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Also known as the Bank Insurance Model or BIM, bancassurance is an organizational strategy that allows a bank to offer various types of insurance. The model is created by establishing ongoing relationships with one or more insurance providers. Those providers are then able to utilize the bank’s staff and resources to sell the policies.
A bancassurance relationship can be established in one of two ways. The most common approach is for an insurance company and a bank to enter into contractual relationship that allows the provider’s products to be sold by bank personnel. In return for selling policies at local branches, the bank receives some sort of compensation package, often based on the number and type of sales generated. A second model calls for the bank to actually purchase an insurance company, and integrate the operation into the bank structure. In this scenario, space at each branch may be set aside for insurance salesmen to offer their services to bank customers.
The bancassurance, or Bank Insurance Model, is one of two different strategies that may involve a bank and an insurance company. There is also the Hybrid Insurance Model, or HIM. This approach combines the function of the BIM with the traditional insurance model of a stand-alone provider that maintains its own sales team. The hybrid approach is sometimes employed when regulations within a given country forbid the pure bancassurance model from being established.
While the idea of bancassurance is not found in every banking system around the world, the approach has gained in popularity in recent years. In some cases, laws were repealed in order to allow this type of business arrangement to exist between banks and insurance providers. An example is the repealing of the Glass-Stegall Act in the United States. Around the same time, the Gramm-Leach-Bliley Act was passed, thus paving the way for banks to explore this type of ongoing business arrangement. Since the beginning of the 21st century, China has also restructured laws to allow banks and insurance companies to establish this type of relationship. In countries like Spain or France, where the model has functioned for some time, mortgage insurance as well as various types of life insurance coverage tend to be the most popular with bank customers.
One of the major concerns regarding bancassurance is that an arrangement of this type places a great deal of control of the financial community with banks that do business in the area. This concerns some people, and is often the reason behind legislation that precludes the possibility of a relationship between a bank and an insurance company. In nations where the model is popular, the impact is usually viewed as either minimal, or actually beneficial to the economy in general.
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