L3: Bancassurance Flashcards
What is bancassurance?
Bancassurance is the distribution of insurance products by banks.
The distribution is done through an arrangement between a bank and an insurance company
The benefit of partnership:
The integration of bank’s superior banking franchise with the insurer’s insurance and wealth management expertise.
The concern of partnership:
Products provided by the partnering insurer may not be the most competitive.
Explain the concept of “Buy your own insurance company”
A bank can look to acquire an insurance company as its subsidiary key consideration will be the synergies for both parties in the deal.
The benefits of BYOC
- Ready management team and products
2. Track record of product and the team
The concerns of BYOC
- Incompatibility or unwillingness of the management team to adapt to the environment of the acquiring bank
- Poor past year track record
- Culture conflict between bank and insurance company
Pros & Cons of Integrated Model
Pros
1. Sales process is managed by the bank, therefore greater control.
- Insurer is the only product provider
Cons
1. Greater change management required to promote sales culture in banks
Pros & Cons of Hand in Glove Model
Pros
1. Speed in implementing bancassurance process
- Frequent interactions can create great synergy
Cons
3. Cross cultural misfit
Pros & Cons of Separate Sales Force
Pros
1. Fast in implementation of Bancassurance process
- Minimal culture issues as little integration
Cons
1. Least effective method in maximizing opportunities from bank’s database.
State 3 on how banks benefit from bancassurance model?
+ Revenue Diversification
+ Leverage on reputation & brand recognition
+ Becoming a one stop financial shop
State 3 benefits for insurer from bancassurance model?
+ Revenue & Channel diversification
+ Increase margins on core business
+ Reduce client acquisition cost
