European Life insurance firms are well-placed to act both as distributors and providers of wealth management services and products, although the industry’s health differs considerably across the region, according to Celent.

European Life insurance firms are well-placed to act both as distributors and providers of wealth management services and products, although the industry’s health differs considerably across the region, according to Celent, the research and consulting firm.

In its report, Wealth Management Opportunities in the European Life Insurance Industry, the Boston-based firm said the European life insurance market has been through a stormy three-year period and the main countries remain at different stages of development, as they were before the financial crisis.

But it goes on to say: "Life insurance companies are well-positioned to distribute wealth management products and to be long-term retirement solution providers.”

Europe’s market varies widely on national lines. The bancassurance model does not succeed equally in all geographies. Banks are the most important intermediaries in terms of life insurance distribution in France and Italy. Life insurance penetration is much higher in France, however.

The findings of the report come at a time when wealth managers, looking to find ways of adding net money inflows after a relatively stagnant past three years, are seeking ways to better reach a new client base and more efficiently serve existing clients. In the UK, independent financial advisors, for example, have traditionally played a far bigger role in distributing products such as funds than is the case in France, Germany or Italy.

“The financial crisis changed the way insurers and insured perceived the future value of investment and saving types of insurance products. European countries have seen their economy shrink following the financial crisis and the economic downturn,” said a statement by Celent about its report.

“Some countries were relying on a specific industry, such as real estate in Spain and financial services in the UK. Even though the other European regions were more diversified, their economic activity has also suffered, and the life insurance market has been affected. In France, for instance, life insurance premiums decreased by 9 per cent in 2008, proving once again that life insurance is closely correlated to financial markets' performance and volatility,” it continued.

However, despite the advantages that life insurers may have as players in the wealth management market, the report said total IT spending among European insurance companies is expected to fall from 2009 levels; 56 per cent of European insurance firms' IT budgets are spent on the life/health sector. Celent estimates that IT spending by European life insurers will continue to decrease in the coming years.

Among the recommendations Celent makes are:

-- Reassess the portfolio of life insurance products, considering future scenarios influenced by exogenous and endogenous factors;

-- Develop a multichannel distribution strategy to best serve customer needs;

-- Anticipate new customer needs created by the ageing population, particularly retirement planning;

-- Spending on IT initiatives will be reduced, but firms can focus on self-service models for advisors and end-clients;

-- Focus on investment advisory services, risk management, reporting, portfolio management, financial planning, and CRM;

-- Insurance firms need to continue to focus on all client segments, but expand and develop opportunities in the mass market and mass affluent segments. Firms with local presence and good distribution capabilities might benefit from targeting the lower end of the market.