Banks allowed to start bancassurance business
Bancassurance is expected to be launched by 1 March
The Bangladesh Bank has allowed banks to start bancassurance – an arrangement for selling insurance products through banks – in a bid to increase insurance penetration in the country.
The central bank issued a circular on Tuesday (12 December) with immediate effect, signifying that a bank ready to become a corporate agent for its partner insurers can now proceed with the process.
The insurance industry is awaiting a directive from its regulator – the Insurance Development and Regulatory Authority (Idra).
Speaking to The Business Standard last week, Mohammad Jainul Bari, chairman of the Idra, said the directive should be issued any day now.
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Bancassurance is expected to be launched by 1 March – the national insurance day, he added, as both banks and insurance companies need time to prepare for the launch of this new insurance marketing channel.
Bangladesh, which is extremely lagging behind in terms of insurance penetration, also lagged in adopting the insurance product distribution channel popular in other countries.
After a decade of talks, the regulator, the government, and the industry together finalised the framework for bancassurance in the middle of this year.
Three major non-life insurance businesses – marine hull, marine cargo, and fire insurance—that account for over 80% of the non-life insurance premium were excluded from bancassurance, as the Bangladesh Insurance Association (BIA) argued that they were not yet ready for inclusion.
Reaching a consensus, the government in October asked the Bangladesh Bank and the Idra to modify their directives for bancassurance, and the modified ones have been approved by the finance ministry recently.
On 3 December, the finance ministry wrote to the Bangladesh Bank and the Idra to take the necessary measures to launch bancassurance soon.
Bancassurance played a great role in increasing insurance penetration in many countries, including neighbouring India, and Bangladesh should not be an exception, BIA Vice President Nasir Uddin Ahmed told TBS.
According to the draft directives for bancassurance, an insurer can have up to three banks as its corporate selling agents, while a bank, too, can be the agent of up to three insurance companies.
Banks can earn the agent commission not more than the percentage allowed in insurance regulations.
There are over 11,200 bank branches across Bangladesh, and they can play a vital role in increasing the popularity of insurance in the country, said Nasir Uddin Ahmed
