The profitability of bancassurance for European banks

Abstract

Develops principles for banks that want to evaluate the distribution of life insurance as well as non‐life insurance products and identifies key factors for profitability. Analyses the costs of training personnel, the costs of computers and communication, the fixed and variable sales costs, and the costs of administration including customer service. These costs have to be covered by direct benefits in terms of commissions and indirect benefits in terms of more faithful bank customers. Then estimates the profitability of the distribution through a branch network. Develops a model to calculate the “break‐even” sales volume. Identifies five key factors: the number of branches; the number of specialists per branch; the number of customers to the bank; the cross‐selling ratio; and the reduction over time in costs of selling and administration. Gives two examples from the banking sector.