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.
BREAKING DOWN Bancassurance
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 In 1999, most of the Glass-Steagall Act was repealed allowing bancassurance, also known as Allfinanz.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.
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 €64.67 billion as of June 24, 2016.
Bancassurance Growth in Europe and the World
Bancassurance market growth in Europe is expected to be highest in Turkey at 14.70% and in Poland at 15.17% until 2020. It is more stagnant in the biggest European economies, where market penetration of insurance products is 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 policies 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 some other countries, but the global trend has been toward the liberalization of banking laws and the opening up of domestic markets to foreign firms.