Insurance companies will have reasons to prepare themselves for a much cherished celebration, as the government, according to a report published in this paper a couple of days back, has approved guidelines for selling their products through banks, technically known as bancassurance. When such an arrangement comes into force, insurers will avail an extensive and organised platform like the banks to sell their products to intending buyers who include individuals. The proposed arrangement is a partnership between insurers and banks and it is designed to benefit the partners concerned, financially. The most important beneficiaries, however, will be the policyholders, as their potential loss gets transferred to insurers for fees of varying amounts.
Two regulatory bodies – the Bangladesh Bank (BB) and the Insurance Development and Regulatory Authority (IDRA) -- have been involved with the process, as they separately prepared guidelines for insurance companies and banks. The Financial Institutions Division (FID) of the Ministry of Finance has gone through the guidelines and finalised a framework for launching the system in the local market. The framework focuses more on selling life insurance policies by insurers and offers limited opportunities to non-life companies to sell their products. Two key non-life products -- fire and marine insurance -- have been kept out of the purview of the bancassurance. This exclusion surely would create a sense of frustration among the non-life insurers.
Stakeholders concerned see the bancassurance as an opportunity to expand and popularise insurance in the country where insurance penetration is one of the lowest in the world. The rate is now as low as 1.0 per cent of the gross domestic product (GDP). The poor coverage comes in contrast with the existence of as many as 82 insurance companies. A variety of factors are responsible for people remaining lukewarm to the benefits of insurance in this country when in developed countries, insurance is a widely-used word in the corporate world as well as in the life of individuals. One can manage risks for almost everything---home, cars, personal health, business establishment, family etc. in those countries through insurance. Here, the vast majority of the population is least bothered about insurance coverage. A small percentage of the population, mainly educated and employed, chooses to take life insurance policies and children's education policies. Businesses avoid insurance unless they are required to do so under official rules and regulations.
The insurers, particularly those selling life policies, also on their part are not that aggressive in motivational work, as seen even in neighbouring India where life and general insurers run extensive advertisements to expand their business. Here, agents of local life insurers selling life policies are hardly seen approaching potential clients. Rather, there are allegations galore against a section of life insurers of depriving policyholders or their nominees of their dues. In many cases, insurers withhold payments to the nominees of the deceased policyholders under different pretexts. The IDRA investigations have also revealed that some companies even do not have the necessary funds to pay policyholders or their nominees. Such irregularities have given rise to suspicion about life insurers in particular. So, banks might be choosy when it comes to selling insurance products under a bancassurance arrangement. To give insurance business a boost, the IDRA and the insurers will have to address first the issues that have kept the potential customers away from taking policies, life or otherwise. The government also needs to look into the problems that have surfaced due to the presence of too many insurance players in a small market. The insurance sector could be a strong candidate for merger and acquisition.
© 2024 - All Rights with The Financial Express
