After years spent locked in a regulatory battle over whether banks should be allowed to sell insurance, banks and insurance companies are recognizing that bancassurance—a French term for the selling of insurance by banks—is finally becoming a reality. Most players also recognize that the biggest untapped bancassurance opportunity is life insurance, because it is currently distributed through expensive agent salesforces and has yet to be purchased by many potential consumers. The question for both banks and life insurers is how to organize to profit from this new opportunity. The answer, we believe, is for them to form partnerships.

Our research suggests that the sale of life insurance through banks will meet an important set of consumer needs. Most large retail banks engender a great deal of trust in broad segments of consumers, which they can leverage in selling them life insurance. In addition, a bank’s branch network allows the face-to-face contact that is so important in the sale of life insurance. In France, for example, over half of all life insurance sales are now made through banks. In the rest of Europe, the proportions range from just 5 percent in Sweden to 33 percent in Spain (Exhibit 1).

Though...