BANCASSURANCE REGULATIONS, 2015
[Gazette of Pakistan, Extraordinary, Part-II, 1st August, 2015]
S.R.O. 722(I)/2015, dated 31st July, 2015.–In exercise of the powers conferred by sub-section (3) of Section 167 of Insurance Ordinance, 2000 ( XXXIX of 2000) read with clause (ii) of sub-section (1) of Section 40 and clause (u) of Section 20 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) having been previously published in the newspapers of wide circulation for eliciting public comments, the Securities and Exchange Commission of Pakistan, with the approval of the Policy Board, is pleased to issue the Bancassurance Regulations, 2015, namely:–
1. Short title, Commencement and Applicability.–(1) These Regulations may be called the Bancassurance Regulations, 2015.
(2) They shall come into force at once.
(3) These Regulations shall be applicable on all new insurance business written on or after January 1, 2016 under the Bancassurance Agency Agreements. However, the Insurer and the Bank shall make amendments in the existing Bancassurance Agency Agreements, wherever necessary, to comply with these Regulations no later than December 31, 2015. The Insurer shall send a written confirmation, signed by the Designated Insurance Executive, to the Commission mentioning that the necessary changes have been completed and the relationship with the Bank complies with the requirements of these Regulations.
2. Definitions.–(1) In these Regulations, unless there is anything repugnant in the subject or context,–
(a) “Annexure” means annexures appended to these Regulations;
(b) “Bancassurance” means the offering, advertising, distributing, selling and/or marketing of insurance products by a Bank licensed by State Bank of Pakistan to their account holders/customers/general public through their sales and distribution channels including but not limited to branches, telemarketing centres, websites etc. by virtue of Bancassurance Agency Agreement(s) between the Insurer and the Bank;
(c) “Bancassurance Agency Agreement” called by whatever name or title, means a legal contract between the Bank and the Insurer, under which the former acts as the corporate insurance agent of the latter, meeting all the requirements of the relevant provisions of the Ordinance and Insurance Rules;
(d) “Bank” for the purpose of these Regulations, includes,–
(i) a “banking company” as defined in clause (vii) of Section 2 of the Ordinance; or
(ii) a “scheduled bank” as defined in clause (lvii) of Section 2 of the Ordinance; or
(iii) any other institution or organisation directly or indirectly regulated by the State Bank of Pakistan;
(e) “Bank Insurance Executive” means an employee of the Bank, by whatever name, title or designation called, directly or indirectly responsible for managing the Bancassurance arrangement for the Bank who will comply with the provisions of Sections 96 and 97 of the Ordinance;
(f) “Certification” means the process by which a Specified Person is issued a certificate jointly by the Bank and the Insurer entitling him to solicit and procure insurance business on behalf of the Insurer under the Bancassurance Agency Agreement;
(g) “Commission” means the Securities and Exchange Commission of Pakistan established under Section 3 of the SECP Act 1997 (XLII of 1997);
(h) “Designated Insurance Executive” means an employee of the Insurer, called by whatever name, title or designation, directly or indirectly responsible for managing the Bancassurance arrangement with the Bank on behalf of Insurer;
(i) “Direct Sales Model” means a particular bancassurance distribution model where the Bank uses its own sales force to market and distribute insurance products through its network;
(j) “Group Life Insurance Policies” means a life insurance contract having a term not exceeding one year, offered on yearly renewable term and group underwriting basis through a master policy document. The policy-holder is a company, body corporate, bank, registered association or any enterprise. It excludes group life policies with cash values and individual life policies which may be sold to a group of individuals;
(k) “Insurer” means an insurance company registered under the Ordinance to carry on insurance business;
(l) “Insurance Consultant” means a specified person who is an employee of the Insurer and is responsible for soliciting and procuring insurance business under the Bancassurance Agency Agreement;
(m) “Insurance Rules” means the Securities and Exchange Commission (Insurance) Rules 2002, Insurance Rules 2002, and/or Takaful Rules 2012 or any other rule(s) issued under the Ordinance;
(n) “Misselling” means the deliberate, reckless, or negligent sale of insurance products in circumstances where a product sold is either mis-represented or unsuitable for the customer’s needs;
(o) “Ordinance” means the Insurance Ordinance, 2000 (XXXIX of 2000);
(p) “Persistency” means the ratio of renewal year premiums collected in a calendar year to the premiums due in the same calendar year (the premiums due being inclusive of any increases as a result of a policy provision). The premium due in that calendar year shall include the premium in respect of policies discontinued (lapsed or surrendered) during that calendar year;
(q) “Policy-holder” shall have the same meaning as assigned to it under clause (xlvi) of Section 2 of the Ordinance;
(r) “Protection Products” refer to regular premium individual insurance products with no element of savings or investments for the policyholder, such as term life policies;
(s) “Referral Model” means a particular bancassurance business distribution model where the Insurer uses its own Insurance Consultants to market and distribute insurance products through the Banks' distribution network based on sales leads generated by the Bank;
(t) “Savings Products” refer to regular premium individual life insurance products which have a savings or investment portion for the policyholder. This includes investment linked unit linked policies, investment linked account value policies, universal life policies, and with/without profits conventional endowment and whole life plans;
(u) “Regulations” means Bancassurance Regulations 2015;
(v) “Specialized Training” includes orientation, particularly in the area of insurance sales, service and marketing, as per the relevant provisions of the Ordinance, the Insurance Rules and the directives issued by the Commission;
(w) “Specified Person” means either an employee of the Bank or an employee of the Insurer who has undergone the required practical training, examination, certification in respect of Bancassurance arrangement/product, and who is responsible for soliciting and procuring insurance business for the Insurer under the Bancassurance Agency Agreement; and
(x) “Schedule” means schedule appended to these Regulations.
