Bancassurance is a strategic partnership in which a bank collaborates with an insurance company to offer insurance products to the bank’s customers. This mutually beneficial arrangement not only allows banks to generate extra income through the sale of insurance policies, but also enables insurance companies to broaden their customer reach without the need to expand their sales teams.
Moreover, this model leverages the extensive customer base and distribution network of banks to provide insurance products, creating a win-win situation for both industries and their customers.
Bancassurance brings a series of advantages for both the provider and the customer, including:
- Convenience for the customer, who can access both banking and insurance services;
- A win-win deal, in which banks increase their revenues while insurance companies broaden their client coverage;
- Stronger customer relationships for banks by offering a broader range of services to their clients;
- Cost efficiency for both the bank and the insurance company by sharing resources and reducing overall costs.
In the Republic of Moldova, bancassurance is mainly regulated by the Law on Insurance and Reinsurance Activity, which defines the term "bancassurance agent" as a bank and/or a branch of a third-country bank operating on the territory of the Republic of Moldova, a savings and loan association, or a non-bank credit organization. These entities, based on the mandate contract granted by the insurance company, have the right to conclude insurance contracts with third parties in the name and on behalf of the insurance company, in accordance with the conditions stipulated in the mandate contract. The bancassurance agent is also defined as an insurance intermediary in the same law, which further specifies that the capacity of an insurance agent or bancassurance agent is incompatible with that of an insurance and/or reinsurance broker or brokerage assistant.
Despite significant progress in the economy and the accessibility of services, several challenges persist regarding the popularity of bancassurance in the Republic of Moldova. These challenges include:
- The regulatory framework for financial services in Moldova is still evolving, and ensuring compliance with both banking and insurance regulations can present difficulties for institutions.
- The general population has a low level of financial literacy, which leads to a limited understanding of these services. Consequently, the adoption rate of such services remains low.
- The bancassurance market may encounter competition from traditional insurance companies and other financial service providers, complicating efforts to establish a strong presence.
To conclude, while bancassurance holds great potential for enhancing financial service offerings in the Republic of Moldova, its success will largely depend on addressing these existing challenges. The collaboration between the bank and insurance sectors can create valuable opportunities for growth and customer engagement. However, to maximize these benefits, it is crucial to improve financial literacy among the population and streamline the regulatory framework. By fostering a more informed consumer base and adapting to market dynamics, the bancassurance model will be widely applied, ultimately leading to a more integrated and efficient financial landscape that benefits all stakeholders involved.
By Iulian Pasatii, Partner, and Liviana Frunza, Junior Associate, Gladei & Partners
