Banks to sell insurance
FROM PAGE B1
The ratio of the premium collected by insurance companies to GDP is only 0.4 percent while it is more than 4 percent in India, according to recent data from Switzerland-based research organisation Swiss Re Institute.
One of the reasons for the low insurance penetration in Bangladesh has been the low claims settlement ratio.
For example, payments against claims of around 10 lakh policyholders are hanging in the balance as 29 life insurance companies are not clearing dues owing to a liquidity crisis. The unsettled claims involved Tk 3,050 crore in the four years to the second quarter of 2023, data from the Insurance Development and Regulatory Authority (Idra) showed.
“Once banks start selling insurance products, it will help insurers generate more profits. This will enhance their capacity to win back people’s trust,” said Mohammad Ali.
Jalalul Azim, chief executive officer of Pragati Life Insurance, feels that the model should have been launched earlier. “Still, there is a huge opportunity to enhance the image of insurance companies.”
He also said both insurers and banks will benefit from bancassurance if they do business following the instructions of regulators instead of engaging in unhealthy competition.
Istiaque Mahmud, head of the bancassurance department of Guardian Life, said the bancassurance distribution channel will open up business opportunities for the hugely untapped insurance market, which is estimated to be worth Tk 5,000 crore.
“Now, it will be easier for customers to purchase reliable insurance products.”
Ala Ahmad, CEO of MetLife Bangladesh, said bancassurance has the potential to give a boost to the insurance sector. And as a new channel to sell insurance products, it will bring more people under the coverage of insurance.
“MetLife Bangladesh is committed to investing in the development of bancassurance while continuing to support its existing agent base.”
Main Uddin, a professor at the banking and insurance department in the University of Dhaka, says agents of most insurance companies gave incorrect or exaggerated information to policyholders while selling policies.
Besides, they did not properly share rules. As a result, they have lost the trust of customers, hurting the reputation of their companies. “Now, the general public has a negative perception about the industry.”
“Since banks are more trustworthy to people than insurance companies, bancassurance will improve insurers’ acceptability.”
Toufic Ahmed Choudhury, a former director-general of the Bangladesh Institute of Bank Management, said the new distribution channel would help banks generate more revenues.
“However, banks should focus more on their core areas.”
Two insurance agents based in Dhaka said they think that the model will prove to be beneficial for the industry.
“People’s trust in the insurance sector will come back and the business will expand,” said one of them.
There were 530,360 agents across the country in 2022 while policy numbers stood at nearly 90 lakh, according to the Idra.
Sheikh Kabir Hossain, president of the Bangladesh Insurance Association, a platform for insurance companies, said: “This is good news for the entire industry, especially for the life insurance sector.”
Mohammad Zainul Bari, chairman of the Idra, said the regulator will initiate various preparatory activities, including workshops, for the officials of banks and insurance companies so that they can offer the bancassurance facility as soon as possible.