By the BOG’s Procedures for Issuance of Directives, 2020, the Bank of Ghana has released the bancassurance directives as an Exposure Draft to get feedback and opinions from the banking sector and the public.
The BoG claims that Bancassurance has expanded significantly in Africa and globally since the 1980s by giving banks and other financial institutions (BOFIs) the chance to offer their clients a wider range of products while generating extra revenue by giving insurance companies access to their distribution channels and other platforms.
Conversely, insurance businesses can improve their sales and reach a wider audience by utilizing the distribution channels of BOFIs.
Because BOFIs offer a one-stop shop for all of their financial needs, including insurance products, customers benefit from convenience. The directive stated that insurance companies in Ghana have resorted to partnering with banks to offer Bancassurance products through the latter’s distribution channels.
As emphasized in this Directive, the BoG said that the Distribution Partnership Model is its authorized model for Bancassurance.
Using an RFI’s distribution network, approach enables Regulated Financial Institutions (RFIs) to sell insurance products to their clients on behalf of an insurer.
Individual or retail clients can select the product and insurer of their choice using this model, which enables an RFI to contract with one life and one general insurance carrier. The model guarantees that the RFI and the insurer do not share any risk.
Additionally, it is consistent with the National Insurance Commission’s (NIC) Bancassurance model.
The BoG stated that the purpose of this Directive is to give the banking sector BOG’s regulatory expectations to guarantee that RFIs adequately manage the inherent risks associated with the product and to further facilitate and guarantee a smooth implementation of Bancassurance’s business in Ghana between the banking and insurance sectors of the economy.
Remedial measures and sanctions
Regarding its sanctions and corrective actions, the BoG stated that an RFI that violates the guidelines of this Directive will be subject to pay the Bank of Ghana an administrative penalty of at least two thousand penalty units and up to ten thousand penalty units (per section 92(8) of Act 930), in addition to any other penalties or corrective actions that the BOG deems necessary by Act 930. 50.
When any of the following requirements are broken, BOG may apply one or more of the following sanctions, in addition to the other fines and corrective actions outlined in Act 930:
a. Prevent the RFI from conducting business with Bancassurance;
b. Prevent the RFI from making additional loans or assuming other financial risks, such as capital expenditures or investments;
c. Limit bonuses or overpayment to the director or key management staff who are in default; d. Remove the defaulting individual from office or deem them unfit and proper.
More Stories
The World Bank promises to use its “Better Bank” vision to propel Ghana’s development.
In terms of concessional lending, Ghana is the second-most indebted African nation to the IMF.
Shippers were cautioned not to pay for port delays.