Bancassurance : Maltese banks' ease of entry as compared in part to banks in major European and Asia-Pacific economies

Abstract

Bancassurance in a nutshell is 'the joint effort of banks and insurers to provide insurance products and services to the bank's customer base, mainly' (Swiss Re, 2007). In Malta, the largest three core domestic banks started to adopt such arrangement as part of their operations as from 1994. This dissertation's main aim is to gain an insight into the drivers and barriers to entry faced by the banks when entering into this market niche over the years. In addition, this dissertation strives to determine the reasons why some other core domestic banks have not yet engaged in bancassurance activities. In this respect, after analysing all the results of this research study, a set of recommendations will be derived, aimed at those local banks wishing to enter the bancassurance business arena. These recommendations will help the banks to obtain a better understanding of the pros and cons of extending their operations to the bancassurance market. This dissertation will also provide a comprehensive, methodical review of the involvement of Maltese banks in insurance activities. However, this dissertation does not only look into the Maltese bancassurance market, but it also gives an overview of the bancassurance reality in the European and Asia-Pacific regions. The scope of such overview is to observe how other foreign countries are faring in this market niche, so that the local scenario will be placed in this context. When comparing the reality in Malta to foreign countries, the local market lags behind with respect to the restriction that banks are not allowed to offer most general insurance policies to their clients. Although in the short term this limitation will remain in place, in the medium to long term this can be waived in order to have a more competitive and liberalised IV bancassurance market. However, while credit institutions think that they should be authorized to sell non-life insurance products, they also argue that insurance companies should be allowed to enter the banking market by distributing banking products to their customers, a concept known as 'assurbanking'. In light of the foregoing, this research study enables a better understanding of the present reality of the Maltese bancassurance market as compared to other countries. Consequently, the findings will shed more light on the various philosophies embraced by key market players; namely credit institutions that are engaged in bancassurance activities, by others that are not yet involved in such type of arrangements, and by the regulatory authority. The qualitative research paradigms used in this dissertation are one-to-one interviews. Through such qualitative research, different aspects of bancassurance in Malta were tackled, mainly in the areas of: - The regulation and the authorisation process of bancassurance models - The barriers to entry faced by banks when entering in bancassurance - The challenges and risks faced by banks that are involved in bancassurance - The benefits of bancassurance for banks - The distribution of bancassurance products - The limitations of the bancassurance market in Malta with respect to that of other European and Asia-Pacific economies Bancassurance in Malta is in a growth stage. However, growth will bring with it challenges and opportunities which shall be identified and properly tackled by V financial institutions. Thus, this dissertations will help banks to play a proactive role in the bancassurance market.