Monday, May 27, 2024


Dhaka Tribune

Can bancassurance revive the insurance sector?

This bancassurance model will be a direct sale method, which will see banks utilizing their existing workforce to market insurance products

Update : 01 Mar 2024, 12:41 AM

Although relatively new, insurance industry insiders are pinning their hopes on bancassurance, as they believe the nationwide banking networks can finally help them penetrate the uninsured populace.

Banking in insurance (bancassurance) is a system that enables sale of insurance products through the banking channel in the country.

The banks will act as corporate agents of the insurance firms.

This is an alternative selling strategy for insurance products through banking institutions with sights set on revenue boost for both.

Insurance companies are expected to get more clients for their products with wider penetration, leading to a rise in their revenues, and banks’, too.

This type of alternative selling of insurance products is popularly called bancassurance, originating in France in the 1970s.

This is simply a relationship between bankers and insurers that is aimed at offering insurance products to the bank clients.

This will require no equity investment for banks, according to a presentation of the Bangladesh Bank.

Such a system, available in almost all south Asian economies, will reduce the risk-based capital requirement for the same level of revenue.

This will secure an additional and more stable stream of income through diversification into insurance and reduce the reliance on interest spreads as the major source of income.

Also, the increased insurance coverage will add to the fiscal prudence of the population and provide financial support in the event of a calamity.

Earlier, Idra, the regulator of 81 insurance companies in Bangladesh, sent its opinions to the FID in June, 2021.

Idra thinks bancassurance would help raise insurance-penetration rate in the country, which is now less than 1% of the gross domestic product (GDP).

Life insurance policies are sold through banks in most European countries. It has also gained popularity in various Asian countries. 

It was introduced in neighboring India about three centuries ago. 

Pakistan and Sri Lanka have also been successful in bancassurance.

Guidelines set

Bancassurance has been introduced through scheduled banks operating in the country. 

All banks are given the power under the Bank Companies Act, 1991 to do the business of marketing and selling insurance products as ‘corporate agents’ of insurance companies from December 12, 2023.

The new guideline titled ‘Corporate Agent (bancassurance) Guideline - 2023’ allows banks to directly sell insurance products to their customers.

Under its provisions, each bank can offer a maximum of three life and three non-life insurance products under its umbrella.

Obtaining a corporate agent licence for bancassurance activities will require banks to pay a Tk 50,000 fee to the IDRA, valid for three years.

While banks can sell all types of life insurance products, they are restricted to specific non-life categories: motor, travel, health and crop insurance.

This bancassurance model will be a direct sale method, which will see banks utilizing their existing workforce to market insurance products.

To apply for a corporate agent licence, banks must submit the following documents to the Idra: a draft agreement with the partnering insurance company, approval from the Bangladesh Bank and a payment order for the licence fee.

Those who got licences

Licencees include Brac Bank PLC, Mutual Trust Bank PLC, Guardian Life Insurance, MetLife, City Bank, Dutch Bangla Bank PLC, Green Delta Insurance, etc. 

More banks and insurance companies are subject to regulatory approvals, while those who received licences are in the process of training their personnel about bancassurance. 

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