Bangladesh Insurance Sector and Its Long Journey

A K M Ehsanul Haque

1st March, 2021 12:52:05 printer

Bangladesh Insurance Sector and Its Long Journey

Bangladesh Insurance industry began its journey almost as early as the country's independence. Since then it has gone through various phases namely nationalisation and denationalisation of insurance companies. No doubt it was a long and difficult journey to reach what it is today.

It is believed that for the size of Bangladesh's economy, the insurance sector is over saturated. A total of 79 insurance companies currently operate in the insurance sector. Out of which 46 companies are in general business and 33 companies are involved in writing life businesses of which two are foreign insurers.

Bangladesh is a nation of about 18 crore of population. It has a tremendous potential for developing insurance business. But unfortunately it has an insignificant amount of contribution to the national economy.

According to one statistics, contribution of insurance to GDP is less than one percent which is relatively lower compared to other SAARC countries.

Insurance Development and Regulatory Authority (IDRA) was established as per the Insurance Act 2010. The purpose of its formation was to bring discipline and streamline activities in the insurance sector.

Before the formation of IDRA, the insurance sector was regulated by the Controller of Insurance. Insurance is saddled with numerous problems. One of the biggest challenges faced by the insurance sector is curbing irregularities and corruption which are apparently hampering development and progress of insurance business in the country.

Among various problems, the insurance sector is facing a serious shortage of competent and insurance qualified personnel.

In order to address this critical issue, insurance companies should be prepared to invest on a long term basis and offer financial assistance and cooperation to develop a skilled workforce for the greater interest of the insurance sector for the future.

Lack of an adequate quality training facility is an important area which needs to be addressed. Training should be made compulsory. There should be both in-house as well as external training facilities.

Lack of awareness is another problem believed to be largely contributing to the poor growth of insurance business.

IDRA has organised "Bima Mela" every year for the last several years apparently to create public awareness about the benefit and importance of insurance.

Another problem is delayed insurance claims by insurance companies. Insurance companies' dilly-dally approach towards settlement of all types of claims has tarnished the image of the insurance sector in the eyes of the insured.

A great deal of improvement is needed in this regard in order to restore trust and confidence in the insurance market.

All genuine/ bonafide claims should be settled in a fair and timely manner. Delay in settlement of claims shall only bring bad name to insurance companies which shall prove detrimental to the insurance sector.

IDRA has a bigger responsibility to ensure effective implementation of insurance laws, rules and regulations and oversee national insurance policy.

Government has declared 1 March as “National Insurance Day” to celebrate the day on which the father of the nation joined Alfa Life insurance company way back in 1960.          

On this day various functions and insurance seminars are held to commemorate this auspicious occasion.

Insurance sector should follow the best practices adopted in various countries around the world.

Bangladesh’s insurance sector needs a lot of reforms and has a long way to go in order to catch up with its counterparts in the region.

A combined and concerted effort is all that needed to uplift it from the current sorry state of affair.

The insurance sector needs a shot in the arm!

During my nearly four decades stay in Dubai, U.A.E., I served in various multinational insurance companies in various capacities.

Let me share my experience and highlight the differences between U.A.E. insurance market and Bangladesh insurance market.

It is relevant to mention here that U.A.E. insurance market follows the principles of insurance strictly which is not the case with the Bangladesh Insurance sector.

One important difference between the two insurance markets is that U.A.E. is a non-tariff market whereas Bangladesh is a tariff market.

In a tariff market there is an intense competition for business where quality of service matters over price. It is important to provide quality and prompt service especially when it comes to settlement of claims.

On the other hand, Bangladesh insurance sector appears to be sluggish in this regard. There are allegations that some insurance companies take their sweet time and bargain with the claimant regarding the amount of settlement which is against the principle of Indemnity when it comes to settlement of property insurance.

Unlike UAE insurance market, Bangladesh insurance market is ripe with various unethical insurance practices.

In Bangladesh, insurance companies have a general tendency to disregard and evade insurance laws, rules and regulations which rarely takes place in the UAE insurance market.      

Unlike insurance development and regulatory authority (IDRA), UAE ministry of finance responsible for regulating insurance business take their job seriously in implementing UAE insurance laws, rules and regulations.

Another factor is quality of services provided by surveyors/loss adjusters in UAE are of high standard and quality. But sadly there appears to be an acute shortage of technically qualified and competent surveyors in Bangladesh.

There are allegations that some survey firms indulge in corrupt practices which help assist promotion of fraudulent claims, a serious problem for Bangladesh insurance sector.

In the UAE insurance market, fraud is viewed as a serious crime. They are dealt with strictly by the relevant authorities resulting in cancellation of registration of survey firms found guilty.

Risk management is another area of difference. Risk management is a technique which goes hand-in-hand with insurance. While this technique is applied by insurers in the UAE as part of their insurance functions to improve risks, this concept is hardly used by insurers in Bangladesh.

As far as current reinsurance facility is concerned, Sadharan Bima Corporation (SBC) enjoys a monopoly besides being involved in writing direct business from the market.

It is felt that in the bigger interest of the Bangladesh insurance sector, an independent reinsurance company should be established. This will not only strengthen reinsurance business, but it will also promote Bangladesh as a separate reinsurance center in the region.

 In essence, the insurance sector is suffering from several anomalies which are mostly responsible for the current woes of the insurance sector. Some of the shortcomings are:  1. Greed of insurer to make money at any cost, 2. Lack of professionalism, 3. Lack of competent and skilled workforce, 4. Unethical business practices, 5. Corruption at almost all levels, 6. Lack of adequate quality training facility, 7. Acute shortage of competent and technically qualified surveyors, 8. Inadequate distribution channels for sale of policies, 9. Lack of new and innovative insurance products etc.

 On top of everything negligence in duty, ineffectiveness, incompetence, unwillingness etc., by IDRA are largely responsible for the current sorry state of affairs of the Bangladesh insurance sector.

The writer is the Director, Sadharan Bima Corporation (SBC). E-mail: [email protected]