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Bancassurance models have evolved over time. They have evolved from simple bank-insurance cooperation to more complex integration, involving changes in operational structure, product design, sales strategies and marketing.
These developments reflect the alignment of banks and insurers with customer needs and market trends.
Three main models dominate the market:
- Partnership,
- Integration,
- Subsidiarization.
Bancassurance: the partnership model (cooperation between independent partners)
In this model, banks and insurance companies remain legally separate entities, requiring recourse to professional advisors who sell insurance products to the bank's customers.
This model also requires the development of complementary skills, with each partner concentrating on its own area of expertise. The bank manages accounts and financial services, while the insurance company designs and manages insurance products.
The independence of these activities enables each partner to make strategic decisions in complete autonomy.
Despite this major advantage, cultural differences between bankers and insurers can compromise cooperation ties, particularly when it comes to coordinating and distributing profits, which can impair the effectiveness of the model.
Bancassurance: the integration model (integrated cross-selling)
The integrated cross-selling model closely links the bancassurance business to the banking business, through a distribution agreement. This way, insurance products are offered directly to bank customers, often as complementary products to existing banking services.
This approach enables banks to leverage existing customer relationships and sell additional products, such as life or home insurance.
This bancassurance operating mode is not only fast and simple but also reversible, ensuring the independence of the partners.
Unfortunately, this model also has its drawbacks:
- a basic range of insurance products,
- limited exploitation of potential synergies between the two business sectors,
- the risk of conflicts of interest.
Read also | The leaders of the bancassurance market
Bancassurance: the subsidiary model: ownership-based control
The ownership-based control model rests on complete integration of the insurance business by the bank with a view to creating a unified structure, enabling the bank to control all insurance products and services offered to customers.
In this case, the bank alone exclusively defines the strategy, rates, offers and distribution processes for insurance products, guaranteeing a more coherent, customer-based approach.
This model comes with a long-term capital commitment, reinforcing the stability of the bancassurance entity.
On the other hand, the acquisition or creation of an insurer requires major financial commitment.
Bancassurance: comparison of the three operating models
| Criteria | Partnership Model | Integration Model | Subsidiary Model |
|---|---|---|---|
| Nature of partnership | * Legally distinct partners * The bank partners with one or more external insurers to distribute their products | In association with an insurer, the latter's products are fully integrated in banking services | The bank sets up its owninsurance company, which it controls entirely |
| Designing insurance products | Partner insurer | Partner insurer, with adaptation and integration into bank offerings | Bank-owned insurance subsidiary |
| Product marketing | Bank branches, under the insurer's name or as a white-label product (1) | Directly integrated into the bank's offering, often packaged with other services (loan insurance) | Insurance company established and/or controlled by the bank |
| Relationship with the insurer | Partnership between a bank and an insurer through an exclusive or non-exclusive contract | Close collaboration with an insurer, customer experience fully integrated in the bank | The insurer is a subsidiary of the bank, fully controlled by it |
| Advantages | * Low investment for the bank * Flexibility with the possibility of having several partners * Access to a diversified insurance offering | * Simplified customer experience * Cross-selling * Smoother underwriting process | * Total control of the insurance offer by the bank * Higher profit margin for the bank * Optimized distribution through branches |
| Disadvantages | * Less control by the bank over the insurance offer * Bank's dependence on partner insurer | * Need for synchronization between bank and insurer * Complexity of product integration | * Management complexity * Significant financial commitment |
| Examples | * France: Société Générale(bank) + Sogécap (insurer) * Asia: Standard Chartered (bank) + Prudential (insurer) | * United Kingdom: HSBC offers insurance through partnerships with local and international insurancecompanies * Belgium: ING integrates home insurance with its loans | * France: Crédit Agricole Assurances * Spain: Santander Seguros |
(1) A white label is a service or product designed by one company (the insurer), which other companies (the banks) take over and market under their own brand.
