SOME banks have teamed up with insurance companies whereby the latter are able to use the banks’ premises and customer information to aid their marketing efforts. Some examples of bank/insurance company affiliations include Metrobank/Axa, BDO/Generali, BPI/Philamlife, and RCBC/Great Pacific. The idea is great in principle. The banks gain since they obtain commissions from the sales of insurance products by their affiliate. The insurance companies gain because they are able to locate well-heeled prospects to whom they may make sales. Perhaps even the banks’ customers gain since a wider range of financial services is available than would be the case if the bank did not have an insurance company affiliate.

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A good idea? I am not so sure. Why not?

There is a difference of culture between banks and insurance companies. Banks are primarily concerned with accepting deposits, providing money transmission services and making loans. Their work is essentially reactive. Bankers respond to customers’ requests. There is a marketing dimension to banking but it is traditionally dependent on lengthy contract and mutual respect with the customer.

Insurance companies, particularly Philippine subsidiaries of international entities, are primarily sales/marketing operations. The role of financial sales “executives” is to sell. Their remuneration is largely, and in some cases, wholly based on sales commissions.

Consequently, there is a dichotomy between bank and insurance employees. This dichotomy may be, and often is, submerged by good interpersonal relationships between the bank and insurance staff. But, at the end of the day, bank staffs are employed to provide a service and insurance staffs are employed to sell.

As a bank customer, I value the excellent service I receive from bank staff. I welcome the culture of perfectionism that exists in all reputable banks. If I want to buy products marketed by insurance companies, then I approach the insurance company directly. I do not welcome representatives of insurance companies having access to my bank account personal data. It is not appropriate. I have not asked for it. I should be able to forbid it via an instruction to my bank. But I am not sure that the bank could implement my instruction. Hence I shall not bank with a financial institution that has an insurance company as an affiliate.

BSP regulations specify that the bank must own at least 5 percent of the affiliated Bancassurance entity. In the cases of BDO/Generali and RCBC/Great Pacific, this is not a problem since the Sy family is a substantial shareholder in BDO/Generali and RCBC/Great Pacific are both firms belonging to the Yuchengco Group of Companies.

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The Bancassurance world is fluid. In 2003, Equitable Bank and Philamlife signed a seven-year Bancassurance contract to form an entity called Pelac [95 percent owned by Philamlife]. Pelac is an acronym for Philam Equitable Life Assurance Co. Inc. In 2007, Equitable bank was subjected to a takeover by BDO. In March 2009, BDO announced that its Bancassurance affiliate was Generali. Where did that leave Pelac? By December 2009, former Philamlife honcho Jose G. Cuisia Jr. announced through tame journalist Doris Dumlao that all 200 sales people from Pelac will be transferred to BPI-Philam Life Assurance Corp. Presumably BDO has sold its 5 percent interest in Pelac. We trust that BPI is happy to receive what, in a sense, are cast-offs from BDO.

Despite my reservations relating to a culture clash between bank and insurance company employees working under the same roof, there is no doubt that the Bancassurance world is growing fast. For example, RCBC said last week that paid premium reached a little over P1 billion in 2009, up from P702.4 million in 2008. RCBC see sales from its Bancassurance business growing by another 20 percent this year as it obtains more insurance business from its customers and customers of other firms belonging to the Yuchengco Group of Companies.

RCBC also plans to take advantage of a recent BSP decision to allow thrift, rural and cooperative banks to sell micro insurance. The challenge may be to market insurance products that are fair to the customer yet profitable to RCBC since marketing costs and administrative overheads can be substantial when on micro insurance sales.

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The murky world of pre-need firms has been possibly revived by the enactment of RA 9829 which is designed to restore the public’s confidence in this thoroughly unsatisfactory industry.[With apologies for those pre-need firms that have met contractual obligations to their clients]. The effect of RA 9829 is to replace the demonstrably inadequate Security and Exchange Commission (SEC) by the Insurance Commission (IC). It is not clear whether this move will restore the public’s confidence in the pre-need concept.

I always considered the distinction between pre-need and orthodox life insurance products to be artificial.

As AXA Philippines President and CEO, Rien Hermans, put it: “Life insurance is not about dying; It’s about living.”

We are sure that Legacy Group’s CEO, Celso de los Angeles agrees!