The impact of banks on the selling of life assurance in Malta

Abstract

Deregulation has 'allowed banks to compete in areas of financial services industry that up until recently were prohibited' (Casu, Girardone and Molyneux, 2006). One of the outcomes of deregulation was that banks started to merge with insurance companies and distribute life insurance products. The term bancassurance started to be used in order to describe the 'distribution of insurance products through a bank's branch network' (Tripathy and Pal, 2006). The first countries to introduce bancassurance were France and Spain. From then onwards, bancassurance became prevalent in various countries. The concept of bancassurance was introduced in Malta in 1994 through Middle Sea Valletta Life Assurance Company Ltd; a venture between Middlesea and Bank of Valletta p.l.c. Bancassurance has since then been introduced through other banks in Malta. The aim of this study was to find out how the entry of banks in the life assurance business arena has affected the selling of life assurance in Malta. It also investigated the views of life assurance companies on the entry of banks in the life assurance industry. These affairs were explored through interviews with bank managers, life assurance companies and a broker. Life assurance sales history records were also analysed. The main findings concerned the entrance of banks to the life assurance market which led to an increase in the sales of life assurance over the years. Moreover, banks have attracted a large share of the life assurance business away from other players in field. These results suggest that banks have made life assurance in Malta more widespread but at the same time they have possibly been siphoning business from life assurance companies.