Bancassurance: Lenders focus on informal groups

Dar es Salaam. Commercial banks are increasingly shifting their attention to informal groups as they seek to capitalise on bancassurance arrangements to raise their deposit levels.

Bankers believe that informal groups such as Village Community Banks (Vicoba) and WhatsApp groups hold huge amounts of money that have not yet been tapped, while insurance services would not only increase the security of funds, but also extend the relevant insurance products for people in that category.

The number of banks that focus on life insurance in partnership with insurance firms keeps increasing.

Banks promise that members of such informal groups will be paid a sum of money in exchange for a premium upon the death of an insured person or after a set period.

Promotions of life insurance products from various banks are to be found on various platforms as they woo informal groups to their side and tap into the massive funds that they (the groups) collect during their meetings.

“We have a lot of experience with these groups especially Vicoba. They have a lot of money which they used to keep in their homes. Our coming into the area is also meant to raise the level of security and reduce theft of members’ hard-earned funds… We have taught them how to open accounts using our system,” said the Tanzania Commercial Bank (TCB) managing director, Mr Sabasaba Moshingi.

Initially, the bank introduced a product for the informal sector in 2016.

The groups, he said, deposited over Sh27 billion into the bank’s system last year.

“At the moment we are receiving many requests. In short the feedback is very promising and this life insurance has been well received in the market,” he said.

He said since the group insurance started in June this year, the bank’s bancassurance product had attracted over 1000 groups.

The goal, he said, was to reach 100,000 in two years from now. TCB works with ten insurance companies in its bancassurance arrangement.

Tanzania Insurance Regulatory Authority (Tira) introduced bancassurance in 2019 in an effort to increase the uptake of insurance products and services across the country.

NMB Plc Bank launched its bancaasurance in February last year (2020) and, according to chief executive officer Ruth Zaipuna, growth has been monumental.

She told The Citizen in a recent interview that given the bank’s wide distribution channels, a large number of customers were able to access a wide range of insurance products, including life and general, from various physical distribution channels as well as digital channels, thereby improving overall insurance penetration across the country.

“We’re delighted to have been the first bank in the country to launch bancassurance. We continue to see good growth in the business, with an average of 300 policies being booked per day,” she said.

The bank also offers several innovative features on its digital channels which allow customers to access insurance products from the convenience of their mobile phones.

“We believe that there are great opportunities for further penetration in the market, and are constantly looking for ways to improve our customer experience,” she said.

The head of Insurance Business, at the NBC Bank, Mr Benjamin Nkaka, said the bank decided to introduce group insurance to reduce costs that would otherwise be expensive is paid by individuals.

“It is also a method for the bank to create new customers… There are people who will buy and insurance product and get a chance to get another bank product so we decided to go back to traditional methods like groups to raise customer numbers,” he said.

According to chief executive officer for Sanlam Life, Mr Julius Magabe, banks’ selling of bancassurance products to small groups was a good thing because it increases uptake of insurance in the communities.

Banks through their wide footprint were able to provide wider reach of insurance services to points that insurers alone will take longer to reach and therefore joint partnership between insurers and banks is a catalyst for quicker growth of insurance penetration.

Report from Tanzania Insurance Regulatory Authority (Tira) indicated that since the bancansurance inception in 2019 a total of 17 banks out of over 50 banks have been registered and licensed to sell insurance products on behalf of the insurers.

However, the regulator is expected to provide new guidelines that will outline the roles and boundaries demarcations of distribution channels, especially agents, bancassurance and brokers, so fear following the complaints from brokers.

Speaking to The Citizen recently, the Tira acting director for planning, research and development, Mr Zachariah Muyengi, the response from banks has been positive.

He said Tira was looking up to ensuring that through bancassurance, insurance products reach more people, especially those in rural areas where about 65 percent of the population live and work in agriculture, livestock, fisheries, forestry and mining.

Source: The Citizen