Sunday, 22 December, 2024
When the global insurance industry grew at an annual rate of 7.5% last year, Bangladesh's industry, serving nearly 180 million people, struggled with only a 0.40 per cent penetration rate.
The main reasons are insufficient policy support, low penetration and settlement rates, a negative reputation from agent misconduct, and a lack of financial literacy among the population.
Over the next decade, according to the Allianz Global Insurance report, the global insurance market is expected to grow by an annual rate of 5.5% to trail behind the global GDP.
One of the primary reasons for this growth is that insurance is legally mandated in most developed countries, as it is a crucial component of economic development, the report noted.
The general insurance penetration in Bangladesh was only 0.40 per cent last year which remains low compared to regional peers like India, Pakistan and Sri Lanka. The main reasons are a lack of awareness, proper education and the negative image created by a lack of knowledge and policy support, according to a recent study by PwC.
A significant portion of the Bangladeshi population distrusts insurance agents and has limited awareness of life insurance products. This issue has been exacerbated by recent financial scandals in the banking sector, which have exposed widespread mismanagement and corruption.
“So, most insurance companies are facing hurdles to attracting more customers as they are not properly educated but are misguidedly fuelled by a low volume of settlements. The situation has been aggravated recently by a series of financial scandals in the banking sector exposing mismanagement and corruption”, the PWC report noted.
“In the landscape where insurance is a mandatory facet in developed nations, Bangladesh finds itself significantly trailing, with fewer than one in seventeen people holding life insurance policies in a country of 180 million. This deficiency is rooted in a trifecta of challenges: a lack of awareness, insufficient education, and a negative image fostered by a dearth of knowledge and policy support”, said B. M. Yousuf Ali, President of Bangladesh Insurance Forum, an apex body of CEOs of insurance companies.
“With insurance, economic resources are allocated more efficiently so that individuals and businesses can be more confident in assuming developing risks, and economic growth and job creation are stimulated”, Yusuf Ali, also the Managing Director of Popular Life Insurance company said.
“It increases capital formation and investment by collecting premiums from policyholders and investing those funds. This leads to increased national production. They also (2) reduce business risks which encourages more economic activity”.
“With a policy in place, companies have a buffer against the financial consequences of potentially door-shuttering events—including those that might otherwise cause millions of dollars in losses”, the BIF president said.
On the consumer side, he continued, insurance acts as a shield against unexpected personal expenses, alleviating the costs of medical care, property damage, and beyond. As a result, consumers can maintain their buying power and stimulate the economy with purchases in both trying and thriving times.
When emerging markets are poised to become global growth drivers, skyrocketing availability of data, advances in digital & mobile technology & rampant progress in analytics & artificial intelligence all mark the end of 2021 for the insurance industry, then Bangladesh insurance industry is limping with many obstacles, according to Aon’s 2022 Asia Market Review.
The primary bottlenecks hindering the growth of Bangladesh's insurance industry include bureaucratic inefficiencies, lack of public awareness, insufficient regulatory frameworks, and limited access to innovative insurance products. These challenges stifle market penetration and restrict the sector's potential contribution to the nation's GDP, the report observed.
One of insurance’s key roles is safeguarding the financial health of small and medium-sized enterprises. Insurance cover is crucial for people to insure themselves against the inability to work, set aside money for retirement or protect themselves against the loss of their assets. This is where insurance comes in as a key component in ensuring the healthy development of small and medium-sized enterprises.
“No nation can truly achieve smart nation status without leveraging the insurance industry. For Bangladesh to unlock its full potential, it must focus on harnessing the power of this sector”, said Sheikh Kabir Hossain, President of Bangladesh Insurance Association (BIA), the apex body of the country’s 81 insurance companies.
“It is urgent to foster trust in businesses, attract talented individuals, engage skilled professionals, and implement robust reform measures. Strengthening these areas will create a resilient and innovative insurance industry, essential for sustainable development and economic growth”, the BIA president said.
