The Insurance Development and Regulatory Authority (IDRA) has allowed the life insurance companies to offer full-fledged health insurance policies, curtailing the monopoly of non-life insurers in the local market.
The latest move, formalised through a circular on Thursday last, is expected to create scopes for making the market competitive and the products cheaper as all the 81 insurance companies – be it life or non-life ones – would from now on bid for the market share.
The non-life insurance companies have been offering the health insurance policies, with usually a short-term or not more than one-year tenor, to the clients solely since 2014 under a regulation issued at that time.
However, the regulation became invalid with the issuance of the latest circular that also allowed the life insurers to design, price and sell medical products in the market.
It will help ensure competitiveness and reduce policy premiums, industry insiders familiar with the development told the FE.
Health insurance products have been getting popular since the outbreak of the notorious coronavirus both at home and abroad. The corporate houses are the major clients in Bangladesh.
However, the life insurers earlier could have offered health coverage to their clients but only as a “supplementary” to their main life policies, which is termed ‘rider’ in the industry.
The life insurers inherently get more customers than the non-life ones that offer health products in the retail space.
“The new order will help them get more people covered under the medical insurance at a more affordable premium as now the market is open for all,” said an official at the IDRA.
He informed that the life firms sold around Tk 11 billion worth of health related supplementary products or riders in 2022 and said their business is expected to boost further with the latest order.
The non-life health business was concentrated mainly on the corporate groups, he said, adding: “The individual health policies will be popular soon.”
Top executives of insurance companies were, however, sceptical about the possibilities of yielding quick results out of the policy reform due to ‘a very weak distribution network’ where only one agent plays for more than one insurer or often many insurers.
“We need bancassurance as a partnership with banks and it will bring transparency in the business procurement,” said one CEO of a leading life firm.
He said the business opportunities of health products are huge as most people presently rely on their savings to meet the health expenses.
However, the insurance executives said the health insurance causes cash burn for insurers in the initial years due to high claim frequency and its short durations. If a policy remains claim-free for a year, the insurer makes money from that policy.
“However, companies would suffer losses if around 30 per cent of clients raise claims in a year as the settlement amount is generally high due to high medical expenses in the country than that of the policy premium,” said one of them.
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