WITH the solidification of Slovakia's banking sector and lower growth dynamics in the insurance sector, the country's banks are increasingly teaming up with insurers to offer complex financial packages.
While banks say they can offer improved services to clients on combined savings, loan and insurance packages, insurers welcome the wide distribution network that a bank offers.
Analysts expect Slovakia's insurance sector to stabilise in the wake of the merger between the country's largest insurer, Slovesnská poisťovňa (SP), and German insurance giant Allianz (see story, this page).
Growth in the insurance sector slowed to 10.3 per cent for the first six months of 2002, down from 21.6 per cent from the year before, according to the Slovak Insurance Companies Association.
In addition, with the insurance sector having to cover a decade of deficits in SP, most analysts are expecting an industry-wide hike in premiums, which will further restrict growth.
Banks and insurers say that working together helps to keep costs down while drumming up new business, and that the results can be particularly effective when the bank and insurance provider are part of the same financial group.
Allianz officials, for example, say they have noticed significant growth in insurance contracts through its association with Dresdner Bank, which the insurer acquired last year.
"Thanks to [the acquisition], in one year we have quadrupled the number of life insurance policies sold through bank networks," Allianz chairman Henning Schulte-Noelle told the weekly Trend.
Allianz and SP already sell insurance through a number of Slovak banks.
There are several different types of relationships between Slovak banks and insurance providers. For example, ING bank Slovakia is an arm of Dutch insurance house ING Nationale, and Československá obchodná banka (ČSOB) offers clients insurance through its Ergo subsidiary.
"In such a case, both firms are looking at one goal and are able to use synergy to a full degree," said Miriam Hajduová, spokesperson for the Slovak branch of ČSOB.
Bankers explain that offering insurance allows them to reach a larger number of customers who demand a higher standard of services than before, as well as creating income from commissions on insurance policies.
"A bank can decide between cheaper insurance for the client and [boosting] its own brokerage commission," said David Saleh, director of the main branch of Ľudová banka, which has an exclusive contract to sell insurance through Victoria-Volksbanken.
While selling insurance packages does mean increased administrative and training costs for banks, it also provides added security on loans, allowing for lower rates, say bankers.
As a result, many banks have started to offer lower mortgage and lending rates when they are backed by a life insurance plan - and further rate reductions when other insurance plans are included.
"If a client buys insurance, it lowers the risk for the bank of non-payment of loans in unforeseen circumstances," said Ingrid Kevešová from the retail banking section at UniBanka.
However, analysts warn that banks could discourage clients if they offer only one insurance package, without giving customers the chance to compare prices and benefits.
In addition, they say, banks should guard against expanding too heavily into insurance or other services that can distract from the core banking business.
"This kind of cooperation can enable a clear outflow of resources from the banking sector, if traditional savings are supplemented by life insurance," Saleh said.