“If the authorities concerned pay more attention to the industry, the contribution of the country’s insurance sector to the GDP could be increased to 4 to 5 per cent, said a CEO of a leading insurance company”, he said.
Insurance is fundamentally based on the concept of risk-sharing. Insurance firms offer policyholders benefits through risk distribution that cannot be achieved via financial markets alone. Progress is achieved through unity, and success is attained through collaboration.
Insurance reduces the investment risk faced by companies and the state. Many companies find it far more expensive, if not impossible, to take out a loan without purchasing the requisite insurance protection. Insured, thereby reducing the costs of raising the capital they need.
“This is particularly important in emerging markets like Bangladesh, where a shortage of capital is a major disincentive to investment. The nation aspires to become a developed country by 2024 and to build a smart nation in the coming years”, the BIA president said.
He said the country’s insurance cos amass a mountain of wealth. Assets in the insurance sector increased by 26 per cent, skills18 per cent to Tk 63,629.05 crore in the last five years till 2022. These huge funds should be invested properly to boost economic growth to become a smart nation.
“But lack of professional skills persists in all areas of this business from business operations to policy regulations. Inadequate policy support has aggravated the situation, which is the main hindrance to the expected growth of the country’s insurance industry”, he said.
Sheikh Kabir Hossain said several companies are currently unable to settle claims due to bad investments and non-compliance. Some companies have gone sick. They are unable to settle claims timely.
“A paradoxical situation has emerged in the country: the rich can manage risks personally and have insurance policies”, according to Dr Md Main Uddin, professor and former chairman of the Department of Banking and Insurance at the University of Dhaka.
The government is planning to reform the existing insurance policies with customer-centric regulations to strengthen the country’s promising industry.
“To address ongoing challenges, new strategies and action plans are set to replace outdated policies, ensuring effective resolution of previous issues”, a highly placed Finance ministry official added that the present government has realised the potentiality of the once neglected insurance industry.
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When the global insurance industry grew at an annual rate of 7.5% last year, Bangladesh's industry, serving nearly 180 million people, struggled with only a 0.40 per cent penetration rate.
The main reasons are insufficient policy support, low penetration and settlement rates, a negative reputation from agent misconduct, and a lack of financial literacy among the population.
Over the next decade, according to the Allianz Global Insurance report, the global insurance market is expected to grow by an annual rate of 5.5% to trail behind the global GDP.
One of the primary reasons for this growth is that insurance is legally mandated in most developed countries, as it is a crucial component of economic development, the report noted.
The general insurance penetration in Bangladesh was only 0.40 per cent last year which remains low compared to regional peers like India, Pakistan and Sri Lanka. The main reasons are a lack of awareness, proper education and the negative image created by a lack of knowledge and policy support, according to a recent study by PwC.
A significant portion of the Bangladeshi population distrusts insurance agents and has limited awareness of life insurance products. This issue has been exacerbated by recent financial scandals in the banking sector, which have exposed widespread mismanagement and corruption.
“So, most insurance companies are facing hurdles to attracting more customers as they are not properly educated but are misguidedly fuelled by a low volume of settlements. The situation has been aggravated recently by a series of financial scandals in the banking sector exposing mismanagement and corruption”, the PWC report noted.
“In the landscape where insurance is a mandatory facet in developed nations, Bangladesh finds itself significantly trailing, with fewer than one in seventeen people holding life insurance policies in a country of 180 million. This deficiency is rooted in a trifecta of challenges: a lack of awareness, insufficient education, and a negative image fostered by a dearth of knowledge and policy support”, said B. M. Yousuf Ali, President of Bangladesh Insurance Forum, an apex body of CEOs of insurance companies.
“With insurance, economic resources are allocated more efficiently so that individuals and businesses can be more confident in assuming developing risks, and economic growth and job creation are stimulated”, Yusuf Ali, also the Managing Director of Popular Life Insurance company said.