(2) All words and expressions used in these Regulations but not defined shall have the same meaning as assigned to them in the Ordinance and the Insurance Rules.
(3) In these Regulations, the word “Takaful” may be used interchangeably with the word 'insurance', 'Family Takaful' with 'Life Insurance', 'General Takaful' with 'General Insurance', 'contribution' with 'premium', 'insured' with 'policy-holder' and 'Company' & 'Insurer' with 'Takaful Operator'. Similarly other terms used in the Takaful Rules, 2012 associated with the Takaful business may be used interchangeably with their conventional counterpart words/terms.
NATURE AND SCOPE OF BANCASSURANCE ARRANGEMENTS
3. Basis of Contract.—(1) The sale of all insurance products by any Bank (on behalf of an Insurer) must be done in such a manner which demonstrates that the prospective purchaser makes an offer (either by signing a proposal form or recording verbal consent) to enter into the insurance contract, and either the Bank (being a corporate insurance agent) on behalf of the Insurer signifies acceptance or the Insurer directly signifies acceptance.
(2) Without the evidence of offer and acceptance, no insurance sale shall be deemed to be completed and the insurance contract shall be considered null and void.
(3) The role and function of the Bank as a corporate insurance agent shall be subject to the provisions of Ordinance including but not limited to eligibility, qualification and liability of insurance agents.
4. Bancassurance Arrangement between Insurer and Bank.—Any Bancassurance arrangement between Insurer and Bank shall not be valid unless it incorporates the following components in the Bancassurance Agency Agreement, namely,—
(a) It shall not contain any provisions which reduce in any way the liability or responsibility of the Insurer towards the Policy-holder under the Ordinance and Insurance Rules;
(b) It shall specify any functions which the Insurer, as a part of such arrangement, intends to delegate to the Bank;
(c) It shall clearly define the Certification process which shall include a definition of the training required prior to Certification;
(d) It contains a provision which clearly states the “termination of agreement” clause and rights and obligation of the Bank and Insurer subsequent to such termination and such clause shall also state the treatment to be given to existing policyholders and remuneration to the Bank subsequent to the termination; and
(e) It contains a provision whereby the Bank explicitly agrees to adhere to the provisions of these Regulations and the provisions of the Ordinance and the Insurance Rules in its capacity as a corporate insurance agent.
5. Premium Collection.–(1) The Insurer may assign the responsibility of collecting premiums due on policies once issued through the Bank but before it does this, the Insurer shall ensure that the Bank has the necessary premium collection system, such as automated direct debit system, debit on credit cards or any other system, in place.
(2) Where the Insurer is not satisfied with the Bank’s capability to collect regular premiums and to effectively follow up on premiums due but not paid, the premium collection function shall be taken over by the Insurer.
(3) The Insurer shall also ensure that the Bank’s premium collection system is effectively working and, if it is not, shall take such action as is required to ensure that it is effective, including the withdrawal of the premium collection function from the Bank.
(4) The Bank shall always pay the gross premium to the Insurer and shall not retain any part of the insurance premium received from the policy-holders for payment to the Insurer.
