Much of the conventional wisdom surrounding banks' entry into insurance has centered on emulating the European bancassurance model, and the argument for doing so is quite persuasive.
The European bancassurance model rests on the full integration of insurance as a core product of the bank.
But is it the right answer for everyone? Or do the differences between the European and the U.S. financial service landscape imply that alternative entry strategies might make more sense for some banks, even if a full bancassurance build-out is the ultimate objective?
As the fledgling U.S. market develops, a look at some common themes among those who have had early successes may suggest some answers.
Though this is clearly an objective that most banks would aspire to ultimately reach, the track record of U.S. banks in integrating nontraditional products into their core business lines suggests that it is easier said than done.
Bank customers have different expectations when they deal with their bank. It follows that there is no single correct insurance model for banks.
A broad bancassurance-type strategy might well be the best approach for a very large consumer bank. On the other hand, a large trust bank with a strong franchise in the affluent market might take a very different approach in terms of both products and delivery. A more traditional "business" bank might take a third path, and there could be any number of combinations in between. Some large banks could reasonably take all three approaches at once.
The point is that the new venture should be an extension of what the bank does best. Then it is simply a matter of integrating the products and distribution process into the mainstream of the bank.
If one common theme is selecting a synergistic strategy, another is ensuring that it is well-executed.
Having aligned the bank's strategy with its unique strengths and branding in the market, the successful banks follow through by ensuring that products are carefully selected, designed, and priced for specific channels targeted at specific customer segments.
Banks are in reality not a single channel but a collection of subchannels. Examples include retail, affluent, credit card, mortgage, trust, broker-dealer, small business, and corporate, each with its own set of product and delivery preferences.
Getting the product/chan-nel/customer linkage correct is critical to success.