Economists worried over BD’s wide insurance gap

Economists have expressed their concern over the huge insurance gap in the country.
The concern comes as a global report says Bangladesh is one of the most underinsured countries in the world.
Underinsurance is the gap between the level of insurance in place to cover global risks and the actual cost to businesses and governments of rebuilding and recovering from major catastrophes.
Talking to the FE on Wednesday, the economists said the country's insurance sector needs to be revitalised to remove this big gap.
The latest research conducted by London-based Lloyd's and the Centre for Economics and Business Research (CEBR) shows that Bangladesh, which has the highest expected annual loss from natural disasters, is the most underinsured country.
The country also has the largest insurance gap relative to GDP at 2.1 per cent.
Bangladesh is followed by Indonesia at 1.4 per cent of GDP and the Philippines at 1.3 per cent.
Commenting on the issue, Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh, said this is an undesired situation.
"Our insurance sector has been in disarray for a long and it cannot keep pace with our growing economy," he said.
"We need to make this sector organised to improve the insurance coverage situation because such a poor rate of underinsurance may pose threat to the growth in future," he added.
The country needs a strong regulatory body for this sector, he said, adding that a vibrant insurance sector would help to improve the insurance coverage situation.
Dr Mansur said the people have not much confidence in the insurance sector and that is why the coverage is not increasing.
Dr Khondker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), said the country's economic opportunity is growing but the insurance sector can't keep pace with that.
"Public perception about the insurance sector should be changed. Our banking sector is more or less organised but in comparison to that the insurance sector is in a bad shape," he said.
Dr Moazzem said since the insurance sector is not strong in the country, it fails to match with the rate of the economic return.
"So, in terms of asset-based pricing, the coverage is very poor," he added.
The crop sector is not at all insured and the farmers are in a vulnerable situation in the face of natural disaster, he said, adding this needs to be addressed properly to narrow the huge insurance gap.
The Lloyd research said Bangladesh leads the developing nations, which have the biggest gap, in terms of under penetration, followed by India, Vietnam, the Philippines, Indonesia, Egypt and Nigeria, each of which has an insurance penetration rate of less than 1.0 per cent, the report said.
The average insurance penetration rate in developed nations is twice as high as the average in emerging, or lower-income countries, which account for almost all (US$ 160 billion) of the global insurance protection gap.
Countries with more wealth stand to lose more in pure financial terms. China is the country with the highest insurance gap expressed in dollar values (US$76bn) due to the size of its economy and the fact that its insurance market is still developing, the research said.
Insurance levels are the highest in real estate with an industrial insurance penetration rate of 0.74 per cent.
This is followed by transportation and storage (0.60 per cent) and agriculture, forestry and fishing (0.60 per cent each).
The lowest insurance levels are in the manufacturing sector at just 0.17 per cent, according to the report.
[email protected]