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Low-cost distribution is key to growth

Dutch insurers have been caught up in the Europe-wide trends for consolidation and rationalisation

The Dutch life insurance sector is following firmly in the footsteps of the majority of the European market, as bancassurance-distributed products grab an increasing share of new business.

Bancassurers' low-cost distribution is being seen as a means for insurers to remain competitive in the future, although insurance intermediaries are also expected to remain important in the field and a high level of business still goes through them.

As in the UK, the well developed Dutch personal pensions market has enjoyed long-standing government encouragement, via fiscal concessions for both individuals and employers. And with the onus firmly on the individual to provide for retirement through a vehicle of choice, Dutch insurers have been in the thick of the scramble to pick up the business on the ground.

ING, Bancassurer company, now sells 12% of its business through its banking channel, with Fortis trailing close behind, demonstrating the need for wider public distribution channels.

Greater public acceptance of risk bearing and a romance with bullish stock markets is also manifesting itself via rapid expansion of the unit-linked life sector, although this has started from a low base compared to the UK.

This new preferred savings vehicle showed volume increases of 50% in 1996, say the S&P figures, and its success is being attributed to the higher returns procured for policy holders.

However, Lewis Phillips of London-based brokers Fox Pitt Kelton warns that the market may not be so bright this year: Strong increases in sales of unit-linked products are not surprising in bull markets, but it will be interesting to see how they develop in the coming months with the current economic instability."

The life market though continues to be dominated by Nationale Nederlanden Lev-en, the insurance flagship of ING. Hot on its heels are Aegon, Fortis AMEV Leven and CGU's Delta Lloyd Leven, all belonging to transnational financial service giants.

Proof that Dutch groups are travelling well can be seen particularly in Aegon, which owns Scottish Equitable in the UK, and is doing substantial business through Providian in the fertile US market.

The Europe-wide trend for consolidation and rationalisation in the industry is just as prevalent in the Netherlands, with Achmea, one of the mutuals, and the holding company for Centaal Beheer amongst others, merging in February this year with PVF Pensionen, the former pensions arm of the Dutch industrial insurance board (GAK).

AXA-UAP also announced in May the merger of its two Dutch insurance operations, AXA Leven and UAP-Nieu Rotterdam, for efficiency reasons.

More significantly the merger of Dutch group Fortis with Belgium's largest bank Generale de Banque, alongside the purchase of Spanish number three group Vida Caixa and Segur Caixa, signals a significant beefing up in the sector.

Another leading analyst believes the proliferation of a pan-European insurance sector will have little impact on the Dutch market, with all the main European players firmly ensconced in the country already. "The Dutch market has long been a very open field and, notwithstanding the euro, life insurance is an area where it is essential to have a local presence for distribution and taxation reasons. Un-less we reach a point of tax harmonisation in Europe, then there is little point in UK life insurers, for example, offering products externally to the Dutch market," the analyst says. Hugh Wheelan"

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