The first countries to embark on this bancassurance adventure were France and Spain in the 70s and 80s. Recognized as a distribution model in developed countries (Southern Europe, Norway) and emerging markets (Asia, Latin America), bancassurance remains marginal in the United States. Some important requirements in its development, which are described below, have probably not been met. To attempt an analysis, let`s first describe how bancassurance has developed in France and what its characteristics are. “At DBS, we were looking for a general insurance partner with a strong and long-standing presence in Asia, a broad portfolio of P&C and A&H products, extensive digital capabilities and a proven track record in bancassurance sales,” said Piyush Gupta, Ceo of DBS Group. Under the terms of the agreement, Chubb will exclusively or preferentially distribute general insurance products through multiple DBS banking channels, including branches and various direct marketing channels. The partnership covers five markets in Asia: Singapore, Hong Kong, Taiwan, Indonesia and China. The Philippine Constitution, the Revised Penal Code and the Philippine Competition Act prohibit monopolies and combinations to restrict trade. In this context, it would be desirable to carry out a competitive analysis to ensure that the distribution agreement is valid in the light of those prohibitions.
The Insurance Commission has extensive powers as a regulatory authority and may (where appropriate) require amendments to distribution agreements. In addition to the above points, Circular No. 37, as well as other relevant rules in the fields of insurance and retail banking, has an additional impact on the following points: insurers benefit from the positive image of the bank, its presence and location in the country and the strength of its network. The bank offers a very large base of potential customers and allows insurers to diversify their distribution channels. The French government has facilitated access to credit and insurance through insurance laws. Specifically, the French government enacted a law that initially allowed access to mortgage insurance only to people living with HIV and in the event of death (Belorgey Agreement – 1991). Later, they extended it to strict pre-conditional applications (AERAS agreement – January 2007). AERAS stands for Insuring and Borrowing with an Aggravated Health Risk. AERAS has enabled people at particularly high risk of disability to take out insurance. It also limits exclusions and premium increases from the benefit. Yes, preferential treatment may be possible. The form of preferential treatment is a matter of negotiation or contractual agreement.
Joint Circular No. 86 applied only to bancassurance agreements between banks and life insurers. Circular No 37 extends this scope to (non)general insurance companies and reinsurance undertakings. More than a partnership with distribution agreements between the two parties, Bancassurance in France has developed in an integrated model. Banks have created dedicated insurance subsidiaries, i.e. dedicated legal entities owned by the company with insurance licenses whose capital is wholly or partially owned by the bank. The bank is involved in the governance of the insurance company, its management, profitability and sustainability. The Bank may lease premises to insurance companies under its distribution/bancassurance agreement with these insurance companies. The bank must obtain the approval of the BSP Monetary Board before it can participate in the bancassurance. They must submit a cover letter as well as various documentation requirements before participating in bancassurance.
Insurance companies must submit annual summary reports and other regulatory reporting obligations to the Insurance Commission. GNP requires banks to keep various documents for review as part of the exercise of GNP supervisory powers over the bank. These documents include the contract between the insurance company and the bank. However, the contract between the insurance company and the bank does not have to be submitted to the BSP before approval. The letter requesting pre-GNP approval must include an explanation of the relationship (i.e. how the bank and the insurance company are linked under a common financial conglomerate) between the insurance company and the bank, as well as a description of the products and a justification for entering into a bancassurance agreement. The bancassurance agreement or arrangement must be reviewed and approved by the Insurance Commission. Any changes must also be subject to prior approval. We are not aware of any regulatory restrictions against an insurance company or bank that grants exclusivity to the other party. To the extent that an exclusivity agreement is possible, the duration of exclusivity is a matter of negotiation or contract between the parties. Such an agreement may be maintained for as long as the agreed duration of the exclusivity agreement is reasonably necessary to protect the interests of the parties and does not unduly restrict trade or competition.
Only financial products intended for private clients who do not present an investment risk may be cross-sold under a bancassurance agreement. According to the rules of the GNP and the Insurance Commission, the bank and the insurance company must belong to the same financial conglomerate before bancassurance activities can be authorized. In addition, the GNP rules stipulate that the insurance company must have been disclosed and reported as part of the bank`s group structure. The Insurance Commission and Circular No. 2016-40 of 25 July 2016 and Circular No. 2016-53 with additional rules on bancassurance, which contains Circular No. 2015-2020 or complete the implementing rules relating to bancassurance. Bancassurance: Not a legal definition, but a mode of distribution in an integrated modelDo not look for regulation, bancassurance is not formally defined. This is usually a distribution channel in which insurance products are sold through banking networks. However, this definition is too simple in terms of organizational and operational impact in an integrated model. It is not enough to have bank employee insurance contracts available to be considered a real bancassurance. However, Circular No.
37 expressly recognizes the right of banks to offer insurance products through electronic platforms, online methods and other methods required by law, in addition to traditional distribution channels/methods carried out in physical premises. With regard to bancassurance agreements, Vietnamese law considers banks as agents of the insurer and bancassurance distribution agreements as insurance agency contracts. A key to success will be to get the buy-in from the bank and its network that selling insurance makes sense. You should be informed that the sale of insurance through the payment of distribution fees and the economic value generated by the insurance portfolios generates value for the entire group. Another advantage is that this insurance income will also strengthen the Group`s capital. Other benefits include the insurer`s contribution to reducing reputational risk and strengthening the bank`s protective image with customers. The collaboration between the two entities is not limited to the sales and marketing teams. This is a variety of fine settings at different stages of the product development process and the sales process. It also requires the use of customer knowledge, as well as the monitoring of sales, reserves and risks.
Important IT and operational components are also crucial. As part of the exercise of its regulatory powers vis-à-vis insurance companies operating in the Philippines, the Insurance Commission may request information on indemnification agreements related to bancassurance agreements of insurance companies in the Philippines. .