THE HISTORICAL BACKGROUND OF BANCASSURANCE

The first use of the term “Bancassurance” first appeared in France in the 1960s to define the sale of insurance products through banks’ distribution channels, and the concept then spread rapidly across Europe. In Bancassurance, banks provide the distribution channel, and insurance company remains the product developers. The first recorded settlement of Bancassurance was in the 1960s when the CGER savings bank from Belgium started to sell mortgage-linked insurance. 

The real pioneers of Bancassurance in Europe in a commercial sense were the British when Barclays bank of England created Barclays life in September 1965. In the early 1970s, France ACM (Assurances du Credit Mutuel) and Vie et IARD (life and general insurance) formed a partnership that allowed the bank to offer life insurance products with a saving function. In the early 1980s, BANCO DE BILBAO Group acquired a majority stake in EUROSEGUIROS SA, an insurance and Reinsurance company. 

In the United States of America, Bancassurance started developing post the crumbling of barriers set by the passage of the Gramm-Leach-Bliley Act (GLBA) in the late 1990s. the regulatory hedges between different financial institutions were removed by the 1999 Gramm-Leach-Bliley Act, which allowed banks to become financial holding companies engaged in the securities and the insurance business. The Gramm-Leach-Bliley Act removed restrictions previously put by the 1933 Glass-Steagall Act whose aim was to avoid excessive risk-taking and restore public confidence in the banking system following the Great Depression in 1929. 

In Korea, regulatory constraints before 2003 made it hard for Bancassurance to gather any momentum. In 2003, the Korean government authorized the operation of Bancassurance, which attracted most of the existing Korean banks. In 2004, Fortis signed a contract in Thailand with Muang Thai Group for life and non-life policies.

China recently allowed banks to buy insurers and vice versa, stimulating the bancassurance product, and some major global insurers in China have seen the bancassurance product greatly expand sales to individuals across several product lines.

Bancassurance has proved to be an effective distribution channel in a number of countries in Europe, Latin America, Asia, and Australia. Bancassurance has been successful especially in European countries contributing 35% of premium income in the European life insurance market.

The historical development of bancassurance globally can be divided into four phases that show changes in the range of products offered as the level of integration between banks and partner insurance companies increased.

Start Phase 1975 – 1985

This phase could mostly be seen in France where regulation and law were set ahead of business. The phase was characterized by an external partnership between banks and insurance companies and the creation of subsidiaries that specialized in insurance products.

Maturity Phase (1985 – 2000)

This phrase came about as a result of loss return caused by the limited supply of insurance products. A key characteristic of this phase is the take-over and acquisition of insurance companies by stronger banks. The banks involved made a lot of money through the process due to take-over-driven growth and acquisition-driven growth. 

Diversification Phase (2000 – 2005)

Key characteristics of this phase were alliance partnerships that arose in order to reduce or mitigate losses that were incurred in the maturity stage. The focus of the diversification phase was to make more money and focus on customers.

Concentration Phase (2005 – to date)

This phase is characterized by a customer centricity approach where banks and insurance companies collaborate in order to make customers more satisfied. The concentration phase has seen an intensive convergence between banks and insurance companies, however, the global financial crisis that was triggered by United States’ subprime mortgages caused a significant slowdown in the development of the bancassurance channels. But bancassurance has since picked up the pace and is rapidly developing while integrating with new technological trends in improving customer satisfaction levels.