Insurance body to require prior clearance for sale of bancassurance products

A bank must seek the certification of the Insurance Commission (IC) before it can sell insurance products under the proposed cross-selling scheme being prepared by the Bangko Sentral ng Pilipinas (BSP).

The BSP’s cross-selling scheme proposes to allow the subsidiaries and affiliates of commercial banks (KBs) and expanded commercial banks (EKBs) to sell their products in the bank’s premises. The planned ruling covers the insurance and mutual fund subsidiaries of banks.

IC Commissioner Eduardo T. Malinis said the proposal for a prior certification is necessary to make sure that the insurance products to be sold conform with the rules.

"If the bank will sell insurance policies, then logically IC should require them to get a certification before selling. The IC is the government agency that licenses the brokers, intermediaries, and agents selling insurance policies. We have to make sure the policies are secured," Malinis said.

He agreed that a technical committee should be formed between the BSP and the IC to work out the details of the regulatory guidelines. The BSP will ensure the soundness of the banks while the IC will ensure the quality of the insurance products and the insurer.

"The ultimate end is to make sure the policyholder is covered and protected, and the insurer will remain financially-viable through its principal, the bank," the IC said.

In mid-June, the BSP announced that it was issuing a circular allowing financial subsidiaries and affiliates of banks to sell their products within the premises and even using the facilities of the banks. But even before the BSP could come out with a draft of the proposed circular, financial institutions raised a howl.

Domestic and foreign insurance companies without bank affiliations said the BSP proposal would favor a "chosen few" while thrift banks said it smacked of the traditional bias in favor of commercial banks.

Foreign insurers received support from their respective chambers of commerce. Some foreign embassies even called to register their opposition to the proposed BSP scheme. They said that the monetary authorities had a narrow view of a financial product better known as bancassurance.

The US Embassy and the American Chamber of Commerce took up the cudgels for New York Life while the Chamber of Thrift Banks spoke for thrift banks. Foreign banks like the Standard Chartered Bank of the Philippines fear that the BSP did not see that bancassurance is a worldwide trend for the banking and financial system.

The IC itself was swamped with protests from the insurance industry asking Malinis to take their case to the BSP. Of the 38 life insurance companies currently operating, only three to five insurers will benefit from the proposed BSP circular.

Ayala Life Insurance can sell its life insurance policies through the Bank of the Philippine Islands (BPI) branch network. Both are allied with the Ayala Group of Companies. Philippine Axa Life can market its products through the Metro-bank network.

The Rizal Commercial and Banking Corp. (RCBC) could sell products of Great Pacific Life Assurance (Grepalife) while Banco de Oro Universal Bank might be able to sell products of Generali Pilipinas Life.

Other banks which have insurance affiliates like Equitable PCI Bank, the United Coconut Planters Bank (UCPB), and the Philippine National Bank (PNB) must first get the go signal from the BSP regarding its capital and liquidity health before it can start avail of the cross-selling activity.