“It increases capital formation and investment by collecting premiums from policyholders and investing those funds. This leads to increased national production. They also (2) reduce business risks which encourages more economic activity”.
“With a policy in place, companies have a buffer against the financial consequences of potentially door-shuttering events—including those that might otherwise cause millions of dollars in losses”, the BIF president said.
On the consumer side, he continued, insurance acts as a shield against unexpected personal expenses, alleviating the costs of medical care, property damage, and beyond. As a result, consumers can maintain their buying power and stimulate the economy with purchases in both trying and thriving times.
When emerging markets are poised to become global growth drivers, skyrocketing availability of data, advances in digital & mobile technology & rampant progress in analytics & artificial intelligence all mark the end of 2021 for the insurance industry, then Bangladesh insurance industry is limping with many obstacles, according to Aon’s 2022 Asia Market Review.
The primary bottlenecks hindering the growth of Bangladesh's insurance industry include bureaucratic inefficiencies, lack of public awareness, insufficient regulatory frameworks, and limited access to innovative insurance products. These challenges stifle market penetration and restrict the sector's potential contribution to the nation's GDP, the report observed.
One of insurance’s key roles is safeguarding the financial health of small and medium-sized enterprises. Insurance cover is crucial for people to insure themselves against the inability to work, set aside money for retirement or protect themselves against the loss of their assets. This is where insurance comes in as a key component in ensuring the healthy development of small and medium-sized enterprises.
“No nation can truly achieve smart nation status without leveraging the insurance industry. For Bangladesh to unlock its full potential, it must focus on harnessing the power of this sector”, said Sheikh Kabir Hossain, President of Bangladesh Insurance Association (BIA), the apex body of the country’s 81 insurance companies.
“It is urgent to foster trust in businesses, attract talented individuals, engage skilled professionals, and implement robust reform measures. Strengthening these areas will create a resilient and innovative insurance industry, essential for sustainable development and economic growth”, the BIA president said.
“If the authorities concerned pay more attention to the industry, the contribution of the country’s insurance sector to the GDP could be increased to 4 to 5 per cent, said a CEO of a leading insurance company”, he said.
Insurance is fundamentally based on the concept of risk-sharing. Insurance firms offer policyholders benefits through risk distribution that cannot be achieved via financial markets alone. Progress is achieved through unity, and success is attained through collaboration.
Insurance reduces the investment risk faced by companies and the state. Many companies find it far more expensive, if not impossible, to take out a loan without purchasing the requisite insurance protection. Insured, thereby reducing the costs of raising the capital they need.
“This is particularly important in emerging markets like Bangladesh, where a shortage of capital is a major disincentive to investment. The nation aspires to become a developed country by 2024 and to build a smart nation in the coming years”, the BIA president said.
He said the country’s insurance cos amass a mountain of wealth. Assets in the insurance sector increased by 26 per cent, skills18 per cent to Tk 63,629.05 crore in the last five years till 2022. These huge funds should be invested properly to boost economic growth to become a smart nation.
“But lack of professional skills persists in all areas of this business from business operations to policy regulations. Inadequate policy support has aggravated the situation, which is the main hindrance to the expected growth of the country’s insurance industry”, he said.
Sheikh Kabir Hossain said several companies are currently unable to settle claims due to bad investments and non-compliance. Some companies have gone sick. They are unable to settle claims timely.
“A paradoxical situation has emerged in the country: the rich can manage risks personally and have insurance policies”, according to Dr Md Main Uddin, professor and former chairman of the Department of Banking and Insurance at the University of Dhaka.
The government is planning to reform the existing insurance policies with customer-centric regulations to strengthen the country’s promising industry.
“To address ongoing challenges, new strategies and action plans are set to replace outdated policies, ensuring effective resolution of previous issues”, a highly placed Finance ministry official added that the present government has realised the potentiality of the once neglected insurance industry.
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