Bancassurance in Bangladesh | All you need to know

Bancassurance is a term used to describe a business model in which a bank and an insurance company cooperate to offer products to their customers. The goal of Bancassurance is to provide customers with a one-stop-shop for all their financial needs. In addition to providing convenience, it also offers customers the opportunity to save money on fees.

BB issued a circular to launch bancassurance on December 12, 2023, on the same day.

Bancassurance in Bangladesh

Bancassurance is a term used to cooperate between a bank and an insurance company. The bank sells insurance products to its customers, and the insurance company uses the bank’s distribution channels and customer base to sell its products. In Bangladesh, Bancassurance is about to start. Banks in Bangladesh are going to expand their product offerings to include more insurance products.

Bancassurance is a combination of banking and insurance services offered by a single institution.

Bangladesh is a rapidly growing country with a large population. To build a strong economy, the government is interested heavily in Bancassurance. The government can keep its finances safe and ensure that its citizens are not at risk by providing insurance.

Learning more about how Bancassurance can help you in your business and personal life.

How Bancassurance Can Benefit Businesses?

To create a safe and secure environment for their customers, the government of Bangladesh is investing in Bancassurance. 

This partnership allows the bank to offer insurance products to their customers. 

The two businesses offer life insurance, health insurance, and property insurance to their customers. Bancassurance can benefit companies in Bangladesh by providing a way to provide their customers with various products, including insurance products. This can help the businesses attract and keep customers.

The product is usually marketed through the bank’s branches and provides customers with an easy way to buy insurance products.

The bank typically sells the insurance products, while the insurance company provides underwriting and claims processing. This type of arrangement can benefit businesses in Bangladesh in several ways.

The main benefits of Bancassurance for businesses in Bangladesh include:

1. Increased sales and revenue: Businesses can increase their sales and revenue by offering bancassurance products. 

2. Increased customer acquisition: By offering bancassurance products, businesses can increase their customer acquisition and retention. 

3. Decreased cost: Businesses can decrease their costs by offering bancassurance products. 

4. Increased credit availability: By offering bancassurance products, businesses can increase the amount of credit. 

5. Increased market reach: By offering bancassurance products, businesses can expand the market they serve and gain access to new customers and markets.

Bancassurance can benefit businesses in Bangladesh in a few more ways. 

First, it can help businesses grow by providing them with an opportunity to sell insurance products to their customers. 

Second, it can help businesses to save money by allowing them to bundle their insurance products with their banking products.

Third, Bancassurance can help businesses to save money on their insurance premiums.

Fourth, Bancassurance can help businesses save money on the costs associated with underwriting and claims processing.

Fifth, customers may avail of additional services.

Sixth, Bancassurance can help reduce the risk of fraud or financial crimes.

How Does Bancassurance Benefit Banks?

There are many reasons why Bancassurance is lucrative to banks. The company has provided this insurance for many years because it has been able to keep its finances safe. The government can keep its finances safe and ensure that its citizens are not at risk by providing this insurance.

Bancassurance can help to ensure that your business is there when times are tough, and you require support. You can have a team to help you through these times, and Bancassurance can help you keep your financial stability.

Bancassurance is a business model that allows banks to offer their customers life insurance and other financial products. Banks can benefit from this arrangement by earning commissions on the sales of the insurance products and by earning interest on the deposits used to fund the policies. The bank can also benefit because it is the only institution that the customer deals with when buying insurance, leading to increased loyalty and repeat business.

It provides customers with a wide variety range of products. By offering insurance products through the bank, the bank can benefit from increased customer loyalty, cross-sell opportunities, and an expanded customer base. In addition, the insurance company can benefit from the bank’s distribution network and reach a more extensive customer base.

So, the benefits for banks incorporate:

  1. Increased customer base
  2. Increased profits
  3. Reduced costs
  4. Improved customer service
  5. Improved Customer Satisfaction
  6. Improved fraud prevention
  7. Increased cross-selling opportunities
  8. Increased Efficiency
  9. Enhanced Risk Management

How Does Bancassurance Benefit Insurance Companies?

Bancassurance, the collaboration between banks and insurance companies, offers several benefits in the context of Bangladesh. Here are specific advantages for insurance companies in the Bangladeshi market:

  1. Enhanced Market Penetration:
    • Bancassurance provides insurance companies in Bangladesh with a valuable opportunity to expand their market reach. By leveraging the extensive branch network of banks, insurers can access a larger customer base.
  2. Cost-Effective Distribution:
    • Establishing separate distribution channels can be expensive. Bancassurance allows insurance companies to utilize the existing infrastructure of partnering banks, resulting in cost savings related to setup and maintenance.
  3. Customer Trust and Credibility:
    • Banks are often regarded as trustworthy financial institutions by the Bangladeshi population. Partnering with banks enhances the credibility of insurance products, instilling trust among customers.
  4. Financial Inclusion:
    • In a country like Bangladesh, where segments of the population may be underserved or financially excluded, Bancassurance can contribute to financial inclusion. Access to insurance products through banks brings financial services to a broader demographic.
  5. Cross-Selling Opportunities:
    • Bancassurance partnerships facilitate cross-selling opportunities. Insurance companies can collaborate with banks to bundle insurance products with other financial services, providing customers with comprehensive financial solutions.
  6. Regulatory Compliance:
    • Bangladesh has specific regulations governing the financial services sector. Bancassurance ensures that insurance products comply with these regulations, as banks are well-versed in regulatory requirements and can assist in adherence.
  7. Tailored Product Development:
    • Working closely with banks allows insurance companies to tailor their products to the specific needs and preferences of the Bangladeshi market. This customization can result in more relevant and attractive offerings for customers.
  8. Technology Integration:
    • Many banks in Bangladesh are adopting digital technologies. Bancassurance partnerships enable insurance companies to leverage these technological advancements for streamlined processes, efficient customer service, and digital distribution.
  9. Risk Diversification:
    • For insurance companies in Bangladesh, diversifying distribution channels is a risk mitigation strategy. Relying on Bancassurance alongside other channels provides a diversified approach to market exposure.
  10. Increased Awareness and Education:
    • Banks, being key financial touchpoints, can play a crucial role in increasing awareness about insurance products. Bancassurance allows for collaborative efforts to educate customers on the importance and benefits of insurance.
  11. Localized Marketing:
    • Banks have a deep understanding of local markets and customer preferences. Through Bancassurance, insurance companies can benefit from the localized marketing expertise of their banking partners.
  12. Long-Term Strategic Partnerships:
    • Bancassurance partnerships in Bangladesh can foster long-term relationships between banks and insurance companies. Building strong partnerships contributes to stability and continuity in the distribution of insurance products.

