DEVELOPMENT AND ANALYSIS OF BANCASSURANCE IN REPUBLIC OF NORTH MACEDONIA

Abstract

Insurance companies use different channels of distribution to reach the end client, such as, for instance, direct sales, insurance brokerage companies, advocacy companies, agents, etc. Today, insurance companies more frequently use new and improved channels of distribution of their products. These types of new distribution channels are using their own strengths comparing to traditional insurers, such as brand awareness, marketing knowledge, existing customers and know – how on creating financial packages that include insurance policy. The new distribution channels use differentiated approach to selling insurance services and create new services. The significance of new distribution channels is rising due to the already formed database of clients. One of the new types of insurance distributive channels is using the banking network for selling insurance products. Furthermore, domestic banks are the most affordable gateway for foreign insurance companies to an underdeveloped insurance market. The introduction of bancassurance has not been stimulated only by insurance companies, but by the banking sector as well in the pursuit of means to acquire additional income. First and foremost, serious and positive competition among banks resulted in a continuous reduction of interest conditions and administrative costs in the standard operation process, i.e. credit sales; thus causing the decrease of the main income from active interest rates. Then, legislation in many countries requires taxation of interest income on saving deposits, coinciding with the risk of reducing the volume of traditional savings and deposits that the banking sector is facing. This, only redirects depositors towards purchasing life insurance policies, which in many countries have a more affordable tax treatment, as well a significant investment component. Banks are attempting to keep and “bind” clients using “bancassurance”.
The bancassurance trend in the Republic of North Macedonia was started by Ohridska banka (Societe Generale), acting as an agent of the Life Insurance Company GRAVE AD Skopje, starting from 2012. The first integrated product launched as credit life insurance is a blend of crediting the population sector with liability insurance in the event of deathof the borrower. By using this product, in the event of the death or permanent disability of the borrower, the life insurance company settles the outstanding loan.
These characteristics make the product beneficial for the bank, as well as the population. Bancassurance applies a win-win strategy, i.e. both institutional business partners profit from it. To be more precise, the bank offers a wider variety of additional financial, i.e. insurance services for its clients, all the while acquiring a new source of income from this additional activity.