Popularity of bancassurance reduces commission charges to 50 percent of premium

Popularity of bancassurance has reduced commission charges against insurance policies to 50 percent of the premium, which was 90 percent some 10 years back. The proponents of bancassurance are of the view that the insurance companies were offering their products through Telcos, TCS and call centres etc. The Bank of Punjab had even introduced crop insurance during the Musharraf regime.
One banker said the banks had become corporate agents of the insurance companies. "Banks do not cover the risk and restrict their activity to introduce a customer to the insurance company," he added. Syed Ali Imran, handling the insurance business with MCB in Karachi said the re-insurance companies covered the risk while operating behind the insurance companies world-wide. "Insurance has become popular not only for car financing but it also covers accidents etc," said another banker from Karachi.
The bank insurance model (BIM), also sometimes known as bancassurance or allfinanz, is the partnership or relationship between a bank and an insurance company, or a single integrated organisation, whereby the insurance company uses the bank sales channel in order to sell insurance products, an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base.
Bancassurance has been well established in Europe, Far East and growing in India and Middle East. It started in 1985 in Europe and has registered exponential growth till date and becoming popular in Asia, Africa, Far East Asia and Middle East. It surfaced in Pakistan back in 1996 and the product offering has upgraded from simple to sophisticated level over the last 20 years. Major thrust has been from 2007 onwards with business volumes increasing exponentially. Almost, all the top banks in Pakistan are in the business of insurance today. Right from birth to admission to university, wedding, new job, purchase of house, career change, business set-up, property loss, retirement, grandchildren and death, this business carries an event-trigger approach. The SECP has played pivotal role in its promotion by providing guidelines. Pakistan is one of a few countries where guidelines from regulator are available to run this business. The SBP has also issued a thematic report in 2015 on the concept, which has propelled the banks at large to adopt it as a lucrative area to grow. The SBP has also issued guidelines in 2012, which the SECP has also modified their earlier guidelines in 2015, which are being followed by the banks right now.
An estimate in 2010 had suggested that the business would flourish from Rs 2.8 billion in 2010 to Rs 5.6 billion in 2013 but the bankers have informed that it has touched to Rs 14 billion on 31st December 2015. Meanwhile, the opponents of bancassurance have pointed out that the banks' management has set ambitious targets for their staff of every cadre that has led to health problems relating to nervous system and heart among bankers.
One senior banker said the visits of middle level management to neurosurgeons and heart specialists had increased phenomenally in recent past due to the pressure. So much so, he added, the bankers were no more an attraction to parents for their daughters.