What are the types of Bancassurance?

Bancassurance refers to the distribution of insurance products through banks. It is a partnership between a bank and an insurance company to provide a wide range of insurance products to the bank’s customers. There are several types of Bancassurance models, each with its own characteristics. Here are some common types:

  1. Pure Distribution Model:
    • In this model, the bank acts as a distribution channel for insurance products.
    • The bank’s role is limited to selling insurance products, and it does not get involved in the underwriting or policy management.
  2. Referral Model:
    • Under the referral model, the bank refers its customers to the insurance company, and the insurance company takes care of the sales process.
    • The bank earns a commission or fee for every successful referral.
  3. Co-Branding Model:
    • In a co-branding Bancassurance model, both the bank and the insurance company share their brand names on the insurance products.
    • This model leverages the trust and credibility associated with both the bank and the insurance provider.
  4. Joint Venture Model:
    • Some banks and insurance companies form a joint venture to create a separate entity that exclusively handles Bancassurance activities.
    • This model allows for a more integrated approach, with both partners actively participating in the management and operations.
  5. Integrated Model:
    • In an integrated Bancassurance model, insurance products are integrated with other banking products and services.
    • Customers may, for example, have insurance coverage linked to their bank accounts, loans, or credit cards.
  6. Product bundling Model:
    • This model involves bundling insurance products with other financial products offered by the bank.
    • Customers may receive a package deal that includes banking services, loans, and insurance coverage.
  7. Online Bancassurance:
    • With the rise of digital banking, many Bancassurance activities have moved online.
    • Customers can purchase insurance products through the bank’s online platform or mobile banking app.
  8. Micro Bancassurance:
    • This model focuses on offering insurance products with lower premiums and coverage tailored to specific customer segments.
    • It is particularly relevant for reaching the underbanked or those with limited insurance coverage.

The choice of Bancassurance model depends on the strategic goals of both the bank and the insurance company, the regulatory environment, and the preferences of the target market. Each model has its advantages and challenges, and successful Bancassurance partnerships often involve a deep understanding of customer needs and effective collaboration between the bank and the insurance provider.

What are the products of Bancassurance?

The products offered by bancassurance companies vary but often include banking products such as checking and savings accounts, credit cards, mortgages, and insurance products such as auto, home, and health insurance.

Bancassurance is a practice where banks and insurance companies offer products from both industries to their customers. The products available through Bancassurance can include anything from car insurance to life insurance, and banks often promote these products to get customers to buy multiple services from the same institution. Proponents of Bancassurance argue that it offers customers convenience and simplicity, while critics say that it can lead to higher prices and reduced competition.

Who started Bancassurance?

Bancassurance started in the 1980s in French and developed both in France and Spain. Some credits Barclay’s Life, an insurance subsidiary, formed in 1965 in the UK for pioneering of Bancassurance.

Finance News: Latest Financial News, Finance News today in Bangladesh
Infographics by the Financial Express

In Bangladesh, Bancassurance Guidelines for Banks has been finalised on May 24, 2022.

Major bancassurance players in Bangladesh?

In Bangladesh, this sector will be overgrowing due to the increasing demand for insurance services from the people. The leading players in the bancassurance market are the banks and the insurance companies. The banks provide the products and services of the insurance companies to their customers, while the insurance companies use the bank’s network to reach a more extensive customer base.

Banks and insurance companies will play in the bancassurance field under the FID, IDRA, and Bangladesh Bank.

Chief Bancassurance Officer (CBO)

The role of the Chief Bancassurance Officer (CBO) is to lead the development and execution of the bank’s bancassurance strategy. In addition, the CBO works with the CEO and senior management to identify and assess opportunities for Bancassurance, develop product and distribution plans, and manage the relationship with the insurance company. In Bangladesh, the CBO is a new position that is being created in response to the growth of Bancassurance.

Eligibility to lead the wing as CBO

  • A Master’s degree and 12 years of experience in banking or insurance
  •  will lead the wing as CBO. His grade will be within the five but below the CEO of the banks. 

The wing, however, can not force the customer to take the insurance policy. It can offer retail and SME insurance products but not corporate customers. In addition, the officers cannot provide misleading information to the bank clients to sell the products.

Bancassurance is a business model banks and insurance companies use to offer products from both industries to their customers. It has become popular in recent years as a way for banks to grow their profits, and many countries have seen an increase in bancassurance businesses. Bangladesh is one of those countries, and the bancassurance industry is increasing.

Find all about the bond market in Bangladesh.

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