DEFINITION of 'Bancassurance'

An arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base. This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.

BREAKING DOWN 'Bancassurance'

Bancassurance arrangements are very common in Europe, where the practice has a long history. In the United States, bancassurance was prohibited until the repeal of the Glass Steagall Act in 1999, and has not yet caught on as a practice for most forms of insurance. Bancassurance remains prohibited in a number of other countries; however, the global trend has been toward the liberalization of banking laws.

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