Stakeholders at a recent policy meeting have suggested seeking advice from the development partners before introducing 'bancassurance' in the country.
They put forward the recommendation as the local insurance industry has hardly any knowledge about the product and its marketing strategy, according to the meeting minutes, a copy of which was obtained by the FE.
On the other hand, they argued that the development partners like the International Finance Corporation (IFC), Asian Development Bank (ADB) and the World Bank have much up-to-date knowledge on the marketing channel of the insurance product and they can assist Bangladesh to formulate a required policy.
The Financial Institutions Division (FID) of the Ministry of Finance organised the meeting in September last, with FID additional secretary Abdullah Haroon Pasha in the chair.
Representatives from the Bangladesh Bank and the Insurance Development Regulatory Authority (IDRA) were, among others, present at the meeting.
The meeting was told that the existing bank company act of 1991 has no restriction in introducing the business model of bancassurance in the country.
Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base.
This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer bases without increasing their sales force or paying agent and broker commissions.
The participants of the meeting said that the central bank can issue a circular to facilitate introducing the product with just taking a prior permission from the government.
Earlier, the government had formed a technical committee consisting of representatives from the Bangladesh Bank, IDRA and other relevant organisations. The committee has already submitted its report to the government.
IDRA representative Abu Mahmud pointed out that such marketing strategy may emerge as a most successful one if there are divisions of customers like clients from urban and rural areas.
He thought that this is the most cost-efficient marketing strategy in the world and the management expenses of the insurers could be reduced through this channel.
Mr. Pasha said the existing insurance policy has a provision on introduction of such strategy in the country. "It will enhance contribution of insurance sector to the country's GDP".
Dr. Nahid Hossain, a joint secretary at the FID, said Bangladesh Bank and IDRA should issue separate circulars for the banks and insurance companies to introduce the product, but these will have to be complimentary to each other and free of contradiction.
jasimharoon@yahoo.com