Collapse Of Banks Doesn't Affect Bancassurance

Experts have given the firm assurance that bancassurance premiums are always safe in an event of a collapse of a bank.

There have been fears that the collapse of banks could see customers losing their investments and have a rippling effect on bancassurance products.

But speaking to JoyBusiness after the media launch of a partnership between Standard Chartered Bank and Prudential Life Insurance Ghana, Managing Director of Wealth Management at the bank, Gautam Duggal, said banks do not underwrite risks.

“There’s no underwriting risk that bank owns; banks are absolutely clear that they are not underwriting a risk, they are not manufacturing a product we are only helping our clients to get to the insurance company and bringing the insurance product closer to our client,” he said.

Mr Duggal added, “Tomorrow if anything should happen to any of the banks the risk is carried by the insurance company and not by the bank; the insurance company continues to service the client, ensures that any claims or any what they have committed as the policy document is given to the clients at the due point.”

On his part, Chief Executive Officer of Prudential Life Insurance Ghana Ltd., Emmanuel Mokobi Aryee has expressed his outfit’s commitment to meeting an increase in minimum capital requirement for insurance companies.

“Currently, Prudential Life Insurance Ghana Ltd. is heavily capitalized, like I said, we come from a very strong parentage with assets and management accruing about 700 billion pounds and therefore the company is well capitalized; as we speak now we are overcapitalized by the NIC requirement for now and even in future, that’s nothing for us to worry about at all,” he said.

Bancassurance
Bancassurance is a relationship between a bank and an insurance company, aimed at offering insurance products or insurance benefits to the bank's customers.

In this partnership, bank staff and tellers become the point of sale and point of contact for the customer. Bank staff are advised and supported by the insurance company through wholesale product information, marketing campaigns and sales training.

The bank and the insurance company share the commission. Insurance policies are processed and administered by the insurance company.

This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.

Bancassurance has proved to be an effective distribution channel in a number of countries in Europe, Latin America, Asia and Australia.

Guidelines
According to a release from the National Insurance Commission (NIC), a bank desirous of selling insurance products, shall be presented by an insurance company to be licensed as a corporate agent in accordance with section 115 of Insurance Act, 2006 (ACT 724).

A bank so licensed shall sell Life Insurance products and or Non-Life Personal insurances only.

Non-Life personal insurance is defined as all non-life insurance policies sold to or purchased by individuals for their own benefit as opposed to corporate entities.