Major commercial banks invest heavily in insurance [Archives:2005/894/Business & Economy]

November 14 2005

Although Banks and insurance companies have common interests, commercial banks have been trying to dominate the insurance industry through the purchase controlling stakes in major insurance companies, as insurance prospects in Yemen seem to be positive and bankers are optimistic on the growth of the insurance business and the returns on investment in insurance.

The Yemeni insurance market is still at its infancy, insurance companies are trying to expand their role in the economy in order to maximize their shareholders returns, considering the complicated nature of the insurance business and the risks involved. But are banks really concerned over these risks?

There are five reasons for bankers to invest in the insurance business, apart from the direct commercial linkages among banks and insurance, the competition among insurance companies is most likely to raise pubic awareness around the importance of insurance and is likely to be followed by considerable growth in consumer-based insurance. However, the synergy between banks and insurances businesses is likely to flourish with respect to the following reasons:

1- There should be a joint effort between banks and insurance companies to offer free life insurance for their clients who have saving balances, provided that the balances will not be less than a certain amount. The insurance cost will be as a part of the interest given to the client.

2- Banks are to impose life insurance on debtors instead of the other guarantees which could not be enough to meet the insurance costs.

3- Banks are to compel their clients who present letters of credits with comprehensive insurance on their goods from partner insurance companies.

4- Banks should be the main source for marketing insurance documents like those of accidents, car insurance and traveling coupons.

5- The insurance companies should depend on banks as economic advisors and market trend forecasters to confirm their own estimations.

It could be summed up that banks are not an alternative or rivalries of insurance companies, but they could be good partners. The present relation could be developed into a joint wider cooperation for the good of the two parties.