The government, in a bid to boost the country’s insurance industry and address the crisis of confidence, is allowing scheduled banks to serve as corporate agents for life and non-life insurance firms.
Banks interested in selling insurance policies on behalf of firms will have to secure approval from the Bangladesh Bank first. Industry insiders believe the move will help increase customer confidence in the sector, which in turn will help further expand the insurance sector.
The government on Wednesday finalised the Bancassurance Guideline and Corporate Agent (Bancassurance) Policy. Under the guideline, banks will have to appoint chief bancassurance officers and bancassurance managers to sell policies.
It should be noted that despite banks acting as corporate agents, insurance firms will remain solely responsible for settlement of claims.
Banks cannot legally be held accountable for any risks arising from policy sales, and the guideline encourages launching an awareness campaign to inform customers.
The guideline discusses and defines 25 key points, including eligibility of corporate agents; issuance, renewal, suspension and cancellation of licenses; agreements, premium collection, processing of policy sold under bancassurance; commission rates; and settlement of claims.
Speaking to The Business Post, Zenith Islami Life Insurance Ltd Managing Director and CEO SM Nuruzzaman said, “Corporate agents exist in many other countries. Nations that introduced such an initiative have very disciplined insurance industries. We are not that disciplined as yet.
“It is also being said that the overall number of agents will decrease. This is not true, we are still trying to expand this industry. If banks serve as our agents, it would help us in getting significantly more customers.”
Banks have a lot of customer confidence. Policy sales under bancassurance will help strengthen this confidence, Nuruzzaman pointed out.
On condition of anonymity, the managing director of another insurance firm said, “A company can have up to three banks as corporate agents. Many bank owners also own insurance firms, and they will prefer selling policies in their own banks.
“The regulator should work on ensuring discipline in the process.”
What’s in the guideline?
To become a corporate agent, a bank will have to prepare a draft deal with an insurance firm, secure approval from the Bangladesh Bank, and pay the licensing fee.
Upon verification of all relevant documents, Insurance Development and Regulatory Authority (IDRA) will issue a bancassurance license to the applicant bank. A license will remain valid for three years.
A bank will have to pay IDRA Tk 50,000 as license or renewal fee. The authority reserves the right to suspend or cancel a bancassurance license.
Moreover, a bank may lose this license if it fails to uphold the Insurance Act 2010, and any other relevant laws, refuse to cooperate with inspections, or engage in practices harmful to customer interest.
Policy sales process
A customer will fill up the insurance proposal, and pay the premium to a bank serving as a corporate agent. The bank will provide the customer with a receipt. If the insurance firm accepts the proposal, the customer will get the final receipt and insurance documents.
If the insurance firm refuses the proposal, it will notify its corporate agent. The bank will have to refund the customer within three business days for life policies, and seven days for non-life policies.
On behalf of a non-life insurance firm, a corporate agent will be able to sell group insurance, health insurance, and products designed for small and medium enterprises.
Premium collection
According to the bancassurance guideline, a corporate agent will collect premiums into a designated account belonging to the insurance firm. Quarterly reports must be prepared through designated software.
A bank, under no circumstances, will be allowed to adjust commissions with premiums.
Settlement of claims
According to the bancassurance guideline, a customer or his/her nominee will have to contact the relevant insurance firm to settle claims on life insurance, policy maturity, policy surrender, and health insurance.
The guideline clearly mentions that a corporate agent will not raise any question if the relevant insurance firm seeks customer information for claims settlement. Moreover, if an insurance firm decides that an insurance claim has no merit, the corporate agent will not get involved.
Commission rates
An insurance firm will be able to make bancassurance deals with up to three banks, to help the company launch an inclusive bancassurance marketing system. Moreover, an insurance firm will not be able to make such a deal with a bank without a license from IDRA.
A firm will pay a bank up to 15 per cent commission for non-life insurance products. For life insurance products, a firm will pay up to 35 per cent to a bank in the first year, 10 per cent in the second year, and 5 per cent for policies spanning three or more years.
The insurance act allows revival of lapsed policies. But in the case of bancassurance, if a customer has one or more lapsed policies, a corporate agent will not be able to sell a new policy to them within a one year period.
The same rule will also apply to any customer who voluntarily cancels his insurance policy.
Settlement of complaints
Upon receiving any customer complaints regarding a policy sold by a corporate agent, the relevant firm will work on resolving the issue. This matter will be mentioned in the bancassurance agreement.
If IDRA receives any complaints, the regulatory body will take necessary steps to resolve the issue under the Insurance Act, 2010.
Insurance firms will have to prepare a yearly bancassurance report and submit it to IDRA. This will ensure firm implementation of the guidelines, and regulatory monitoring.
IDRA reserves the right to change, modify and amend any part of the Corporate Agent Guideline 2023.
Bangladesh currently has 81 insurance firms. Among them, 35 are life insurance firms, and 46 are non-life insurance firms.
At the end of December 2022, the amount of gross premium in the country’s insurance sector stood at Tk 16,812 crore. Of the amount, Tk 11,399.51 crore is under life insurance, and Tk 5,413.14 crore is under non-life insurance.
