The Co-operative Insurance Society (CIS) last week became the latest insurer to move closer to a bank.

Its parent organisation, the Co-op Group, is merging the management of CIS with that of its banking operation, the Co-operative Bank.

It will enable CIS, with its 4.5 million policyholders, to cross-sell products to the Co-operative Bank's three million customers.

CIS has assets of £26bn and the bank has customer deposits of £6bn.

The two entities will unite under a single chief executive and board of directors.

Both are owned by the Co-operative Group, but until now have been autonomous.

The move towards closer relations between an insurer and a bank puts the Co-op in line with an established trend.

CGNU last month reached a bancassurance agreement with Spanish savings bank Caja Espana, while in September AXA sidled up to French bank BNP after the collapse of a distribution deal with Germany's Deutsche Bank.

But analysts were not impressed by the Co-op Group's admission that, until now, there had been precious little cross-selling.

Group chief executive Sir Graham Melmoth was reported as saying: "There isn't much overlap between our bank account holders and our insurance policyholders.

"Often our banking customers do not know they can also buy a Co-op insurance policy."
One City analyst said: "It's an indictment of its management that it hasn't been doing it."

HSBC analyst David Hudson said: "It's not exactly going to set the insurance industry quaking in their boots."

The chief executive of the new holding society, which will operate as an umbrella over the two entities, will be responsible for setting its business targets.