No need to keep weak cos alive with saline

Insurtech needs to be used widely. Insurance companies must also be compliant. But there is no need to keep the weak companies alive with saline, said Professor Dr Hasina Sheykh, Chairman of Department of Banking and Insurance at Dhaka University, in an interview with The Business Post’s Esme Azom.

The contribution of the insurance sector to the country’s GDP is not even 1 per cent while there are over 80 insurance companies. What is your view on it?

The economy of Bangladesh is not large and the insurance companies have not yet come up with a variety of products. So, many insurance companies combined could not contribute even 1 per cent to the GDP. Rather, many insurance companies are competing with a few products targeting a small number of customers. But there are only 67 insurance companies in neighbouring country India.

However, Bangladesh’s all insurance companies are not doing well financially. Only a few insurers are commercially successful. All the insurance companies are not fully compliant. Media report revealed that half of the insurance companies have not minimum capital.

Can a bank do business with non-compliant business entity like an insurance company? But how are they doing? If the companies comply with rules, bring a variety of products and do business successfully, they can make a big contribution to the GDP. And then no one will raise any question about the number of companies.

There is a negative perception of insurance among the general public due to a lack of proper insurance agents and in some cases, customers are victims of fraud by the agents. What is the way out?

Bancassurance is launched as a way out of this. In such case, the bank will be the corporate agent of the insurance company. In order to build their own reputation, banks will not treat potential customers like the current retail agents of insurance companies.

Again, Bancassurance system will create pressure on retail agents of insurance companies. They have to survive through competition. About 70 per cent of insurance business in India is now done through Bancassurance channel.

Another way is the use of technology in the insurance sector. Many insurance companies are already using Insurtech to bring transparency to their business. This move reduces traditional fraud. However, measures should also be taken to prevent hacking or such modern frauds.

Is there any opportunity for the government to realise the potential of the insurance sector to build Smart Bangladesh?

Of course, there is an ample opportunity. The smart insurance industry will be technology based. In this regard, Insurtech needs to be used widely. Insurance companies must also be compliant. IDRA will have to play a strong role in this regard. Already IDRA has taken several initiatives, we appreciate it. But there is no need to keep the weak companies alive with saline. Like Bangladesh Bank's decision, there should be merger-acquisition in insurance as well.

Use of technology like RegTech, SupTech will increase the efficiency in regulation and supervision. Insurance companies need to analyse various products. Then the dependency on the agents will also reduce.

The customers themselves will come and tell their needs and buy the matching insurance products for them. The most important term in insurance business is settlement of claims. The sooner insurance companies understand this simple fact, the better off the insurance industry will be.

Experts say lack of skilled manpower is a major problem in the insurance sector. Why is Bangladesh failing to create skilled manpower?

It is a policy problem of our country. There is not failure to create skilled manpower, but failure for skilled manpower in his or her sector. For example, along with business degrees, a large number of engineers are interested in banking jobs. We need to create an environment for skilled manpower to be utilised in his/her sector. The right person cannot be retained in the right place if there is a wide gap in pay or training or opportunities between the sectors. 

What is the role of Banking and Insurance Department of Dhaka University in creating skilled manpower?

Every year our banking and insurance department creates educated graduates for the insurance sector. Along with us, Rajshahi and Chattogram universities are also playing this role. When a graduate goes to work, he/she shows that their friends who are educated in banking education get job with a starting salary of Tk 60,000-Tk 70,000 while most insurance companies are not willing to pay more than Tk 20,000-Tk 25,000. Then graduates lose interest in the insurance industry.

Then a graduate in insurance studies works for another sector. And insurance companies hire low-paid incompetent people who don't have the ability to improve the insurance industry. It is the misfortune of our insurance industry that it could not attract insurance graduates.

Insurance students of our department undertake internships with many insurance companies as part of their degree. Compliance and good companies offer them jobs during that internship itself.