(5) Every Bank shall, with a view to conserve the insurance business already procured through it, make every attempt to ensure remittance of the premiums by the policy-holders within the stipulated time, by notifying the policy-holders orally and in writing, or through other means such as call centre email or SMS and the Insurer shall advise the Bank of its desired level of business persistency from time to time and the Bank shall make all reasonable efforts to ensure that its systems and processes are in place to meet these levels.
(6) In the case of life Insurance, the Insurer shall also ensure that notices under Section 93 of the Ordinance are sent to the policy-holders.
(7) Any payment for premium made by the policy-holder and received by the Bank shall be deemed to constitute payment to the Insurer.
(8) The policy-holder shall have a right to pay premium to the Insurer through any means legally permitted in respect of the policies purchased through a bank.
(9) The option of premium deduction through direct debit shall be at the written consent of the policy-holders and the Bank and/or Insurer shall provide free SMS and/or Email alert to the policy-holders for premium payment through direct debit.
6. Marketing Brochures and Sales Material.–(1) The content and layout of all marketing and sales related materials used to solicit Bancassurance business shall be approved both by the Bank and the Insurer and should not be in conflict with applicable insurance laws and regulations. The insurer shall be primarily responsible for the accuracy of all contents of advertising and sales material.
(2) In all such sales material the relative roles of the Bank and the Insurer shall be clearly stated at a prominent place and such statement must particularly contain the fact that the Bank’s role is that of a corporate insurance agent and that the Insurer as principal is responsible for all liabilities under the policy and the name, address and contact details of the Insurer shall also be mentioned at a prominent place.
(3) The market conduct rules and rules issued in respect of the insurance agent by the Commission shall be observed by the Bank.
(4) For life insurance, wherever applicable, illustration of benefits, on the prescribed format provided by the Insurer shall be signed by the Specified Person and the intending Policy-holder and any insurance proposal, where the illustration of benefits is missing, unsigned or is not based on the product parameters mentioned in the proposal form, shall not be accepted by the Insurer for any further process.
(5) The marketing brochures, sales material and bancassurance products information available on Insurer’s and Bank’s websites should be consistent with each other.
7. Claims Handling.–(1) Under the Bancassurance arrangement, the claim adjudication and settlement shall be the responsibility of the Insurer and the Bank shall play a facilitating role by assisting the policy-holder or nominee(s), as the case may be, in claim processing. The contact details of the Insurer for claim settlement shall be prominently displayed on the insurance contract and also be made available by the Insurer to the Bank so that the information can be cascaded to the policy-holder of nominee(s) at the time claim intimation.
(2) The Bank shall facilitate the Insurer in all possible manner in collecting the necessary documents and information related to claims, as requested by the Insurer and the Bank shall not question the information requested by the Insurer for claim adjudication and settlement, and shall not interfere with or influence the decision of the Insurer regarding the payment or repudiation of a claim.
(3) The process of claim lodgement shall be appropriately communicated to the policy-holder alongwith the policy document and the Insurer shall acknowledge receipt of claim within seven working days along-with communication of all the required documents or information for claim processing. The Insurer shall settle a claim within a period of ninety days as provided in Section 118 of the Ordinance. Before declining a claim, on account of deficiencies in claim documents submitted, the Insurer shall communicate to the beneficiary (or the guardian as the case may be) such deficiencies within fourteen days from the date of provision of said documents to the Insurer.
(4) The Insurer shall make the claim settlement directly in the name of the policy-holder or his nominee, as the case may be.
8. Commission Payable to Bank.–(1) The level of commission payable to the Bank for its role of soliciting and procuring insurance business as corporate insurance agent may vary based on any performance criteria which the Insurer and Bank may agree and the rates and structure of the commission shall be clearly mentioned in the Bancassurance Agency Agreement.
(2) Any commission to be paid by the Insurer to the Bank must be computed on premiums received by the Insurer and under no circumstances the commission on premiums to be received in future, be paid.
(3) The Bank shall not charge, to the policy-holder, any service fee, processing fee, administration charge or any other charge unless such a charge has been included by the Insurer in the premium and communicated to the policy-holder in advance.
(4) Nothing in Regulation 8(1) shall prevent the Insurer from sharing any third party costs incurred by the Bank related to advertising or development of marketing material subject to the limits specified under Regulation 13.
(5) The following shall be applicable for life insurers, in addition to those stated above:–
(a) The commission payable to the Bank shall be in the form as set out in these Regulations and shall not exceed the limits set out in these Regulations; and
(b) Any sharing of third party costs incurred by the Bank related to advertising or development of marketing material shall be subject to the limits specified under Regulation 13.
