Insurance Market in Bangladesh
Jiban Bima Corporation (JBC) is the countrys only state-owned life insurance company, which was established on May 14, 1973. JBC offers life insurance schemes to cover risks, with the aim to promote a savings habit among the people as well as generate funds for the countrys economic development. M Ali Noor, managing director of JBC, in an email interview, recently informed The Weekend Independent about the insurance industry in Bangladesh.
Regarding the present state of the life insurance sector in the country, Ali Noor, in an email reply, said: The market of life insurance in Bangladesh is still fragmented. Bangladesh is a country that is exposed to a variety of risks. Yet, insurance coverage is very low in this country. Penetration ratio, measured as the ratio of gross written premium to GDP, was only 0.9 percent in 2014 (0.7 percent for life insurance and 0.2 percent for non-life). The low insurance penetration in Bangladesh, with about 17.1 million policy-holders in 2014, according to IMF data, compares unfavourably with other South Asian countries.
As to the problems encountered in expanding the insurance sector, the JBC managing director said: There is limited campaign on part of the authorities highlighting the importance and benefits of life insurance. Also, there is no effective regulatory framework to promote insurance awareness among the people.
Regarding the organisational structures of insurance companies in Bangladesh, Noor described them as weak and inconsistent, with lack of corporate governance.
There is lack of accountability and transparency in the insurance sector. Modern standard accounting systems are absent and there is reluctance to use modern technology. There is an immense shortage of actuary consultants. Also, there is a high rate of management expenses in insurance companies, Noor said.
Besides, lack of training programmes for little-educated insurance agents, who sell insurance products to prospective policy-holders, is one of the main obstacles faced by the life insurance sector, he added.
Bangladesh Insurance Academy offers different types of training programmes for insurance agents, as well as development courses for officials of insurance companies. Dhaka University and East-West University have opened departments of actuary, which will meet the need of actuarial consultants. But professional courses, such as insurance diploma, are not properly evaluated by the insurance companies, Noor said.
Standard conduct rules are absent in the insurance sector. Sometimes, insurance agents are engaged in fraud activities, some of them take premiums in cash from policy-holders without giving money receipts. As a consequence, lack of trust develops between policy-holders and insurance agents as well as insurers (insurance companies), he said.
Furthermore, a claim settlement is often a long process, involving investigation, verification of medical documents and proof of age of the policy-holder, etc. Hence, various obstacles have to be overcome when settling a claim, he said. Also, there is a lack of market data, including updated mortality and morbidity figures.
To develop a positive image of the insurance sector, Noor said new rules have to be promulgated as soon as possible.
There is absence of proper rules to invest life fund for more profitable sectors, and non-availability of quality insurance products in Bangladesh, though some new insurance products have been launched for poor and marginal communities, he said.
Bangladesh has made significant gains in economic growth, development and poverty reduction, which has propelled the country from low income to low middle income status. Insurance helps to protect people and businesses from shocks. Insurance serves a number of valuable economic functions, including enabling entrepreneurship and innovation, allowing risk transfer and helping societies save and invest, he added.
Regarding development of regulatory bodies and policies, Insurance Development and Regulatory Authority (IDRA) was established in 2010 and it is in charge of regulating and supervising all insurance companies of the country. Within a short span of time, new corporation act and insurance rules will be promulgated, Noor said. Furthermore, National Insurance Policy 2014 has been introduced to run the sector smoothly.
Regarding the achievements of Jiban Bima Corporation, Noor said JBC has the most extensive semi-urban and rural footprint through a large network of branches. JBC had a premium income of Taka 4.67 billion in 2017, with an annual growth rate of 13.50 percent
At present, JBC is not a re-insurer of other private life insurance companies of Bangladesh, though it has the authority to act as a re-insurance company in the life insurance sector.
Hence, a lot of foreign currency is remitted from Bangladesh to foreign re- insurance companies every year, Noor said.
As per Insurance Corporation Act of 1973, Sadharan Bima Corporation (SBC), the only state-owned non-life insurer in Bangladesh, acts as a reinsurer of non-life business, he added.n
Edited by The Weekend Desk.
Photo: Courtesy
