Steering bancassurance innovations in Bangladesh

The concept of bancassurance, a fusion of banking and insurance services, has been a transformative force in the global financial landscape. Countries like Austria, France, Germany, Italy, Portugal, Spain, and the UK have witnessed remarkable success over the last five decades, these nations collectively commanding 40 per cent -50 per cent of the global bancassurance market share. This model is also gaining traction in East Asia and South America, indicating its widespread appeal and effectiveness.
In Bangladesh, the advent of bancassurance under the aegis of the central bank's guidelines in May 2022 marked a pivotal moment. In the transformative journey of Bangladesh's financial sector, banks have emerged as forerunners of digital innovation, significantly outpacing insurance providers in adopting and implementing digital processes.
This technological competence is not merely a testament to the banking sector's adaptability but also positions itself advantageously in leading the charge towards a robust bancassurance model in the country.
The digitization efforts undertaken by the banks have equipped them with data analysis tools and customer service platforms, enabling a seamless integration of banking and insurance services. This integration is critical in formulating best practices for bancassurance, ensuring that the delivery of insurance products through banking channels is efficient, customer-centric, and aligned with global standards.
Moreover, the customer base of banks in Bangladesh, characterized by its solvency and readiness to invest in insurance products, presents another strategic advantage. Banks have direct access to a wide range of customers, from retail account holders to corporate entities, many of whom possess the financial capacity and willingness to purchase insurance policies. This access allows banks to effectively cross-sell insurance products, tapping into an existing trust and banking relationship that they have cultivated over years.
A concrete example that illustrates the potential success of such an initiative can be found in the experience of France. French banks, leveraging their technological advancements and extensive customer base, have successfully integrated bancassurance into their service offerings. By doing so, they have not only expanded their product portfolio but also enhanced their value proposition to customers, setting a benchmark for countries like Bangladesh.
It is, however, crucial to recognize the diversity in digital advancement across Bangladeshi banks. While only a handful of large banks are at the forefront of digital innovation, the majority lag behind, presenting a challenge in uniformly implementing bancassurance across the board. Addressing this digital divide is essential, and strategies such as government and private sector-supported digital upskilling and technology sharing can help ensure a more inclusive advancement towards bancassurance.
The bancassurance model involves sharing customer data between banks and insurance providers. Effective risk distribution in this area requires clear agreements on data handling, privacy, and security protocols to protect customer information and comply with data protection regulations. Both parties should develop contingency plans for potential risks, including market downturns, changes in regulations, operational failures, etc. Establishing joint task forces to manage and respond to unforeseen events can ensure a coordinated approach to risk management.
Banks typically excel in customer service and transaction processes, while insurance companies have expertise in underwriting and claims management. By dividing responsibilities according to each party's strengths, operational risks can be minimized. For instance, banks can focus on marketing and initial processing of insurance applications, while insurance companies handle underwriting, policy issuance, and claims processing.
Insurance companies, which typically have more experience in risk assessment and management, should take the lead in designing insurance products and setting prices. Banks, on the other hand, can provide insights into customer preferences and market demand. Collaborative product development ensures that products are financially viable for insurance providers and attractive to bank customers.
As Bangladesh moves towards solidifying its digital infrastructure and achieving the ambitious goals set forth in "Vision 2041," bancassurance stands as a cornerstone in this endeavour. The digitalization of bancassurance processes aligns perfectly with the nation's vision of a technologically-advanced financial ecosystem. By adopting a forward-looking approach, banks and insurance companies in Bangladesh can collaboratively develop a bancassurance model that is efficient, inclusive, and capable of addressing the dynamic needs of the population.
Dr. Nurur Rahman is Founder and CEO of Somikoron AI, an AI-based startup in Bangladesh. Somikoron is paving the way for Bangladesh's insurance, finance and retails industries to be compatible with the Fourth Industrial Revolution.

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