High street "bancassurers", such as Natwest and Legal & General are set to become following their proposed merger, are unlikely to make selling general insurance a high priority, according to leading consultants and analysts.
In the wake of NatWest's offer for Legal & General, the consensus from industry observers is that the banks will continue to broker personal lines general insurance business but will concentrate on promoting higher-margin life, pension and savings products.
Banks are already major players in the personal lines market, with July's Insurance Times Top 50 Brokers league table showing Lloyds in third place by revenue, NatWest in sixth, and Barclays at 11th.
But many observers have long been puzzled about why banks underuse their branch networks for selling general insurance, particularly in comparison with continental Europe.
For instance, figures from Goldman Sachs show that 15% of general insurance products in the Netherlands are sold through banks, compared to fewer than ten per cent in the UK.
Sophisticated software would allow banks to boost their insurance sales by tracking customers' current insurance-buying patterns.
But the view from Ernst & Young insurance audit partner James Dean is that despite this advantage, general insurance is unlikely to be high on the agenda of the new breed of bancassurers. "If you look at market growth, general insurance is tracking GDP, while long-term savings products are growing well ahead of GDP. If the banks look ahead it is much more obvious to get a share of the savings market".
Dean points out that the profit on distributing insurance products underwritten elsewhere will always be restricted, but that banks are still reluctant to underwrite themselves. "There isn't the enthusiasm for it -- the banks are worried about volatile earnings."
Goldman Sachs European insurance analyst Andrew Goodwin agrees. "Banks aren't doing anything radically different, just replacing the broker. Unless they are particularly efficient, their distribution costs aren't going to be much lower. Non-life products make a small margin. Profits are likely to be much greater in life products where you have a whole profit stream."
Mark Ward, partner in Arthur Andersen's financial services department, agrees that personal lines will never be top of the banks' agendas. "Life products and retail banking have driven bancassurance. They sell general insurance because they seek to be your partner from cradle to grave. But it's not necessarily part of the strategic vision of the retail financial services outlets."
At PricewaterhouseCoopers, Ian Dilks, chairman of the European insurance group, believes that other banks and insurers are likely to follow NatWest and Legal & General in forging closer links between banking and insurance. "Banks believe it does make sense to have insurance products to push through their channel," he said.
But he also believes that e-commerce and internet trading will give insurers avenues other than banks in which to sell their products.
A NatWest spokesman said: "We are going to provide a whole range of products. There is no move towards one particular area."
