Magazine article American Banker

Profit Boom Seen in Tying Insurance, Bank Products

Magazine article American Banker

Profit Boom Seen in Tying Insurance, Bank Products

Article excerpt

U.S. banks could double the profits they make on each customer if they integrate insurance sales with their core products, a recent study found.

The integration of insurance into a bank's core product menu, or bancassurance, has been successfully done in Europe for years.

Insurance provides the biggest growth opportunity for banks competing for customers' business, according to the study by the Bank Administration Institute and Boston Consulting Group.

The study, "Putting it Together: Convergence Strategies for Banking, Insurance, and Investments," was released this month.

"Insurance products represent the best-if not only - strategy to reverse the fast-declining profitability and 'share of wallet' of their customer businesses," according to the study's summary.

Fifty percent to 75% of bank retail customers do not generate a profit, the study said, and it costs banks an average of $2,500 to acquire each new customer. That's twice the cost of customer acquisition in 1993.

Banks must act quickly because the window of opportunity to capitalize on growth in insurance may close in five years, said John Garabedian, the Boston Consulting Group vice president who oversaw the study.

Banks have missed opportunities in investment products, where they have won a small share of the market and are holding a largely defensive posture, he said. But it doesn't have to be that way with insurance, Mr. Garabedian said.

The Citibank and Travelers Group deal is a bold step, he said. While other banks are merely contemplating the business, Mr. …

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