Life Branches?

THE selling of insurance by banks, and vice versa, is a simple enough concept in theory. In practice, though, as Allianz and Dresdner may discover, it is often far from straightforward. In the case of Citibank, for instance, hopes were high following its 1998 merger with Travelers Group that the latter's insurance products would be sold to the rank's customers. In reality, however, there has been only limited integration of the organisation's insurance and banking operations since the merger.

Lots of banks are keen to sell insurance in their branches, mainly because they need to flog as many products as possible to their customers in order to cover the high fixed costs of maintaining their outlets. Insurance companies, on the other hand, usually lack the physical means to reach customers, so they seek access to bank branches as an extra distribution channel.

The natural home of bancassurance, the combination of banking and insurance, is in countries such as France and Spain, where people are culturally accustomed to buying insurance from banks. In France, about 60% of life-insurance products are sold through bank branches, according to PriceWaterhouseCoopers (PWC), and in Spain 80%. In the Netherlands and Belgium, fund managers and analysts regard companies such as ING and Fortis as evidence that bancassurance can work elsewhere too.

So far, though, it has failed to take firm root in any other country. In America, the 1933 Glass-Steagall act long forbade banks and insurers from getting together. That law has now been repeated, but the new Gramm-Leach-Bliley act restricts the sharing of customer information between banks and insurers. Ironically, the act's protection of privacy may make it harder for banks to succeed in insurance, since it makes cross selling more difficult.

In Britain, the record of selling insurance and banking together has been patchy at best. The banks' share of the life-insurance market is relatively small — about 15%, according to

RWC. Other distribution channels (such as independent advisers) continue to dominate the business. One explanation for the difference between Britain and the rest of Europe, says Keith Baird, an analyst with Prudential Bache, is that outside Britain people tend to place far greater trust in their banks. "They have a good reputation; they're not seen as rapacious rip-off artists, as they arc in Britain."

Another difficulty is that insurance products are more complex than most banking services and are not easily sold by low-skilled branch staff. In France, banks have solved this by marketing simpler products, making it easier to train staff to give advice about them.

Those who believe in bancassurance often disagree about how to put it into practice. From a bank's point of view, does it need to own the company that offers the insurance it sells? And does an insurer need to buy a bank to get its distribution? Bank of Scotland, which has relationships with several insurers, believes that, as consumers become more Internet-savvy and price-conscious, they will want the best insurance products, not a manufactured in-house brand. Some insurance companies say that arm's-length alliances between banks and insurers are better than full-blown mergers. AXA, for instance, a French insurance giant, has distribution agreements with five big banks in France. It says that banking and insurance are far too different to co-exist within the same company. There was a time when Allianz thought the same.

bankassurance	банкострахование: предоставление банками услуг страхования
fixed costs	постоянные (фиксированные) издержки: прямо не зависят от объема операций (аренда и т.п.)
variable costs	переменные издержки
privacy п	неприкосновенность частной жизни
cross-selling	перекрестная продажа
arm's-length alliances	альянс «на расстоянии вытянутой руки». альянс между участниками, осуществляемый так, как если бы между участниками не было никаких юридических или финансовых связей во избежание конфликта интересов
arm's-length relationship	отношения «на расстоянии вытянутой руки»: отношения между независимыми участниками

The Economist Vocabulary

Exercise 1. Translate the following into Russian.

in-house brand; Internet-sawy; price conscious; to take firm root to set up shop; to flog one's products to the customers; fixed costs of maintaining banks' outlets; fund managers; to share customer information; full-blown mergers

Exercise 2. Translate the text into Russian orally.

Wal-Mart and Financial Services