Borrower Insurance: Banks are preparing the response to alternative insurers

While Bruno Le Maire asks the banks to limit the increase in credit rates, they are preparing for a new commercial battle, over the insurance of the debtor. A market in which they now hold a dominant position. Despite the Hamon and Bourquin laws, which give customers the option to withdraw from their contracts during the first year of the loan offer and then on the anniversary date, the market share of so-called “alternative” insurers has remained stagnant at almost 12%, the Financial Sector Advisory Committee (CCSF) report released in October 2020 revealed. However, these players are known for their aggressive pricing.

From Thursday 1 September the entry into force of the Lemoine law risks upsetting the face of the market. The termination of the insurance contract will be possible at any time for the stock of loans. “So far the banks have been able to play certain jokes to build customer loyalty, invoking deadlines or the date of sending the cancellation letter that were not appropriate. The reform will put an end to this situation., explains Christophe Vanhuyse, head of the Swiss Life loan office. The insurer plans to benefit directly. “Our general agents and brokers have anticipated the entry into force of the Lemoine law for a number of their clients who wish to change insurance”He adds.

Almost half of customers are in favor of switching insurers, according to a Sia Partners study conducted in April. Many business opportunities to be seized. “The limited window of opportunity for resolution has so far prevented insurers from organizing effective commercial campaigns. Resolving at any time can open up a very dense battle for players who already have home insurance customers, for example, and will be able to cross-sell.judge Pierre Etchegoyen, Sia Partners insurance consultant.

Bank bomb actions

“We are not expecting the big night anytime soontempera Sébastien Limousin, director of distribution and digital at the wholesale broker April, which is among the more aggressive alternatives. This reform is part of a context in which the conditions for access to credit are tightening, the market share of alternatives should not change much as a whole. The volume of proxies on new loans will automatically decrease, on the other hand we have a concrete opportunity to seize the recovery of the stock of contracts with banks.

Not even François-Régis Bernicot, CEO of Suravenir, the insurance subsidiary of Crédit Mutuel Arkéa, is expected “a tsunami”. “Mechanically there will be an increase in cancellations, but volumes cannot be predicted. We greatly underestimate the customer’s attachment to his bank. Some competitors, however, are eagerly preparing to bomb bank stocks to prey on good risks.recognizes.

Young people under 40, who borrow between € 200,000 and € 500,000, are more inclined to save by changing insurers, reveals the Sia Partners study, while now they are drowned in the pooling of collective bank agreements. “Alternatives are expected to be able to attack contractual actions. The insurance proxy rate could increase from 2% to 3% in 2023 “believes Pierre Etchegoyen.

Banks on the alert

For now, French banks are watching the attitude of alternative insurers before changing their reactions. “One of the hypotheses is that the banks are cutting the margins to play on the price leverage. The group contracts of the banks are very marginal, of the order of 70% “analyzes Sébastien Limousin.

Market leader, CNP Assurances thus announced, in the spring, with its partner and shareholder La Banque Postale, the freezing of creditors’ insurance prices on new contracts. “while the loss ratio will increase due to the abolition of the health questionnaire for loans under 200 thousand euros”underlines Thomas Chardonnel, Director of Partnerships France.

If they fail to raise their rates to keep up with the evolution of the cost of risk, the insurance banks can revise their margins downwards. But the economic equation in a banking group is more complex. “The commission pays the banking network for the distribution of contracts and it will be difficult to cut corners. This plays into the wait-and-see attitude we are seeing among banks right now: their priorities are inflation, rate hikes and tightening credit conditions.explains Pierre Folk, associated partner insurance at Sia Partners.

Offer and prices to be reviewed

However, bank insurers are not standing by. “Termination requests can increase. And the best answer we can provide lies in the quality of our offers and our services “says Thomas Chardonnel.

Suravenir took the lead in reworking its prices. “Since June, our system has been based on the residual capital owed by the borrower, in order to protect us from competition from alternative insurers. We have also changed the segmentation of our under 40 offering. We are also considering revising our offering on group contracts so that healthy people are not penalized by pooling, for example we are considering segmenting them for smoking customers . This is only a first step because our ambition is to stay in the market and adapt “explains its general manager.

Crédit Mutuel Arkéa has also prepared itself operationally. “We train banking consultants and adapt our ‘process’ to be able to formulate a response to the customer in ten days with a modification of his credit as required by the Lemoine law”, says François-Régis Bernicot. The next few months promise a pitched battle.

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