Home ›› 01 Mar 2023 ›› Front
Defying all economic crises in both home and across the globe, the country’s insurance premium collection grew a staggering 12.04 per cent in 2022.
According to Insurance Development and Regulatory Authority (IDRA) data, premium collection by the insurance sector reached a total of Tk 16,812.65 crore last year.
Insurance premium is the amount of money an individual or business pays for an insurance policy.
Of the total premium collection in 2022, the gross premium of life insurance companies stood at Tk 11,399.51 crore while the amount was Tk 5,413.14 crore for the non-life insurance companies, according to IDRA.
IDRA said the number of insurance companies in the country has grown to 81 in the 51 years since independence. Among them there are 35 life insurance and 46 non-life insurance companies.
Even amid the Covid-19 pandemic, the country’s insurance premium collection grew 8.3 per cent, when the real growth of total insurance premiums worldwide fell to 3.4 per cent. The growth in premium collection is providing great liquidity support to the country’s banking sector.
IDRA also said about 1 crore people are involved with the insurance sector in the country which has created some 7 lakh jobs. IDRA is coordinating with the government to identify the existing problems in the insurance sector and solve them.
Insurance penetration
Despite the commendable growth in premium collection, Bangladesh’s insurance is far behind reaching its full potential.
The country’s insurance penetration, meaning premiums as a share of GDP, was recorded at 0.40 per cent in 2020, the lowest among the emerging Asia-Pacific nations, according to Swiss Re data, a leading global reinsurer based in Zurich, Switzerland.
The insurance penetration rate stood at 0.49 per cent, 0.57 per cent and 0.55 per cent in 2019, 2018 and 2017 respectively.
However, the Bangladesh Bureau of Statistics data shows that the sector’s contribution to GDP in fiscal Year 2020-21 (FY21) was 0.27 per cent, which was 0.28 per cent in the previous year.
According to Swiss Re, in 2020, insurance penetration in Thailand was 5.30 per cent followed by Malaysia 5.4 per cent, China 4.5 per cent, India 4.2 per cent, Vietnam 2.3 per cent, Indonesia 1.9 per cent, the Philippines 1.8 per cent, and Sri Lanka 1.2 per cent and Pakistan 0.80 per cent.
According to the BBS data, the insurance premium as a share of GDP at constant price stood at Tk 7,353 crore in FY21, up by 3.22 per cent from Tk 7,123.6 crore in the previous year.
Factors for low penetration
Stakeholders and experts blame trust deficiency, limited products, lack of proper implementation of laws and monitoring to scan irregularities of the insurers for the low penetration. Besides, a lower mean income of the majority population is another barrier.
“People employed in the formal sector and government officials have an institutional system that provides them with pension. In incorporated as well as good companies, there is group insurance. But most people are employed in the informal sectors and their income is not enough to maintain an insurance policy. Financial inclusion is very low here,” said Professor Mustafizur Rahman, distinguished fellow of Centre for Policy Dialogue (CPD).
The economist noted that there are not enough insurance products with a small-size premium to bring low-income people under the insurance coverage and companies are running after the big clients.
“In order to increase the coverage, companies should develop affordable products for low-income groups and reach out to them,” he recommended.
He said, “The government initiative for a universal pension scheme would be one kind of insurance for people. If the government pays a minimum amount for low-income groups, it would be a big option for the sector.”
“Trust deficiency is a key factor for the low penetration, which needs to be restored without any further delay,” Rashed Bin Aman, managing director and CEO of Sonali life insurance Company Limited, told The Business Post.
There is a shortage of knowledgeable and skilled manpower, which is a great challenge. In removing the barriers, institutional capacity should be developed and training is a key to this, he said.
Claim settlement, asset and life fund scenario
Meanwhile, with almost 63 per cent of the market share, five companies currently dominate the country’s life insurance industry, indicating that the majority of the firms are yet to solidify their presence in this sector.
Despite the fact that the raging pandemic hit the country’s economy hard, insurance companies, however, managed to increase their settlements of insurance claims.
At the end of 2021, insurers paid Tk 7,724 crore for insurance claims which was Tk 6,728 crore in 2020 displaying a hike of Tk 996 crore in just one year.
The sector’s life fund was Tk 35,889 crore at the end of December 2021. Among the 35 insurance firms, 10 held Tk 33,671 crore in their life funds at that period.
The value of assets of life insurance companies fell to Tk 44992 crore at the end of 2021 from Tk 45,388.68 crore in 2020.
Sector’s shortcomings
‘’There is a lack of skilled manpower in this sector. Technical people in particular are in short supply. Also, bringing in automation will require increased investment. But many companies are not seeing it that way. If you consider the customers, many companies are yet to come under automation.
They should treat this as a project,” Ala Uddin Ahmad , chief executive officer (CEO) of MetLife Bangladesh told TheBusiness Post.
‘‘The main problem in the insurance sector is that customers are not getting genuine service. Insurance companies must settle claims on time. It is necessary to improve the insurance industry’s transparency and accountability.’’ Rashed Bin Aman, CEO of Sonali life insurance Co, told The Business Post.
‘‘In 2014, the government created a national insurance policy that identifies a number of issues with the industry. I believe that the insurance sector’s contribution to GDP will increase if the government’s national insurance plan is properly implemented,” he added.
How to advance the sector
‘’In order to take the sector forward, manpower needs to be increased to enhance surveillance and regulations need to be fully implemented on an urgent basis, though these things are time-consuming,‘’ BM Yousuf Ali, Managing Director and CEO of Popular Life Insurance Company Limited told The Business Post.
