View from City Road: Bancassurance loses attraction

Bancassurance, that horrible Continental term for flogging personal finance products like life assurance and pensions to a captive bank audience, was once seen as a potentially huge and lucrative source of income for banks - a dream use for the surplus capital banks have been accumulating in ever-growing piles. With competition on the increase and customers ever more cost-conscious, bancassurance seemed to offer the holy grail. What could be better? A captive customer base, delivered through the branch network, to sell pensions and life assurance to at a fraction of the cost ordinary life companies, with their huge direct-selling forces, have to sustain.

Sales people at Black Horse Financial Services, Abbey Life's arm which sells direct to Lloyds Bank customers, do not have to tramp around seeking clients; potential contacts are already logged and analysed in abundance in Lloyds' customer records.

Some of the gilt might be coming off the bancassurance dream, however.

Half-year profits announced yesterday by Abbey Life's BHFS arm fell by pounds 16m to pounds 44m. Judging by these results, bancassurance seems to be faring no better than the industry as a whole - worse if anything. The public appears increasingly reluctant to commit itself to long-term life assurance while sales practices and commission levels remain in doubt.

All of which is bad news for banks like NatWest, whose 'bancassurance' arm is now one of the 15 biggest life companies in the UK from a standing start only 18 months ago. TSB is another bank which has hitched its future to becoming a personal finance supermarket.

Undoubtedly bancassurance will eventually become a reasonable money spinner but those who dreamt of mega bucks are likely to be sadly disappointed.