What is 'Bancassurance'
Bancassurance is 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 bases without having to expand their sales forces or pay commissions to insurance agents or brokers.
BREAKING DOWN 'Bancassurance'Bancassurance, otherwise known as allfinanz, was prohibited in the United States until the repeal of the Glass-Steagall Act in 1999, and still hasn't caught on as a practice for most forms of insurance. The Glass-Steagall Act of 1933 prohibited banks in the United States from entering into business with a firm that provides another type of financial service.
Bancassurance arrangements, however, are very common in Europe, where the practice has a long history. The global bancassurance market is dominated by European banks such as Credit Agricole (France), ABN Amro (Netherlands), BNP Paribas (France) and ING (Netherlands). For instance, in December of 2015, Allianz and Philippine National Bank (PNB) formed a joint venture through which Allianz gains access to over 660 commercial bank branches and 4 million customers located in the Philippines. Allianz SE is an insurance and asset management company based in Munich, Germany, with a market cap of 64.67 billion Euros as of June 24, 2016.
Bancassurance Growth in Europe and Rest of World
Bancassurance market growth in Europe is expected to be highest in Turkey at 14.70% and in Poland at 15.17% until 2020, and more stagnated in the largest European economies, where market penetration of insurance products are highest. In Western Europe, insurance premiums account for 7.4% of GDP, whereas in the Philippines, insurance premiums only account for 1.7% of GDP. In recent years, the practice of bancassurance within the insurance industry is most prevalent in Latin America. In 2013, the share of life insurance polices sold through commercial banks was 44% in Colombia and Mexico, 50% in Chile, and 80% in Brazil. Bancassurance is widespread in China, with 54 of China's 108 largest banks offering some form of insurance in 2014. Furthermore, 30% of all new insurance policies sold in China were sold by banking firms, as of June of 2016.
Bancassurance remains prohibited in a number of other countries, but the global trend has been toward the liberalization of banking laws and the opening up of domestic markets to foreign firms.