Pandemic hits insurers hard

The ongoing pandemic has hit every sector, including the insurance, hard. The entire activities of insurance revolve around premium income. High premium income means high growth rate. From 2010 to 2019, the country's insurance sector showed on an average 9.11 per cent growth in premium income. In 2019 aggregate premium income was Tk. 143.18 billion out of which life sector contributes Tk. 95.99 billion and non-life Tk. 44.18 billion and overall growth was 8.65 per cent.
In 2020, the scenario is different than that of 2019 as premium income fell to Tk. 138.21 billion (unaudited data), down by 3.47 per cent than 2019.
If the growth were same as previous year the total income would be Tk. 155.57 billion. The insurers in fact lost nearly Tk. 17.36 billion of premium earnings due to the pandemic. Money adding to the economy in the form of premiums has huge impact as it rolling for long time compare to other financial means.
Pandemic not only has caused damage to premium income but also has affected other areas. Commission is the only source of income of agents that earns through selling policy. Insurers' activities were totally stopped during the month of May to June of 2020. Their income had fallen to zero during this period. Some insurers curtailed workforce because of their inability to pay them. Overall excess management expenses also have surged.
Due to economic downturn, the commercial banks have cut interest rates that have been slowing down the funds' growth. Subsequently, it would affect the policyholder's bonuses and dividend to shareholders.
However, vaccination programme around the globe has raised the hope of normalisation of economic activities. Global pandemic ruins the world economy and new variants still raises new concerns. In 2019 worlds' total GDP was about 87.55 trillion dollar. According to International Monetary Fund world lost 3.5 per cent of GDP last year due to pandemic. The mammoth size shows the plight of the world economy. Bangladesh is not out of the global crisis, it maintained fastest growth in GDP in last few years.
In the post pandemic situation, the world would enter in new economy. New business model would replace the old one. Pandemic is the wakeup call for the insurance industry also in many ways.
It demonstrates how to survive in the worst case situation, the necessity of contingency plan, effective marketing strategy, and business mix and above all the uses of information technology.
Therefore to stay strong in adverse situation and to grow constantly insurer must diagnosis their problem properly including following.
• Some insurers are fundamentally strong and established a strong IT foundation for long-term success but majority of the insurers are so poor in integrating technology to their ecosystem. Out of 163 million people (World Bank) 112 million (Source BTRC) people using internet. Rising digital population demand IT based services. A digital ecosystem is cost effective, efficient and popular because it accommodates workforce, sales force and customers under single platform. For the long term success insurer must invest heavily on information technology.
• Policyholder protection and their satisfaction should be the main focus of the insurers. Protecting interest of the policyholders is the important challenges which have long been neglected by many insurers. If it continues policyholder will turn way form the insurance in future. In a bid to earn policyholders satisfaction and protect their right Insurer must change their philosophy from traditional approach to customers need based approach.
• Importing new skills and expertise should be high on the strategic agenda for the insurers. The combination of the right talent and powerful technology will enable insurers to cope up with the challenges in coming years.
• Compliance is another field which is not accepted by the many insures wholeheartedly. Compliance ensures sustainability of insurer and ensures proper treatment to the stakeholders. A strong 'Compliance Program' can ensure the better compliance among insurers.
Insurance is a novel profession as it set cushion against the risk and compensate in the event of loss or damage. Spreading true values of insurance to the masses is the challenges. A strong insurer is blessing for economy as it saves many people becoming poor. Pandemic creates a worst case situation when insures definitely losses their business but learns a life lesson. Technology, talent, innovation, customers satisfaction and compliance are key variables will shape the insurers' fate and survival ability in coming years. Faster they acknowledge better their success.

(Md. Abu Mahmud is an officer at the IDRA can be reached at: [email protected])