9. Pricing, Risk Assessment, Insurance Related Documents.–(1) Pricing of insurance products shall be the sole domain of the Insurer and the Bank shall not interfere in this process.
(2) Risk assessment, determining the risk premium and insurance under-writing shall be the responsibility of the Insurer and the Bank shall not interfere in this process.
(3) Where the Insurer has provided automated under-writing software to the Bank to accept and under-write insurance proposals, the Bank may use the system based on the exact guidelines provided by the Insurer. (For insurance proposals under-written through such a system, and where the policy can be issued immediately without referring the proposal to the Insurer, the Bank, based on the guidelines provided by the Insurer, may issue policy/certificate/ document to the Policy-holder).
(4) The Bank shall abide by the guidelines provided by the Insurer for usage of the automated underwriting computer system and the use of the system by any sales channel of the Bank does not imply in any way, or entitle the Bank to represent itself or act as the insurance under writer.
(5) The Bank’s name shall not appear in the policy document as this could mislead or deceive the buyer of the insurance product and all requirements for new products (for life insurance), as mentioned in the Ordinance, shall be complied with by the Insurer.
(6) The Insurer shall submit a copy of the Bancassurance Agency Agreement that it has entered into with the Bank for the record of the Commission within 15 days of its execution. This requirement shall apply to both Life and Non-Life Insurers.
CODE OF CONDUCT FOR BANK, INSURER AND SPECIFIED PERSONS
10. Code of Conduct for Bank.—Every Bank shall,–
(a) ensure that the Bank Insurance Executive and all Specified Persons are properly trained as per the relevant provisions of the Ordinance and possess sound knowledge of the insurance products they would market, and have undergone the process of the Certification.
(b) ensure that the Bank Insurance Executive and the Specified Person do not make any mis-representation or make misleading statement to the prospect on policy benefits and returns available under the policy which may tantamount to misleading or being deceptive under the relevant provisions of the Ordinance in respect of the market conduct.
(c) ensure that no prospect is coerced by the Bank Insurance Executive or Specified Person to buy an insurance product.
(d) give adequate pre-sale and post-sale advices to the prospective insured in respect of the insurance product.
(e) extend all possible assistance and cooperation to an insured/ nominee in completion of all formalities and documentation in the event of a claim; and
(f) give due publicity to the fact that the Bank does not under-write the risk or act as an Insurer;
11. Code of Conduct for Bank Insurance Executives and Specified Persons.—(1) Every Bank Insurance Executive or Specified Person shall,–
(a) identify that the Bank is acting as an agent of the Insurer at every meeting with the prospect and shall always ensure mentioning the name of the Insurer to the prospect;
(b) disseminate the requisite information in respect of the insurance products offered for sale by the Insurer and take into account the needs of the prospect while recommending/tailoring a specific insurance plan;
(c) indicate the premium to be charged by the Insurer for the insurance product offered for sale;
(d) for an insurance product which is bundled with a Bank product, mention the cost of the insurance product and the Bank product separately;
(e) guide the prospect in completing the proposal form and also explain to him the importance of disclosure of material information required under the relevant insurance contracts;
(f) obtain the requisite documents at the time of completion of the proposal form by the prospect and other documents subsequently asked by the Insurer in connection therewith; and
(g) render such assistance to the policy-holder or claimant or nominee, as may be required in complying with the requirements for settlement of claims by the Insurer.
(2) No Specified person shall,–
(a) solicit or procure insurance business without undergoing the certification process;
(b) give information to the prospect which deviates from the information provided by the Insurer with regard to the insurance product;
(c) induce or misguide the prospect to avoid disclosing any material information in the proposal form;
(d) induce or misguide the prospect to submit incorrect information in the proposal form or documents submitted to the Insurer for acceptance of the proposal;
(e) behave in a discourteous manner with the prospect;
(f) interfere with any proposal introduced by any other Specified Person or any insurance agent of the Insurer;
(g) offer different rates, benefits, terms and conditions other than those offered or agreed by the Insurer;
(h) demand or receive a share of proceeds from the policy-holder or claimant or nominee under an insurance contract;
(i) force a policy-holder to terminate the existing policy and to effect a new proposal from him within three years from the date of such termination; and
(j) become or remain a director of any Insurer;
LIMIT ON THE COMMISSION PAYABLE TO BANK