Despite government plans to boost the country’s insurance industry, this sector’s contribution to gross domestic product (GDP) shrank over the years to 0.25 per cent in FY23, from 0.32 per cent recorded in FY16.
The sector, consisting of 35 life and 46 non-life insurance firms – make nominal contributions to the economy. In comparison, with 63 banks, the banking sector occupied 2.72 per cent of the country's GDP in FY23, shows latest data from the Bangladesh Bureau of Statistics (BBS).
Bangladesh is still struggling to raise insurance penetration – a ratio of premiums to GDP, which is popularly used to measure contribution of this sector.
Insurance penetration accounted for 6.8 per cent of the global GDP in FY23. The global market size grew by more than 7 per cent annually to reach $7 trillion in FY23.
Experts say a lack of transparency and accountability, low awareness among people about insurance services, scarcity of digital and innovative insurance products, as well as lower claim settlement ratio are the reasons behind the meagre penetration in Bangladesh.
Sheikh Kabir Hossain, president of the Bangladesh Insurance Association (BIA) said, “Some companies misused the insurance payments, which in turn led to unsettled claims worth Tk 24,000 crore.
“As a result, the volume of claims is not going down, and concerns are rising among people. They are now disinterested in dealing with the insurance sector. The Insurance Development and Regulatory Authority of Bangladesh (IDRA) has taken some steps, but these are still not enough to settle claims.”
If IDRA manages to increase life claim settlements, the insurance-to-GDP contribution will increase as well, he added.
According to IDRA, the claim settlement ratios of the life insurance sector in Bangladesh was 89.39 in 2018; 88.88 in 2019; 84.82 in 2020; 71.55 in 2021; and 62.50 in 2022 (unaudited). The figures indicate a declining trend in claim settlements, posing a threat to insurance penetration.
Insurance for security, future savings
Chartered Life Insurance Company Limited CEO SM Ziaul Hoque said, “People have the wrong idea that insurance means extra profit similar to that of banks or other financial deposits, but it is not the right thinking. Insurance means security and future savings.
“Insurance companies are providing security of customer wealth, life, health, and family as well as helping them to force savings and arranging to get various types of tax rebate.”
“A positive change is coming. However, we need to increase awareness of our potential and existing customers. We need more publicity similar to the insurance fair and insurance day. The media can help publish articles on the issue, and organise talk shows.”
An analysis of IDRA’s latest annual report shows that even though there was a similar per capita income, the density of insurance in India was $92 in 2022, compared to only $12 in Bangladesh the same year.
Vietnam, which has a lower GDP ranking in the world compared to Bangladesh, witnessed an 18.5 per cent growth in density to $95. However, Bangladesh saw a mere 3.6 per cent growth in 2022. During the period, India’s insurance density grew by 6.5 per cent, adds the annual report.
Bangladesh also ranked 85th in the global non-life insurance market, while it was in the 52th position in life-insurance business out of 88 countries, mentions the IDRA report. Meaning there is a huge untapped potential to raise insurance penetration in the country.
Premium income, assets revive after pandemic
Unaudited IDRA data show that the insurance sector’s premium income rose to Tk 17,140 crore, and grew by 9.68 per cent in 2022 compared year-on-year. It was Tk 15,628 crore in 2021, Tk 13,903 crore in 2020, and Tk 14,308 crore in 2019.
On the other hand, total assets in the insurance sector also rose to Tk 63,629 crore in 2022, up from Tk 61,571 crore in 2021. However, due to the pandemic’s impacts on the economy, total assets stood at Tk 45,389 crore in 2020 – a 14.96 per cent decline from Tk 53,374 crore in 2019.
Ziaul said a sandbox policy is in place to enable digitisation of product innovation in the sector. IDRA’s activities have become more extensive especially after the Covid-19 crisis.
MetLife, Sadharan Bima hold majority market share
According to IDRA, MetLife holds the majority market share among life insurance companies, while state-run Sadharan Bima Corporation has the largest market share among non-life insurers.
Among the life insurance companies, MetLife’s market share accounts 28.59 per cent, followed by National Life 13.43 per cent, Delta Life 7.44 per cent, Fareast Islami Life 7.38 per cent, JBC 6.41 per cent, Popular Life 6.35 per cent, Prime Islami Life 4.18 per cent, Meghna life 3.98 per cent, Pragati Life 3.78 per cent, Guardian Life 3.39 per cent and others account 15.07 per cent.
Meanwhile, Sadharan Bima holds 11 per cent share of non-life insurance market while Green Delta accounts 9.2 per cent, Reliance 7.6 per cent, Pioneer 6.9 per cent, Pragati 6 per cent, Provati 2.6 per cent, Northern General 2.4 per cent, Eastland 2.4, Global 2.1 per cent, Bangladesh National 2.0 per cent and others account 47.8 per cent of the market.
