An anaysis of the bancassurance set-up adopted by the two leading Maltese banks

Abstract

The selling of insurance through banks has since the mid-twentieth century been referred to as bancassurance. Setting up a bancassurance operation can take different forms which range from the simplest form being a distribution agreement between an insurance company and a bank to having a wholly owned insurance subsidiary. Prior to embarking on a bancassurance venture, studies have to be done as to what kind of bancassurance set-up is most favourable, taking into consideration the availability of resources in possession as well as the most suitable model to be set up in the country, with regards to legislation, room for profit and market share. The research study was done so as to compare the best bancassurance model for the two leading Maltese banks, HSBC and Bank of Valletta. The comparison was done on a number of criteria being derivation of expertise in the organisations, and rigidity in the on-boarding stage with regards to staff adaptability and culture coherence. In order to complete the dissertation two research methods were used being a quantitative approach and a qualitative approach. Profits for the bancassurance business for the two banking organisations were compared. Interviews were iv carried out with professionals to get opinions and facts for the qualitative criteria to be compared. Based on the number of different criteria, different points emerged. Some of the criteria such staff openness to the selling of insurance resulted to be similar for both the models and therefore no model came out as being stronger in this respect. Different types of risks proved to be different for both models. Keeping in mind that HSBC Life is more exposed to insurance risks, it resulted that profit was far greater for HSBC Life for most of the years under study. Through these criteria it was established that, so far, a wholly-owned insurance subsidiary in Malta has shown better results.