Since NatWest put itself in play by bidding for Legal & General, the concept of bancassurance has come under attack. Critics have argued that cross-selling has yet to work in the UK; that customers consciously avoid one-stop banking; that new entrants competing on price will loosen relationship banking further; and that traditional bank branches are not geared up to the complexity of selling long-term investments under the UK's tough regulations.
What the market thinks about the merits of bancassurance will determine whether UK banks can get away with acquiring insurers in future, or whether consolidation moves will be confined within each sector.
Lloyds TSB made the last successful push into bancassurance by acquiring Scottish Widows for £7 billion in May. Chief executive Peter Ellwood defends the strategy: "The criticisms are not justified, and are disproved by our record in the marketplace. Customers want a financial provider who understands their needs at every stage of their life and offers the complete range of products and services to meet them." The Scottish Widows deal addresses a relative group weakness in pensions, according to Ellwood.