Banks looking to exploit life insurance market

Press, 19 July 1988, Page 21

Banks looking to exploit life insurance market

By MICHAEL KOSLOWSKI, of AAP (through NZPA) Sydney

Life insurance is becoming a big focus of the “financial supermarket” approach by Westpac and other leading banks keen to exploit the opportunities provided by deregulation. Since the Australian banking system became more competitive in 1983, the Westpac Banking Corporation, ANZ Banking Group, National Australia Bank, and the Commonwealth Bank have all moved to extend their range of customer services. This sparked a chase for the life insurance dollar in addition to other money spinners such as unit trusts, personal superannuation, and insurance bonds. Australia’s two biggest insurance houses, the Australian Mutual Provident Society (AMP) and National Mutual, countered this by marrying into the banking industry. In 1985, AMP and the Write-off The Hastings Building Society has written off $670,000 from an investment. The investment was in the Investment Finance Corporation which went into receivership earlier this year. Despite the loss the society still managed a net surplus for the year of $6335, but it was well down on last year’s $292,423. Fay released BNZ Investments Management said it had agreed to release Fay Richwhite Investment Management from a contract to sub-manage the BNZ Sagittarius Trust. Fay Richwhite asked to be released after reviewing its operations when it resigned as the manager of the Capital Investment Trust. The investments of the BNZ Sagittarius Trust are spread among other trusts in the BNZ Trust Group. In future, it was proposed that the asset allocation decisions would be made by the board of BNZ Investments Management.

Chase Manhattan Bank of the United States, joined forces to win a banking licence and form AMP Chase Bank, as did the National Mutual and the Royal Bank of Canada to form the National Mutual Royal Bank. Australia’s biggest privately owned and most profitable bank, Westpac, won its insurance "licence in October, 1986.

Westpac marketing general manager, Mr Peter Joyner, said the bank was serious about introducing life insurance as part of a financial services supermarket. “That’s been our aim since we went into the investment business in 1959 — it was becoming apparent then that if banks wanted to retain customers they had to offer them other products to keep them coming in the swing doors, if you like,” he said. “Sure, it’s becoming a one-stop type situation which is I’m sure what all banks would be looking at. If we’re talking to customers about one aspect of finance, isn’t it

logical that we should have this other range of products?”

The life insurance industry had an image problem, but Mr Joyner said Westpac would not be pestering unsuspecting customers for business.

He remained philosophical about competition between the big life insurance houses and the banks.

“The big two have got banking licences. We’ve got into it the other way. There are some big organisations all in each other’s beds really.” Westpac aimed to catch up with “No. 2” — National Mutual — within five years. “They’re very big organisations which have been going for a very long time and have a heck of a lot of reserves. We don’t kid ourselves that it’s not going to be a mammoth task,” he said. Westpac has a ready market in which to promote new financial services, because it has more than 3 million customers.

A new advertising campaign would begin shortly

highlighting Westpac’s involvement in the investment business as well as in banking. But, it would take some time because people perceived Westpac purely as a bank, he said.

“We’ll gradually want to get the message across that this is a big financial institution that does more than just your banking needs. We don’t have to have 5000 sales people — we’ve already got them via 1500 branches and investment offices around the country.

“This leads to a more economic product distribution than having one big shop and a whole lot of roaming people.

“From now on the in-vestment-cum-life side will be very much part of the bank’s business, whereas perhaps it might have been a second or third rank priority. “Banks are looking for income, banks are looking to keep customers — and you keep customers by selling them a lot of services. They’re more likely to leave you if you’ve only got one,” Mr Joyner said.