Bancassurance, the strategic collaboration between banks and insurance companies, is set to bolster the largely untapped insurance industry in Bangladesh. Prominent in Europe and some parts of Asia, bancassurance is defined as the symbiotic relationship between banks and insurance companies, where banks receive a commission for opening an avenue for selling insurance policies while insurance companies gain access to a massive network of clients through banking channels. With a penetration rate of a mere 0.5% and a market size of BDT 5,000 crore in Bangladesh, this synergy can serve as a powerful tool for increasing insurance penetration and financial inclusion in Bangladesh.
Developing economies necessitate the demand for insurance, with higher incomes translating to an increased insured population. Gradually, as more and more people avail of insurance policies and bring themselves under insurance channels, the premium size is likely to experience a decline and become affordable to the mass population.
The inadequate claims settlement ratio has held back the insurance penetration rate in Bangladesh to a large extent. Delays in settling claims after policy maturity, insufficient returns due to inadequate fund investment, and financial irregularities pose significant challenges for insurance companies. However, the handshake through bancassurance between banks and insurance companies is expected to foster a conducive environment and bring the uninsured population under the insurance umbrella, resulting in numerous opportunities.
Md. Shah Jalal
Editor
IDLC Monthly Business Review
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