The journey of Bancassurance in Bangladesh

What do you think about Bancassurance?

This question was posed by Mr. Gokul Chand Das an esteemed Member of the Insurance Development and Regulatory Authority IDRA) At the Asia Banking and Finance Magazine Awards ceremony in Singapore in July 2018, Guardian Life won three awards. A very positive discussion ensued, during which I offered the Guardian's help to IDRA in pursuing this idea.

Subsequently, the Guardian Bancassurance Team researched Bancassurance regulations across the region and provided IDRA with draft regulations suitable for Bangladesh. In addition to Mr Das we were also encouraged in our efforts by Mr Khalil Ahmed Executive Director of IDRA now Secretary, Ministry of Cultural Affairs.

In November 2019, we went to see the Governor of Bangladesh Bank, Mr. Fazle Kabir, to ascertain the Central Bank's views on the idea of introducing Bancassurance; we were greatly encouraged by the governor's positive response, which moved us to push forward. 

In my previous life as a corporate banker in Hong Kong, I had seen the positive benefits of The bank and its customers promoting both general and life insurance products to corporate clients, their employees, and small business owners.

Both life and general insurers did not have a retail branch presence, and by linking up with a bank, they were immediately able to leverage the bank's branch network and increase its product distribution at a minimal cost.

My second life, away from banking, began with Guardian Life in 2014 as a non-executive. Director, which enabled me to return to Bangladesh on a regular basis. Over the years at Guardian Life, I was able to observe firsthand that the agency distribution process of selling through agents was an extremely difficult and inefficient process. Agents walking to door hoping to find a prospective client limits the number of potential customer contacts in a day and then the resulting number of successful policy sales.

As a result of the country's booming economy, high school leavers now have a wide range of employment opportunities with salaried jobs in comfortable, air-conditioned offices and retail outlets. 

As a result, working as an insurance agent is far less attractive, and for many Individuals, it is seen as merely a temporary job until they find something better. The proof of this means that after several decades, the life insurance industry in Bangladesh has achieved a very low penetration rate.

From the public's perspective, life insurance fails people when a family breadwinner dies without having been able to arrange some form of financial protection for the family due to the lack of ready access to life insurance.

Over the years, unlike banks, life insurance companies have not established street-level, readily accessible retail outlets across and their "Branches" are merely meeting places for their agency sales force.

To significantly increase the penetration rate (less than 0.5% of GDP in 2021), life insurers need to provide product availability to consumers in the same way banks and NBFIs provide their financial products. 

However, it does not make commercial sense to establish a nationwide retail branch network to sell insurance products; it would be too expensive and would take several years. Hence, there is a need to use a bank's retail network.

As we have seen in several countries around Asia, it is quicker and more cost-efficient for life. Companies should use banks already trusted by their clients to provide a wide range of financial products and services.

Banks can be trusted by their customers and regulators to ensure that Bancassurance partners are reputable, provide insurance products that properly meet customers' needs and that Bancassurance Partners meets the "acid test" of fast and efficient claim processing. 

Bancassurance should be seen as a trustworthy additional distribution channel for the agency distribution system, not a replacement. The Financial Institution Division of the Ministry of Finance, Bangladesh Bank, and IDRA are to be congratulated on their collaborative efforts, particularly in establishing the Joint Working Group that moved the idea of Bancassurance from an aspiration to reality. 

I wish to express my gratitude to the Guardian Life Team, who have spent five years on this project, and to the Guardian Board, for their unwavering support.

As a result of the efforts of everyone involved, the launch of Bancassurance is an important tangible contribution by the insurance industry to supporting the government's strategic development goals.

When Guardian Life was established, the vision of its founders included the belief that "Insurance for All" for the people of Bangladesh, and the launch of Bancassurance across the nation was a significant step towards achieving this goal.

David JH Griffiths. Photo: Courtesy

David JH Griffiths is a Non-Executive Director at Guardian Life Insurance Limited

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.