Headache called lapse of policies

The insurance sector of Bangladesh, one of the key financial sub-sectors, is not contributing much to the country's GDP compared to that of other countries. In the world, the average contribution to GDP by the insurance sector is 7.0 per cent whereas it is merely 0.55 per cent in our country. So we need to look into it and find out ways to raise its contribution to the economy.

The National Insurance Policy-2014 prepared by the insurance regulator IDRA had a target to raise its contribution to GDP to 4.0 per cent by 2021. This remained still far away from reality.
Actually there are many challenges to meet the target or goals. One of the main reasons is poor density of insurance in the country. This is a country of nearly 170 million people, but only 10 per cent have life insurance policies. And of those who have insurance plans, a large number see their policies lapse.
Some 2.212 million life insurance policies were issued annually on an average by the country's life insurance companies during 2009-2017, but 78 per cent of these policies lapsed or became non-performing. This high rate of policy lapse is severely hampering growth of the life insurance sector.
The growth rate of total premium in the area of non-life insurance during 2009-2017 is 5.0 per cent. A report shows that the growth of premium income had been steadily declining during 2010 to 2014. After 2015, again it dropped in 2016 and 2017.
The report prepared by the IDRA also shows that there are 3.5 million vehicles while only 1.5 million vehicles are insured, meaning most vehicles are uninsured.
This indicates that we need to closely monitor the coverage of insurance and widen the scope of non-life insurance. According to the Road Transport Act 2018, the Liability Insurance of Motor Vehicles is not valid any more which will lead to a further fall in non-life insurance business.
To meet the challenges IDRA suggested deploying agents having SSC as minimum qualification and mandatory 72 hours' training. Seminars are being organised at divisional and district levels under a World Bank-funded project, namely BISDP, to raise public awareness. The insurance sector is being brought under full automation mandated by the WB-funded project.
Besides, steps are being taken to include insurance contents in the textbooks of secondary and higher secondary education.
IDRA has taken steps for speedy settlement of claims. Steps are being taken to implement the National Insurance Policy 2014. If all these steps are implemented, many problems in the insurance sector will be solved which may boost the people's confidence on the industry.
Policy lapse is the major issue because it is like cutting the young saplings right after planting them. Some 78 per cent lapse means the same amount of business is lost after procurement.
Government has a vision to turn Bangladesh into a developed country by 2041. For this, insurance companies need to be prepared. The contribution of insurance to the GDP needs to be raised to a large extent. The contribution can also be raised by introducing corporate agents, bancassurance and the suitable micro insurance (micro health, micro credit insurance).
New insurance products need to be introduced after removing the existing problems. Complete automation is required and fast claim settlement is also important. All stakeholders need to come together to take the sector forward in a bid to build a rich and developed Bangladesh.
The author is Director (Additional Charge) & Chief Faculty Member
at the Bangladesh Insurance Academy.

[email protected]