Central bank introduces bancassurance

Bangladesh Bank (BB) introduced bancassruance, bank-insurance partnership of selling insurance products to bank clients, with immediate effect from Tuesday.
All the 61 scheduled banks operating in the country could be involved in the business of marketing and selling products of insurance companies as their 'corporate agents', says a directive issued by the central bank on the day.
The government's approval will have to be obtained under the powers given in the Bank Companies Act, 1991.
The bancassurance will be implemented mainly through the bank branches as per the approved policies and guidelines. A bank will have to sign an agreement with the insurance companies concerned to become their agent.
However, no bancassurance agent can be associated with more than three insurance companies. For this, the insurance company concerned has to get approval from the Insurance Development and Regulatory Authority (IDRA) and the agent from the Bangladesh Bank.
Earlier, the government approved guidelines for introducing insurance products through commercial banks, according to official documents, as bancassurance is expected to serve as a shot in the arm for the country's insurance sector.
Previously, two regulators -- the IDRA and the Bangladesh Bank -- drafted separate guidelines on the matter.
'Bancassurance' is a partnership business model between banks and insurance companies. Under this arrangement, banks offer their customers the option to buy insurance products.
This alternative selling model originated in France in the 1970s. In bancassurance, bank staff and tellers become the point of sale and contact for the customer.
The revised framework focuses on life insurance policies and aims to increase their sales through the banking channel.
The guidelines restrict the business opportunities for non-life insurance companies.
In contrast, all life insurance products are now eligible under the model.
The corporate agents, or banks, will receive a 15 per cent commission on the group insurance business.
The insurance companies are expected to get more clients and broader penetration of the products, leading to increased revenue alongside that of banks.
Bangladesh currently has 82 insurance companies, including two state-owned insurers.
According to the data of the central bank, there are a total 11,239 bank branches across the country, including 5,287 branches in villages.

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