Bancassurance

What is Bancassurance? 

Definition

This refers to the relationship between a bank and an insurance company permitting the insurance company to market and sell its insurance products to a bank’s clientele. Simply put, it is the selling of insurance products through banks through an established partnership between a bank and an insurance company. The agreement benefits both parties as the bank earns a fee from the insurance company while the insurance company covers a wide market range and customers without paying agent fees or broker commissions.

Understanding a Bancassurance

The banks help the insurance companies to market and sell their products through providing wholesale product information, sales training, and marketing campaigns to selected bank staff and tellers who will be responsible for marketing the insurance products. When sales have been successfully made, the insurance company shares part of the commissions with the bank. This concept has proved to be successful in Europe, Asia, Australia, and Latin America.

In the US, however, the Glass-Steagall Act of 1933 does not permit banks to do business with firms that provide other types of financial services. By 1999, this act was revoked as banks were allowed to start doing business with firms that provide other financial services and this led to the entrance of bancassurance into US banks. It was rather known as ‘Allfinanz’, though, not widely accepted as a practice for most insurance companies.