Bancassurance to be launched to increase insurance penetration

To raise the insurance sector’s contribution to GDP to 1 per cent, we need to expand the distribution channel, which we want to do by introducing bancassurance, Insurance Development and Regulatory Authority Chairman M Mosharraf Hossain told The Business Post’s Shahin Howlader in an exclusive interview

What is the present scenario of the insurance sector?

Bangladesh has more insurance companies than the neighbouring countries. If there were fewer companies, each would have had its share of business. But with so many companies, there is a lot of competition, resulting in the poaching of skilled employees and agents.

We took some measures that reduced the number of lapsed policies. Besides, there were eight levels of commission in the life insurance sector, and we brought it down to six. This has halved life insurers’ commission costs. There were various irregularities in the companies’ field offices, especially in their manpower structures. We made a universal organisational structure for all by law last year.

Non-life insurers once had 250-300 bank accounts, but they would show half of the account information in their financial reports. This means they would hide a large part of their income, which they would withdraw from banks at some point.

Scope of growth

At present, we have made a rule that a company will open three bank accounts to collect premiums. Now they cannot hide their premium while their income and the government’s revenue are increasing. We have now been able to ensure discipline in this sector.

The number of insurers has increased, but there are questions about the quality of service. Why is that?

This sector has been fragile for long. The amount of default loans in banks is huge, but they still pay interest to depositors. Some insurance companies may be delaying claim settlements, but that is not as high as the amount of default loans. In fact, the amount may not be more than Tk 100 crore.

Both insurers and clients are responsible for this. If clients do not pay premiums on time, companies cannot settle claims when policies mature because the former did not carefully store the necessary papers. On the other hand, agents also embezzled money.

People have a negative attitude towards the insurance sector for these reasons, though the amount of money paid after settling claims is very low in the market.

But bad news travels fast. Default loans in the money market belong to several thousand people, but the insurance sector’s unpaid claims of Tk 100 crore belong to several lakh people. When several lakh people speak negatively about this sector, it affects the public impression in many ways.

Nothing can be done without insurance in developed countries. This rule will perhaps be introduced in our country in the future. When Bangladesh will become a developed country, maybe people will feel the importance of insurance.

Claim settlement delay is the main problem of this sector. What role is the regulatory body playing in this regard?

We have taken various measures as a regulatory body. On the occasion of Father of the Nation’s birth centenary, we paid around Tk 500 crore in claim settlements of orphans and widows at the “Bangabandhu Ashar Alo Bima Dabi Porishodher Proyash” programme.

In addition, we have formed a cell and a task force to deal with complaints about claims against companies through hearings. We have launched a hotline number (16120) to receive such complaints. The number of customers who have the required documents but are not getting the money is very low. We are keeping an eye on some particular companies. At the end of the year, we also calculate the rate of claim settlement complaint resolution.

Many insurers have a lot of lapsed policies. Who is responsible for this?

Both agents and clients are responsible for lapsed policies. There is a lack of awareness among many clients. We will initially request clients to pay the policy money via cheques instead of giving it to agents.

This is because sometimes agents embezzle the money instead of depositing it. Clients in cities can pay via banks, but those in remote areas cannot. Policies usually become lapsed due to these reasons, but these problems will gradually be resolved. We have taken some measures that have caused the number of lapsed policies to decline.

Most people are not covered by insurance even though our population is almost 18 crore. What is your suggestion for bringing the majority of people under coverage?

We have been working for long to bring more people under coverage. There are about 10 crore bank clients and about two crore insurance clients. We have planned to introduce bancassurance to encourage more people to be insured.

If we can bring bank clients under insurance, they will not have to take coverage separately or rely on agents. If this is introduced, most of the people in the country will come under coverage. Then measures like online mechanism and corporate agent will motivate more and more people to get insured.

Do you think the biggest obstacle to insurance in the private sector is the lack of government patronage?

The prime minister has introduced the National Insurance Day for us. She remains present at the programme on the day to observe it. We are getting full support from the government. Since the insurance sector carries Father of the Nation’s memories, the government is keeping an eye on it.

There are other policy wings, and we are getting the necessary support from them as well.

There are some legal issues, and manpower shortage is a pressing problem. The current workforce is worried about job security. I think the manpower crisis in the insurance regulator is one of the key reasons why this sector has fallen behind.

What steps should be taken to raise the insurance sector’s contribution to GDP to 1 per cent?

There are many tools to do that, but we need to focus on two things first. We have to expand the distribution channel, which we want to do by introducing bancassurance. Second, we need to expand online distribution. If we can do these fast, the insurance sector’s contribution to GDP will go up. We do not have brokers and corporate agents in our country, but we need them.

In short, the distribution channel has to be diversified. People need to be approached with insurance products so that they are not deceived. New schemes have to be launched as per clients’ needs as well.

There have to be measures for skill development at the regulatory body and all companies. If we can create skilled manpower by passing the Bangabandhu National Institute Act 2022 on the occasion of Bangabandhu’s birth centenary, the insurance sector will grow. But if we fail to do that, we will lag further behind.