Infusing new life into the business of insurance

The insurance coverage in Bangladesh has been on the decline, mostly because of the lack of knowledge about risk coverage and clients' distrust of insurance companies.

Over the last one year, Bangladesh Insurance Academy (BIA) has been working to address both concerns by providing training to bankers in insurance products so that banks that received licences of bancassurance can sell products through their well-regulated channels.

Since the launch of the initiative in March last year, the BIA has conducted 58 training courses, with more than 3,000 bankers participating in them. The bankers are directly involved in selling insurance products to their customers.

The initiative is aimed at expanding the insurance coverage through bancassurance in compliance with regulatory standards, said SM Ibrahim Hossain, chief faculty member of the BIA.

The Bangladesh Bank data shows a sharp decrease in the insurance penetration ratio in Bangladesh from 0.50 per cent in 2016 to 0.35 per cent in 2023.

Bangladesh's performance is very poor even compared to neighbouring India where insurance penetration is 4.0 per cent.

In 2023, Bangladesh rolled out bancassurance after the central bank allowed banks to sell insurance products. Bancassurance is a collaborative effort between banks and insurance companies, allowing the former to distribute insurance products through their channels.

In encouraging risk coverage through bancassurance, regulatory bodies, including the Bangladesh Bank, kept in mind the need to gain customers' faith in insurance products.

Hence, it has been made compulsory for banks to submit BIA-issued certificates of bancassurance managers and officers, upon the completion of training, to the Insurance Development & Regulatory Authority (IDRA).

That stands in contrast with the conventional practice of insurance companies to deploy agents, who have limited technical and professional knowledge, to sell products.

Moreover, banks can also leverage their customer service skills and wider networks in attracting potential clients of insurance instruments. Experts say bancassurance has paved the way for a structured and professional approach to the selling of insurance products.

However, the banking sector in Bangladesh has also earned a bad image due to financial scams that rendered at least a dozen banks heavily reliant on the central bank for liquidity support.

The bancassurance guideline formulated by the central bank says that banks, which have maintained a net non-performing loan ratio of no more than 5.0 per cent, will be able to make partnerships with insurance companies.

Banks must obtain regulatory permission and licences from the Bangladesh Bank and the IDRA to operate the windows of bancassurance.

On receiving approval and a corporate agent licence, a bank can engage with up to three life insurance and three non-life insurance companies.

Four banks -- City Bank, Midland Bank, Eastern Bank, and Dutch-Bangla Bank -- have received permission to sell non-life insurance products, while six banks earned eligibility to sell life insurance products, according to Md. Solaiman, deputy director of the IDRA.

BIA training plays a pivotal role in helping bancassurance officers understand the products and their prospects, which, in turn, will contribute significantly to the improvement of financial inclusion and accessibility to more comprehensive services, said Mahbubur Rahman, chief bancassurance officer of BRAC Bank.

"Bancassurance not only offers investment and savings opportunities but also provides risk coverage," making it attractive for customers looking for both financial security and insurance benefits, he added.

Khondoker Imran Hossain, bancassurance manager of Midland Bank, said, "To significantly increase the [insurance] penetration rate, trained bankers can sell insurance products alongside regular banking operations. Customers don't need to visit insurance companies separately."

That makes the whole process a lot more efficient, said Mr Hossain.

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