How and why is the big turn of banks in bancassurance

Of Leonida Stergiou

Four systemic banks (Eurobank, Alpha Bank, Piraeus and Ethniki) are vying for the first places in the banking insurance market, aiming to gain shares in a market that is growing at a rate of over 50% per year.

In collaboration with the cooperating insurance groups (Eurobank-Eurolife, Alpha Bank-Generali, Piraeus-NN-Ergo and National Bank-National Insurance), they create new packages that combine insurance and investment solutions, which will be sold by natural and digital channels, covering new needs, but also trends coming from abroad.

The bancassurance market today is estimated at 1.2 billion euros and concerns the creation of insurance products by insurance companies and their sale by banks. Bancassurance products cover general insurance (life, loss) and insurance products linked to investment products to raise capital.

Rearrangements

The creation of insurance packages by insurance companies and the sale by banks (bancasurrance) is the reason that explains the tendency of concentrating partnerships and deals between insurance groups and banking institutions.

This is an international trend, where large foreign banks now list “banking and insurance operations” in their branches, something that also applies to Eurobank branches, says the head of the bancassurance department of the Eurobank Group, Mr. George Valmas.

Growth springs

As Mr. Valmas explains to Capital.gr, the main reasons for the great development of this sector in Greece are divided into two major categories.

The first is related to reducing the risk of banks, managing customer risk and increasing revenue.

The second is related to the fact that the Greek market is under-insured, ie there is room for growth, with a direct effect on the previous category.

In terms of banks and customer risk management, an insured customer, whether it is a depositor or a business or a borrower, has less risk for himself and the bank.

For example, a life insurance or loan installment insurance in case of unemployment or incapacity, makes the borrower more reliable, the loan poses less risk, to the benefit of the client, his family, but also for the bank.

Enhancing insurance awareness will increase the perimeter of eligible borrowers and reduce risk, resulting in lower interest rates. For example, content security (eg from theft) or damage will protect the customer’s income or savings. It therefore becomes less vulnerable to risks.

Chances

In terms of market growth margins, whether we take the criterion of average premium per capita, or total portfolios to GDP, on average, Greece lags significantly behind.

It is around 50% of the European average, while there are industries where the European average is 2 to 7 times higher. Greece is a country that has a special degree of sensitivity to natural disasters, such as earthquakes, floods and fires.

The fact of “sub-insurance” is reflected in the amount of compensation given each time by the state, ie by taxpayers, instead of private insurance companies.

Risk management

Thus, on the one hand, the reduction of risk (costs for bank and customer) and on the other hand, the large growth margin create opportunities for all parties. In a period of low interest rates, after all, it is difficult to achieve returns for banks and depositors.

Therefore, the sale of bank insurance products increases the commission income for the banks, but also the possibilities for higher returns for the savers, of all risk profiles.

Capital creation

In bank insurance products, the one with which the customer can start with small amounts and with gradual payments is offered. This in the long run enables it to enter the markets at various prices (through mutual funds, etc.).

Historically, this method offers the highest yields in the long run. There is also the possibility of investing one-time capital, as of course the creation of personalized solutions, depending on the profile, goals and needs. In general, however, according to Mr. Valmas, it has been observed that young people prefer gradual payments.

Coverage of needs

Also, such a product, every customer can use it for different reasons. Another for creating capital for his children’s studies, another for a lump sum in his pension, etc.