Insurance sector becoming deadweight for economy

The government’s plan to raise the insurance sector’s contribution to gross domestic product to 4 per cent within this year looks unrealistic given that its share in GDP keeps shrinking over the years.

Currently, 79 insurance companies are operating in Bangladesh. They contribute only 0.3 per cent to the GDP at present.

Bangladesh Bureau of Statistics data show that the sector’s contribution to GDP in the fiscal year 2016-17 was 0.32 per cent which fell to 0.3 in FY17-18. In FY18-19, it stood at 0.29 per cent which remained unchanged in FY2019-20.

“Transparency and accountability need to be ensured to increase the sector’s contribution to the GDP,” Jiban Bima Corporation Managing Director Md Zahurul Haque told The Business Post.

He said that insurance companies failed to gain the people’s trust. Most of them allure people with fancy offers in the beginning but dally with claim settlement.

Haque said the government needs to take initiative to bring people under policy coverage. “They should be forced if required,” he said, admitting that the insurers also lack initiatives to encourage people to take policies.

‘Insurance: A powerful tool’

Md Jalalul Azim, managing director and CEO of Pragati Life Insurance, said the sector’s contribution to the GDP was bound to decline if business did not increase.

“We need to introduce new services and implement some plans mentioned in the national insurance policy to increase business,” he told The Business Post.

“The insurance sector is a powerful tool for boosting the economy. The involvement of people and banks is essential to the sector’s growth,” a senior official of an insurance company told The Business Post. “The insurance sector will grow if we could introduce bank insurance in our country.”

Thirty-three insurance companies offer life insurance policies, of which only one is state-owned. On the other hand, the number of general insurance companies is 46, including one state-owned company.

Unaudited data of 2020 show that there are 4,42,648 people involved in the insurance sector, according to Insurance Development and Regulatory Authority of Bangladesh (IDRA).

Although there are 1.84 crore active life insurance policies, according to IDRA, unofficial estimates put the number of people under insurance coverage at around 10 million, as many people have multiple insurances.

Premium income declines amid pandemic

Unaudited IDRA data show the insurance sector’s premium income in 2019 was Tk 143.08 billion. It declined by 2.83 per cent in 2020 to Tk 139.03 billion.

On the other hand, the total assets in the insurance sector in 2019 were Tk 533.74 billion, which stood at Tk 453.89 billion last year – a 14.96 per cent decline.

Authorities concerned say boosting people’s confidence in the insurance sector, strengthening IDRA, ensuring transparency and accountability are keys to reviving the sector.

President of Bangladesh Insurance Association Sheikh Kabir Hossain said settling insurance claims on time needs to be prioritised as well.

SM Shakil Akhtar, spokesperson and executive director (joint secretary) of IDRA, admitted that the IDRA was not as strong as it should have been.

“Very few life insurance policies were sold last year due to the Covid-19 pandemic, resulting in the sector’s business loss. Premium income also declined because of a halt in third-party motor insurance, even though this type of motor insurance is compulsory all over the world,” he told The Business Post.

He mentioned that a reduction in export and import due to the pandemic also impacted the premium income of general insurance. “These are the reasons why the sector’s contribution to the country’s GDP declined,” he said, referring to Swiss Re Sigma report, published on July 14, 2021, which showed Bangladesh falling one notch in terms of insurance penetration.

Ensuring good services

Former caretaker government adviser Dr AB Mirza Azizul Islam alleged that insurance companies always focus on taking premiums, but make numerous excuses at the time of paying compensations.

“Complaints against insurance companies are not addressed on time. The regulator of this sector must address the issue,” he said.

“Necessary steps must be taken to find out the discrepancies in the insurance sector and take action against those responsible,” Azizul added.