Insurers with good records to be allowed to sell through banks
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Only select insurers with a strong track record of settling claims will be allowed to participate in the bancassurance business, according to the insurance regulator.
The Insurance Development and Regulatory Authority (IDRA) made this announcement during a recent meeting with commercial bank CEOs at its headquarters.
"Not all insurers will be allowed to participate in this bancassurance business," IDRA Chairman Mohammed Jainul Bari was quoted as saying. "We will be very selective."
Mr Bari's comments suggest a gradual approach to the rollout of the bancassurance business model between banks and insurers.
His comments came in response to concerns raised by bank CEOs and managing directors regarding the poor claim settlement record of some insurers, which they believe disadvantages policyholders.
Bancassurance is a partnership arrangement between banks and life or non-life insurers, where banks act as corporate agents to sell insurance products to their existing customer base.
Bangladesh currently has around 140 million bank customers.
The IDRA recently authorised such partnerships and this meeting with banking industry CEOs marked a step towards launching the initiative.
CEOs from insurance companies also attended the meeting, which was chaired by the IDRA chairman.
The insurance regulator chairman recently said that some 19 life insurers have an on-time claim settlement record of between 80 per cent and 99 per cent.
"We have raised the issue of timely claim settlements," Mr Mashrur Arefin, managing director and CEO of City Bank PLC, told The Financial Express.
He said they have called for extending the bancassurance model to agent banking due to its rapid growth.
Highlighting their online service "Citytouch" which processes around Tk 90 billion annually, the CEO emphasised aligning insurance products with such digital services.
Mutual Trust Bank CEO Syed Mahbubur Rahman said, "This is a mutual opportunity both for banks and insurers, and we should not miss on it."
He told the FE that the products insurers typically sell needed to be customised and diversified matching loan offerings.
The CEO said that complex claim settlements would erode customer confidence in banks.
Meghna Life CEO NC Rudra advocated for an immediate launch of the partnership business, as both the regulators -- Bangladesh Bank and IDRA -- have issued the bancassurance guidelines.
"We'll be able to correct the mistakes later… but we should start the business immediately," Mr Rudra added.
The meeting, held on February 19, featured a presentation by IDRA Executive Director (Life) Dr Md Ashrafuzzman.
Bangladesh currently has 35 life insurers and 45 non-life insurers, yet the insurance penetration rate remains below 0.5 per cent of GDP.