Bancassurance
Features
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Bancassurance: common interests between banks and insurers
Banks and insurance companies have designed hybrid financial products complementary to the two types of intermediations.
The two sectors came closer to enlarging their customers basis and thus draining towards them, in an efficient and sustainable way, the once volatile funds which they will, henceforth, turn into long-term saving.
Products
Initially, they were proposed as a supplement to bank products. Today, bancassurance has been emancipated and is now targeting large-scale audience through standardized packages.
In some countries, it has become the first channel of personal risks distribution.
Life insurance
- Financially-predominant products: contracts in case of “life” or in case of “decease”.
- The decease temporary contracts are often built against credit operations: contracts whereby the insured person is the borrower and the beneficiary is the bank.
- Dependency sureties guarantees : payment of life annuity,...
- Retirement saving schemes (the acquisition of a certain capital upon retirement following the payment of relatively-accessible premiums.
These are very flexible products when it comes to the premiums payment and to withdrawal possibilities without penalties or fees incurred.
Non life insurance
- Householder's comprehensive insurance
- Motor contracts
- Life hazards coverage
Development conditions of bancassurance
- The legal and fiscal framework which may slow down or speed up the development of bancassurance.
- Tax breaks favouring personal saving.
- Behavioural and cultural factors: the good image of the bank, their privileged relationships with their clients and the proximity of banking networks.
- Marketing and the definition of products: accessible guarantees with very few options, a clear tariff for low premiums and simplified underwriting targeting all banks client categories.
- Technical steering: financially-predominant products, hence the absence of technical risks.
- The availability of products generating long-term saving: retirement.
- The need to come up with low-cost high-volume premiums.
Bancassurance throughout the world
Born in the 1970s, bancassurance spread during the 1980s and 1990s throughout all of Europe and the rest of the world. It has witnessed a rapid growth. However, it remains difficult to determine which sector had the merit to bring both insurance and bank sectors closer.
In 2002 bancassurance success was made in Europe: Bancassurers account for more than 65% of Spain's life annual premiums, 60% of France's, 50% of both Belgium's and Italy's.
In only ten years, bancassurance managed to be recognised as a success story.
Bankassurance sales throughout the world are rising by 60% for the sum of 1 650 million USD in 2003, compared to 969 million USD in 2002.
In 2002, Bancassurance penetration rate throughout the world was estimated at 30% , all branches considered.
Bancassurance in Lebanon
The products are mainly aimed at medium-income customers. They account for 23% of the written premiums in 2002 compared to 10% in 1999. Several forms of networks emerged on the market:
- Distribution agreement: It is the simplest model dealing with the distribution of insurance products through a banking network, with the insurance company and the bank possibly belonging to the same holding. It's the model adopted by Méditerranée Group with insurance companies Medgulf and the banks: Allied bank, Saudi Lebanese Bank and Banque Méditerranée.
- Les acquisitions: Acquisitions : They consist in share holding in the existant insurance companies. This system has been adopted by Audi bank which owns almost the totality of Libano-Arabe stakes, and by Al Baraka bank that holds 70% of Amane Takaful Insurance (ATI) shares.
- The creation of captive companies: some banks set up their own insurance captives. BLOM with AROPE, Byblos with ADIR, and Crédit Libanais with Crédit Libanais Assurances, these are pioneers in this field.
- The creation of independent companies: by a bank and an insurance company. These are recent operations. In 2002 Fransabank and the Lebanese-French bank set up in partnership with Predica, Bancassurance company. Likewise, Société Générale de Banque in Lebanon and SOGECAP LTD (France) set up Lebanon SOGECAP.
Bancassurance in Morocco
It appeared in Morocco in 1973 and has notably developed for a decade. It has been stimulated by the transformation and concentration movement of the financial sector and by the strategic shareholding involvement of insurance companies in the banks capital.
Bancassurance's most spread model is the distribution agreement (insurance products being distributed by banking networks). Banks, in this respect, possess several assets: density, proximity, contract frequency with clients and information quality.
The size of the bancassurance market is estimated in 2002 at 1.8 billion dirham, that is, 15% of the overall turnover, compared to 1 billion dirhams in 1999 (10% of the turnover).
Bancassurance made 50% of the Life market in 2002. It provides mainly personal insurance products.
