What Is Bancassurance?

Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base. This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer bases without increasing their sales force or paying agent and broker commissions.

Key Takeaways

  • Bankassurance is a partnership between a bank and an insurance company.
  • The insurance company benefits because it can reach a bank's client base to sell their products. They earn additional revenues without having to build a salesforce or pay agent and broker commissions.
  • The bank benefits by improving customer satisfaction. More services are provided under one roof. Moreover, the bank gains additional revenues from sales of insurance products.

Bancassurance Explained

The Glass-Steagall Act of 1933 prohibited U.S. banks from entering into business with firms that provided another type of financial service. In 1999, most of the Glass-Steagall Act was repealed allowing bancassurance, also known as Allfinanz. However, it still has not been fully accepted as a practice for most forms of insurance.

Bankassurance is controversial, with opponents believing that it gives banks too much control over the financial industry; some countries prohibit bancassurance, but the service was legalized in the United States when the Glass Steagall Act was repealed.

Bancassurance arrangements are widespread in Europe, where the practice has a long history. European banks such as Crédit Agricole (France), ABN AMRO (Netherlands), BNP Paribas (France), and ING (Netherlands) dominate the global bancassurance market. For instance, in December of 2015, Allianz and Philippine National Bank (PNB) formed a joint venture through which Allianz gained 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 $93.8 billion as of March 12, 2019.

Bancassurance Growth in Europe and the World

The Bankassurance global market is growing. Asia-Pacific is the most significant region in the world. Europe is a major contributor to the growing global Bancassurance market due to increasing investment from European banks. The United States is anticipated to exhibit a higher compound annual growth rate (CAGR) from 2018 to 2025 because of superior product bank portfolios and increasing use of the internet in the region. Latin America and Africa are also expected to show significant growth in the upcoming years.

According to the Bancassurance Market Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2019 to 2025, the Global Bancassurance Market was valued at approximately $1,103 billion in 2017 and was expected to grow at a rate of more than 6.4% from 2018 to 2025.

The Advantages and Disadvantages of Bancassurance

Bancassurance offers many benefits to customers, one of which is convenience. The bank is a one-stop shop for all financial needs. For the banks and insurance companies, bankassurance increases revenue diversification for the bank and brings greater volume and profit for both players.

These factors are contributing to the growth of bancassurance across the world. The restraining factors of the global Bancassurance market are the risks associated with the reputation of banks and the stringent rules and regulations enforced in some regions.

Bancassurance remains prohibited in some countries. However, the global trend is toward the liberalization of banking laws and the opening up of domestic markets to foreign firms.