has around 500,000 customers, or just one in 25 of the group's bank account holders.
  • Lloyds TSB's mortgage customers have bought Cheltenham & Gloucester home loans, the Lloyds TSB in-house brand, at a rate of one in three.
  • Four bancassurers, including NatWest, Halifax, Royal Bank of Scotland, and Woolwich, failed to send in results to the recent Money Marketing survey of endowments and pensions.
  • bancassurers from Barclays, Midland, and the National Australia Group did send in figures.

Sources:

  • Bancassurance article in Money Marketing
  • Mike Fairey, Deputy Group Chief Executive of Lloyds TSB
  • Mike Fairey's comments to the insurance trade publication