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Dhaka Tribune

Is bancassurance the key for Bangladesh’s insurance industry?

The launch of bancassurance is an important and tangible contribution by the insurance industry in supporting the government’s strategic development goals

Update : 13 Mar 2024, 11:27 AM

This question was posed by Gokul Chand Das, Member, Insurance Development and Regulatory Authority IDRA) at the Asia banking and Finance Magazine Awards ceremony in Singapore in July 2018, where Guardian Life won three awards. A very positive discussion ensued during which I offered Guardian’s help to IDRA in pursuing this idea. 

Subsequently the Guardian bancassurance Team researched bancassurance regulations across the region and provided IDRA with draft regulations suitable for Bangladesh. In addition to Mr Das, we were also encouraged in our efforts by Khalil Ahmed, Executive Director of IDRA now Secretary, Ministry of Cultural Affairs.

In November 2019 we went to see the governor of Bangladesh bank, Fazle Kabir, to ascertain the Central bank’s views on the idea of introducing bancassurance, we were greatly encouraged by the governor’s positive response which moved us to push forward.

In my previous life as a corporate banker in Hong Kong, I had seen the positive benefits to a bank and its customers in promoting both general and life insurance products to corporate clients, their employees and small business owners. Both life and general insurers did not have a retail branch presence and by linking up with a bank they were immediately able to leverage off the bank’s branch network and increase its product distribution with minimal cost.

I began with Guardian Life in 2014 as a non executive director which enabled me to return to Bangladesh on a regular basis. Over the years, I was able to observe first hand that the agency distribution process of selling through agents was an extremely difficult and inefficient process. Agents walking door to door hoping to find a prospective client limits the number of potential customer contacts in a day and then the resulting number of successful policy sales. 

As a result of the country’s booming economy, high school leavers now have a wide range of employment opportunities with salaried jobs in comfortable air-conditioned offices and retail outlets. As a result, working as an insurance agent is far less attractive, and for many individuals is seen merely as a temporary job until they find something better. The proof of this is that after several decades of life insurance in Bangladesh, the industry has achieved a very low penetration rate. 

From a public’s perspective, life insurance fails the people when a family breadwinner dies without having been able to arrange some form of financial protection for the family due to the lack of ready access to life insurance.

Over the years, unlike banks, life insurance companies have not established street level, readily accessible, retail outlets and their “branches” are merely meeting places for their agency sales force.

To significantly increase the penetration rate (less than 0.5% of GDP in 2021 as reported in the Daily Star), life insurers need to provide product availability to consumers in the same way as banks and NBFIs provide their financial products. However, it does not make commercial sense to establish a nationwide retail branch network to sell insurance products -- it would be too expensive and would take several years. Hence the need to use a bank’s retail network.

As we have seen in several countries around Asia, it is quicker and more cost-efficient to use banks, which are already trusted by their clients to provide a wide range of financial products and services. 

Banks can be trusted by their customers and regulators to ensure that bancassurance partners are reputable, provide insurance products that properly meet customers’ needs and that the bancassurance partner meets the “acid test” of fast and efficient claims processing. 

Bancassurance should be seen as a trustworthy additional distribution channel to the agency distribution system, not a replacement.

The Financial Institution Division of Ministry of Finance, Bangladesh Bank and IDRA are to be congratulated on their collaborative efforts, particularly in establishing the Joint Working Group which moved the idea of bancassurance from an aspiration to reality.

As a result of the efforts of everyone involved, the launch of bancassurance is an important tangible contribution by the insurance industry in supporting the government’s strategic development goals.

When Guardian Life was established, the vision of its founders included the belief of “insurance for all” for the people of Bangladesh, and the launch of bancassurance across the nation is a significant step towards achieving this goal.

 

David JH Griffiths is Non Executive Director, Guardian Life Insurance Limited.

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