A commercial bank would be able to tie up with four insurance firms at a time for operating partnership insurance business in the bancassurance model. Of the four, the bank can tie up with two life insurers and two non-life firms.
Earlier, the Bangladesh Bank (BB) proposed three insurance companies with one bank for the partnership business model. But the Insurance Development and Regulatory Authority (IDRA) proposed four insurers with one bank for the same.
The representatives of banks, insurance firms, and other key stakeholders concerned agreed on tagging four insurers with one bank for operating bancassurance - in a meeting at the Financial Institutions Division (FID) at the secretariat on Wednesday.
Bancassurance is an arrangement between a bank and an insurance company that allows the insurer to sell its products to the bank's client base.
The partnership arrangement can be profitable for both the entities. Banks can earn additional revenue by selling insurance products, and insurance companies can expand their customer bases without increasing sales force.
FID Additional Secretary Abdullah Harun Pasha presided over the meeting, where representatives from the BB, the IDRA, banks, insurance firms, and other key stakeholders were present.
The meeting also agreed to form a joint regulatory committee, consisting of members from the BB and the IDRA. The main objective of the committee would be to settle any dispute relating to claims and others.
The government is now finalising the bancassurance guidelines. The IDRA prepared its guidelines, and the BB also prepared its separate guidelines.
Another key consensus came from the meeting on the banks' renewal of bancassurance licences from the central bank.
All the stakeholders opined that they would like to introduce bancassurance from March 01, when the government would celebrate the National Insurance Day.
Bancassurance would help raise the insurance penetration rate in the country, which is now less than 1.0 per cent of the gross domestic product (GDP).
The Insurance Policy, adopted in 2014, had a target of reaching 4.0 per cent insurance penetration in the country by 2021.
An IDRA report noted that both India and Nepal introduced bancassurance much earlier and got good responses from the banking client base.
The per capita income is on the rise in Bangladesh, and the disposable income of people is also increasing day by day. So, there is a good scope for selling insurance products to the bank clients.
A modern channel is needed to sell insurance products, and bancassurance is a good tool to this end, the report added.
The country now has 81 life and non-life insurance firms. According to Swiss Re, Bangladesh's insurance penetration was 0.57 per cent in 2018, the lowest among the emerging Asian countries.
jasimharoon@yahoo.com