Bancassurance: Your link to insurance

IT is common for many bank clients to see a distinct table or area in the bank, situated noticeably away from bank tellers and employees, manned by a person in corporate attire but not a bank uniform, and carrying an ID different from those issued by the bank.

- tion, the bank teller would sometimes ask the client if he or she is already insured. If not, he or she would be then asked if he or she is willing to hear more about being insured. If the bank customer says yes, he or she would be either introduced to or approached by the non-uniformed person manning the distinctly different area in the bank, the bancassurance agent, who will answer the client’s questions about insurance and is ready to present insurance products that might suit the client’s preference.

At times, bank-goers need not be asked by bank tellers if they want to hear more about insurance. Interested clients just proceed to the bancassurance area and inquire about their insurance products.

Bank- goers are usually made more aware about the concept of insurance compared to the non-banking public mainly due to the operation of bancassurance. Data would suggest that bancassurance is among the most popular mechanisms for insurance transactions.

In 2018, 34.62 percent of the total premium collected for life insurance was made through 15 companies with bancassurance arrangements, while 7.22 percent of the total premium collected was for non-life insurance for the same period.

As a distribution channel, bancassurance was second only to individual agents, which took care of 54 percent of total premium collections. Other distribution channels are through brokers, direct marketing, digital and mobile phones, and others.

Bancassurance largely involves the presentation and sale to bank customers by an insurance company.

Sometimes, bancassurance is also referred to as “cross-selling” as it basically relates to the selling of insurance products through the banks’ distribution channels. The point of bancassurance is to promote more activities in the insurance sector and to bring its products closer to the main customer base, the banking public.

Bancassurance companies are separate from the bank itself. A bank is not even required to have equity ownership of the insurance company to engage in a bancassurance arrangement. Essentially, there are insurance companies that are allowed by law to sell their products inside a bank.

Hence, they also operate under the supervision of the Insurance Commission (IC). In 2015, the IC issued the Circular Letter No. 2015-20 to provide more detailed guidelines to better regulate bancassurance in the country, as mandated by Section 377 of the Insurance Code. And since they operate within the bank’s premises, they also need to adhere to bancassurance-related rules issued by the Bangko Sentral ng Pilipinas.

The law also requires the obvious distinction of the bancassurance area and personnel. Hence, it has a separate table or cubicle with distinctive logos of the insurance company.

All products offered by insurance companies within the bank premises should also be previously approved by the Insurance Commissioner.

The role of bank employees in bancassurance, in general, is limited to referral of bank clients to the representative of the insurance company. Consent of the clients is necessary before any referral.

The teller should not introduce or refer a client who declines to learn more about the insurance products.

The law emphasizes that the right of the client to choose or to refuse bancassurance products should be recognized at all times.

Nevertheless, bank employees trained and qualified by the insurance companies may provide preliminary discussion and presentation of its insurance products as well as general information about the insurance company. Such training must be approved by the IC.

An IC-issued license is currently not needed for insurance-trained bank employees but the Insurance Commissioner may still require it if the situation demands.

One of the most important requirements for bancassurance arrangements is the provision of a mechanism to address any complaints that may arise from bancassurance transactions.

The bank may join the insurance company in crafting and providing a process for claims and complaints related to bancassurance. Moreover, the IC also issued

- ance companies offering Variable Unit Link ( VUL) contracts, including those engaged in bancassurance activities.

One of these is the provision of

Product Highlight Sheet (PHS) to potential clients. The PHS summarizes the key information of the VUL product, which is crucial for the client’s better understanding of the product features and more importantly, the risks that he or she might be exposed to.

VUL policies and PHS should also carry the standard disclosure statement declaring that the VUL product is not a deposit product, and that earnings are not assured, and the principal amount invested is exposed to risk of loss. The declaration should also include a warning to the client that if they do not fully understand the VUL product, they should not purchase or invest in it.

Other requirements for VULs are a Client Suitability Assessment, Investment Policy Statement, and