The dynamics of Bangladesh insurance market

Although Bangladesh insurance market is rather small, considering that current penetration rate is low at only 1.0 per cent, there remains an immense potential for future expansion. The future expansion of Bangladesh insurance market and increase of insurance penetration in the country lies in tapping the hitherto untapped segments of the market - personal lines business in particular which has remained neglected so far. Health Insurance has yet to take off in the way it has in our neighboring countries. So is the case of micro insurance. Non-traditional insurance is needed to be developed and marketed. Conducting insurance business in the true spirit of professionalism, bringing in modern management and sales techniques and new product developments are keys to the future growth and progress of life and non- life insurance in the country.  
The growth of the country's economy, in line with the growth in south Asian countries will also provide an impetus to the insurance sector by creating new business opportunities. However, this requires sustained efforts by the insurance industry as a whole, apart from individual insurers introducing new products and improving their services.
Growth :
The growth of insurance  premium income in 2012 was 5.59 percent. The combined premium income underwritten by public and private sectors stood at Tk 86,651 million in 2012.
GDP growth in Bangladesh has been hovering around 6 per cent during the last few years.  However the insurance industry growth have been double digit during the years 2007 to 2010, although this somewhat slowed down during the last two years. The comparative premium position during the last seven years has been as follows:

Number of insurers and market share :
Insurance market in Bangladesh remains fragmented and extremely competitive due to existence and operation of a large number of companies, incommensurate with the size of the market. There are 43 non-life and 17 life insurers in the private sector, in addition to the two public sector Corporations. Recently, the Government has decided to issue licenses to 9 life and 2 non-life insurance companies. None of the Insurance companies, specially in the non-life sector has a large market share. The market share of the largest non-life insurance company is 13.59%. The top 7 private sector insurers collectively account for a market share of 46.54% in the non-life sector.
Insurance penetration :
However, the rate of Insurance penetration (Premium as percentage of GDP) remains stagnant at about 1% as observed from the last 6 years figures:

Underwriting Results
Bangladesh Insurance market underwriting results have been profitable as can be observed from the market loss ratios for the last 5 years as under:

Key drivers :
The key drivers for growth of Insurance, namely Economic Growth , Per capita income growth, Investments in infrastructure, growing Population, segment of young Population, existence of compulsory insurance requirement, regulatory environment - all exist, but need to be bolstered.
It is very much evident that large segments of population and insurable interests have not been brought under insurance coverage. The non-life insurance industry is virtually putting sole reliance on commercial and industrial lines of business, to the extent of possibly 80 to 90% of market premium.  Insurance of personal lines business has remained weak mainly due to negative perception of the public at large of the insurance industry as a whole.
Even for industrial and commercial lines of insurance, business potentials have not been fully explored and tapped. Evidently, there is customer dissatisfaction over pricing of insurance. Bangladesh still follows a system whereby premium rates are prescribed by mandatory tariffs. While the system of tariff has been dispensed with in most of the countries of the world. Perhaps it is still not the time to do so in our country considering the size of the market and not so good financial strength of the existing insurers. However, the system of tariff does not mean that Premium rates should be pegged at levels not commensurate with the loss experience. Therefore the tariff rates require to be periodically reviewed and scientifically adjusted to give a fair deal to the clients.
Challenges of globalisation:
The wind of globalization of trade and commerce has been blowing on all over the world. Barriers of trade and commerce from one country to another will be relaxed. It is undoubtedly a challenging task for the insurance industry of the country. Insurance companies from advanced countries will try to enter our market to sell insurance policies both life and non-life to the public. To face the challenge, our vision and temperament have to be changed, innovative services have to be introduced, the highest standard of professionalism has to be developed, Government rules and regulations have to be suitably amended and enforced and market has to be highly disciplined. Only then can our insurance industry compete efficiently with foreign companies in the domestic market and provide state of the art insurance services to world insurance markets as well. And in the case we can move from strength to strength in the free and unfettered market of the century.
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The writer is secretary general of Bangladesh Insurance Association. He can be reached at: [email protected]