Manulife’s Asia deal rekindles bank debate

Manulife Financial Corp. is paying $ 1.2 billion US for the privilege of selling its life and health insurance products through the branches of DBS Bank Ltd. in four key markets in Asia, a move that will extend the Canadian firm’s reach in the important region and accomplish a distribution arrangement that isn’t possible for Canada’s banks.

The 15- year exclusive agreement covering Singapore, Hong Kong, China and Indonesia draws a stark contrast with Manulife’s home market where banks are barred from selling most types of insurance in their branches.

In Asia, however, banks represent a growing channel for selling insurance, and the distribution model now accounts for between 30 and 60 per cent of insurance sales in many Asian markets, according to Rob Sedran, an analyst at CIBC World Markets Inc. in Toronto.

Manulife’s new partnership in Asia “does raise the question in my mind of why insurance products cannot be distributed via Canadian bank branches,” said Peter Routledge, an analyst at National Bank Financial. “Asian consumers benefit from having the freedom to purchase life insurance where they do their banking — a freedom Canadian consumers do not have.”

Wednesday’s distribution agreement in Asia will give Manulife access to about six million DBS Bank customers through a network of more than 200 branches in the four markets, as well as through Internet and mobile banking.

DBS Bank has retail, wealth, and business customers, and a sales force of more than 2,000 professionals.

As a result of the agreement, Singapore, which is currently a marginal market for Manulife, will become its third- largest business in Asia, according to CIBC’s Sedran.

Banks in Canada are allowed to own insurance companies and sell insurance products, but they are not permitted to sell them through their extensive branch networks — despite past efforts to have this Bank Act restriction relaxed.

Arguments against allowing the one- stop shopping include a potential for tied selling of bank products, or pricing that would squeeze out non- bank competitors that have fewer operations and less clout. There have also been concerns raised about job losses for insurance brokers and agents.