Bancassurance in Malta : a reality or a myth? : with reference to Malta in Europe

Abstract

In this day and age, while competition is becoming increasingly fierce, horizons in the retail financial services market have broadened. The incumbent players continue to pursue business strategies that will allow them to create, maintain and flourish in the process of their operations. The bancassurance route exemplifies one such strategy. It presents an opportunity for the banking and insurance industries to develop hybrid innovative products in a customer-centric approach and to target new customer segments as a result of product diversification, while simultaneously guaranteeing insurers an alternative distribution channel for the sale of their products. Chapter 1 gives an overview of the subject, firstly, by outlining the universal approach adopted both in the provision of financial services, as well as, in the ambit of financial services supervision and regulation, and secondly, it goes on to trace the origins of the bancassurance phenomenon. Having established bancassurance as an ever-growing tactic employed by financial services providers operating in the banking and insurance industries, Chapter 2 addresses the foundations of bancassurance. It intends to serve as an introductory basis to the study, focusing primarily on the definition of bancassurance, bancassurance methodology and the impetus to and reasons behind the pursuit of the bancassurance business. Bancassurance entails consolidation of banking and insurance activities. Moreover, players no longer consider themselves as purely national. Within the EU, this reality forms part of a wider framework envisaging the achievement and implementation in Member States of a Single European Market for financial services. Hence, in Chapter 3, I shall go through the development in the banking and insurance industries leading to the adoption of harmonised pan-European rules and the embracing and application of concepts relative to the Single Market, mutual recognition of and a European passport/license in financial services. Throughout this study it transpires that bancassurers, in the act of selling and distributing insurance, are regarded as insurance intermediaries and therefore, fall within the scope of the EU Directive regulating the activities of insurance intermediaries. Indeed, in Chapter 4, I will continue from where I left off in the preceding Chapter, to analyse the coordination sought to be achieved by the Union in the insurance intennediaries market. In this regard, an in-depth analytical study of the relative law applicable to bancassurers in virtue of their designation as tied insurance intermediaries shall be carried out. Malta implemented the EU Directive on insurance mediation in 2006. Whilst bearing in mind the limited size of the Maltese market, Chapter 5 will explore how and to what extent, has, the local sentiment on the viability or otherwise of bancassurance, influenced the regulatory regime governing bancassurers. In the course of such an evaluation, the difficulties faced by the Government to balance out the conflicting interests of the banking and insurance industries, together with consumer expectations, become self-evident. Chapter 6 suggests some of the challenges that bancassurers may encounter. With sporadic reference to the Maltese scenario, I also bring to one's attention a number of practical implications which ought to be weighed when deciding for or against the bancassurance reality. Finally, by way of Conclusion, whilst reiterating my observations and findings, as they result from the Chapters of this Thesis, I have posed certain questions and attempted to give my views in their regard, thereby intending to prompt further interest and momentum as to the future development of bancassurers and bancassurance regulation.