- Bancassurance is a deal between a bank and an insurance company that allows the insurance company to sell its products to the customers of the bank.
- The insurance company makes more money and has more customers without hiring more salespeople.
- The bank benefits from selling insurance products because it brings in more money.
Bancassurance is an agreement between an insurance company and a bank that lets the insurance company sell its products to its customers. This kind of partnership can be good for both businesses. When banks sell insurance products, they make more money, and when insurance companies get more customers, they don’t have to hire more salespeople.
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How to Make Sense of Bancassurance
Bancassurance is common in Europe, where it has been done for a long time. European banks dominate the global bancassurance market, like Crédit Agricole (France), ABN AMRO (Netherlands), BNP Paribas (France), and ING (Netherlands).
But the picture is very different in each country. A 2013 report found that bancassurance made up 83.6% of life insurance sales in Italy, 66.2% in Spain, 64.2% in France, and 62.6% in Austria. However, its market share was lower in Eastern Europe and nonexistent in the U.K. and Ireland.
The United States was slower than many other countries to accept the idea. Part of the reason for this is that the question of whether or not banks in the U.S. should be allowed to sell insurance has been controversial for a long time. Concerns include unfair competition for insurance agents, risks to the banking industry, and the possibility that banks could force customers to buy insurance to get loans.
On the other hand, advocates said that both banks and insurance companies would benefit from the deal, that it would be convenient for customers, and that more competition could lead to lower insurance prices.
What is Bancassurance?
The Bank Holding Company Act of 1956 prohibited many large national banks from selling insurance products. But a bank could only sell insurance if it was a certain type and was regulated by a certain agency or agencies. In a 1990 report, the U.S. General Accounting Office said that by the late 1980s, many states let state-chartered banks sell most types of insurance, and “in towns with populations of less than 6,000, bank holding companies, national banks, and some state banks can sell all types of insurance.”
In 1999, the federal Gramm-Leach-Bliley Act eliminated most of the remaining rules that kept U.S. banks from selling insurance products. The states still regulate other parts of insurance.
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Growth of the Bancassurance Industry
The bancassurance market is growing worldwide, especially for life insurance and in the Asia-Pacific region. The value of the global bancassurance market was $1.268 trillion in 2021, according to the research and consulting firm IMARC Group. IMARC thinks the market will continue to grow at a rate of 5.9% per year and be worth $1.802 trillion by 2027. A big reason for the trend is the growing number of older people who need more health insurance, life insurance, and retirement plans.
What are the pros and cons of bank assurance?
From the point of view of a consumer, bancassurance has both pros and cons. On the plus side, buying insurance at the bank is easy. This is especially true in small towns where there may not be many insurance agents, though this is less of a problem now that insurance is widely available online. This may also make more Americans who need life insurance more likely to buy it.
On the other hand, the fact that it’s easy to buy insurance at the bank may make people less likely to compare prices and find the best deal. There are also questions about whether bank employees are as qualified as insurance agents and brokers to help customers with their insurance needs.
There doesn’t seem to be much of a downside for banks that get into bancassurance other than the risk to their reputation if the insurance products their employees sell are too expensive or not right for the customer.
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