The Presidents/Chief Executives

All Banks/DFIs

Dear Sir/Madam,

DEDUCTION OF INSURANCE PREMUM AND OTHER CHARGES IN EXCESS OF ACTUAL COST OR THE AMOUNT PAID TO SERVICE PROVIDERS

1. Please refer to BPRD Circular Letter No.5 dated February 25, 2010 on the above subject wherein the banks/DFIs have been restricted from retaining a part of insurance premium received from customers for payment of insurer. The purpose of issuing the above instructions was not to discourage Bancassurance products but to transfer the benefit of discount in insurance premium to customers.
2. It is clarified that the instructions issued by State Bank of Pakistan vide the aforesaid Circular Letter are not applicable on remuneration/commission earned by banks/DFIs under Bancassurance agreement i.e. between the banks & Insurance Companies, executed in accordance with SECP Guidelines in this regard. In these arrangements, a Bank/DFI acts as a corporate distribution agent and sells Bancassurance product to its customers and receives commission against services rendered on behalf of the Insurance Companies.
3. Other instructions on the subject shall, however, remain unchanged.

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