September 28, 2023
Bancassurance is an agency arrangement between an insurer (as the principal) and a bank (as the agent) by which the bank distributes the insurer’s insurance product(s) to customers of the bank. This arrangement benefits both the insurer and the bank because it allows the insurer to reach a wider consumer base and allows the bank to diversify its product portfolio.
Legal and regulatory framework for bancassurance
The regulators for the operation of bancassurance in Ghana are the National Insurance Commission (the NIC) and the Bank of Ghana.
Under the repealed Insurance Act, 2006 (Act 724) and the Banking Act, 2004 (Act 673) (the Banking Act), there were no specific provisions on bancassurance. Banks that wished to offer bancassurance services sought permission from the Bank of Ghana under section 11(1)(p) of the Banking Act. This provision gave the Bank of Ghana powers to determine other services (which were not included in the list of permissible activities) that banks could provide. The NIC subsequently published guidelines on bancassurance and issued licences to banks to act as corporate agents for bancassurance purposes.
Presently, the Insurance Act, 2021 (Act 1061) and the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) contain provisions that specifically regulate bancassurance. The NIC has also revised the old guidelines on bancassurance and published the Guidelines for Corporate Agents to establish a clear regulatory landscape for bancassurance in Ghana.
Approvals and licensing
A bancassurance arrangement typically involves an insurer, a bank and the bank’s sub-agents (who will assist with the sale of the insurance products under the arrangement to the bank’s customers). The approval and licensing requirements for the arrangement (including the bank and its sub-agents and the relevant insurance products) are set out below.
All applications to the NIC for approvals and/or licensing must be made by the insurer. The application must include the appropriate prescribed application fee and supporting documents (including proposed branding arrangements and corporate details of the bank).
The NIC has a statutory timeline of up to 4 months to process the application and communicate its decision. However, in practice, it can evaluate an application and grant a licence within 4 weeks.
Once the approvals and licences are granted, the bancassurance business is expected to commence within 6 months from the date of the grant of the licence. Delayed commencement (i.e. after the 6-month period) would require the prior written approval of the NIC.
Bank of Ghana approval for the bank
Under section 18(5) of the Banks and Specialised Deposit-Taking Institutions Act,2016 (Act 930), a bank which intends to undertake bancassurance arrangement must obtain approval from the Bank of Ghana to offer bancassurance products to customers as part of its business.
NIC licensing of bank and sub-agents
The insurer must apply (on behalf of the bank) to the NIC for the licensing of the bank (as a corporate insurance agent) and the bank’s sub-agents (as sub-agents). A prescribed licence fee is payable when the application is approved. The corporate insurance agent licence is valid for 1 year and runs from 1 May to 31 April each year. The sub-agent licence is also valid for 1 year from 1 January to 31 December. The licences may be renewed upon an application to the NIC.
NIC licensing of insurance products
The insurer must apply to the NIC for the approval of the relevant insurance products to be sold under the bancassurance arrangement. If they have already been approved by the NIC but are amended or repackaged for the bancassurance arrangement, the NIC must approve such amendment or repackaging.
NIC approval of bancassurance agreement
A bancassurance arrangement is governed by a distribution agreement. The distribution agreement must be submitted to the NIC for review and approval.
The distribution agreement typically covers the distribution methods, products, exclusivity provisions, covenants and remuneration. The mandatory terms of the distribution agreement include
- provisions for the appropriate confidentiality of policyholder information;
- provisions on handling and transmission of data;
- provisions that enable the insurer to access and receive all information from the outsourcing service provider that is relevant to the design, development, pricing and sale of the insurance contract concerned;
- a minimum notice period of six (6) months before termination by either party, and;
- a minimum commitment period of one (1) year before a party can exercise a right to terminate the agreement.
Sanctions for non-compliance
A bank which operates a bancassurance arrangement without a corporate insurance agent licence commits an offence and is liable on summary conviction to a fine of up to GHS 120,000 and/or imprisonment (a minimum term of 2 years and a maximum term of 5 years). A bank which offers bancassurance products without approval of the Bank of Ghana may also be liable to an administrative penalty of up to GHS 1,200 for each day the violation continues, revocation of the bank’s licence and/or any other action the Bank of Ghana deems necessary to ensure compliance.
The sanction for an insurer that engages an unlicensed insurance agent is an administrative penalty of GHS 12,000 imposed by the NIC.
