In this paper, we analyze the effect of bancassurance on safety and efficiency of banks using merger simulation method. We also present the possible bancassurance strategy for banks in the short & long term horizon.
Firstly, looking at the changes in Z-score after the simulated mergers between 6 largest banks and 2 largest insurance companies, we find that the banks' safety increases as a result of the mergers until the ratio of insurance assets to total assets reaches about 50%. Secondly, the analysis of economy of scope in the merged firm tells us that the banks will gain economy of scope, which becomes greater especially when the merged firms commit 15%~75% of total assets to the insurance business. These results imply that bancassurance should be vitalized up to a certain degree to gain the safety effect from the asset diversification, and to gain the efficiency through the economy of scope.
In the early stage of bancassurance, it is recommended that the banks concentrate on the sales of the simple insurance products through the strategic alliances, whereby pre-occupying the bancassurance market. Furthermore, it will be helpful to set up the distribution subsidiary co-invested by banks and insurance companies in order for the banks to accumulate insurance know-hows and to gain competencies in the insurance business.
In the long run, the banks might well consider expanding insurance business by setting up insurance subsidiary. It should be, however, noted that the conditions such as minimum number of clients, brand image, customer loyalty, and price competitiveness must be satisfied.
방카슈랑스가 은행의 안전성 및 효율성에 미치는 효과(The effect of bancassurance on safety and efficiency of banks)
|Series Title; No||금융조사보고서 / 2002-08|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|