Adeeba Rahman Despite having expansion of Bangladesh's economy, its insurance sector still remains considerably underdeveloped.
The insurance penetration ratio in Bangladesh remains stuck at only 0.5 per cent, which is much lower than that of other neighbouring countries like India with 4.0 per cent, Sri Lanka 1.2 per cent and Pakistan 0.8 per cent.
In an exclusive interview with The Financial Express (FE), First Vice-President of the Bangladesh Insurance Association (BIA), Adeeba Rahman, has attributed such a sorry state of insurance penetration to some factors including a large extent of trust deficit among the people mainly due to misconducts by some insurers, resulting in a widespread skepticism about the entire sector.
"Apart from the erosion of trust, inadequate financial literacy and people's cultural tendency to prioritise savings for financial security and shortage of skilled professionals are also taking a toll on the growth of Bangladesh's insurance industry," said Ms. Rahman, who is also a sponsor director of the Delta Life Insurance Company.
The BIA, the apex body of 80-privately-owned insurance companies in Bangladesh, plays a pivotal role in shaping policies, advocating reforms, and lobbying for a regulatory environment that supports the sector's growth, thus protecting policyholders' interest, she added.
Ms Rahman has held some other 'chronic issues' like liquidity crunch in some insurance companies, high rate of policy lapses, poor investment practices and lack of financial literacy among the public about the industry also responsible for the situation.
To restore people's trust and promote sustainable growth, Ms. Rahman stressed the need for bringing about a series of urgent reforms in the country's insurance sector.
To name a few, measures should be taken to ensure insurers' transparency and accountability, especially in respect of their operations and settlement of insurance claims, she stated.
Besides, adoption of customer-centric products and avoidance of mis-selling are also equally important.
"Insurance companies have to have better understanding about their customers' needs," she said.
"Offering flexible and customizable products, like policies with adjustable premiums or payment options, could make it easier for the people to keep their coverage active." she said.
Having effective communication skills are a must for the insurers, Ms. Rahman said.
"Insurers must engage proactively with policyholders -- sending timely reminders about renewals, educating them about policy benefits, and providing necessary supports," she said.
The BIA first vice-president said financial agents also need proper training so that they are able to recommend products on the basis of clients' needs, not just for commission incentives.
"A personal touch -- whether through customized business illustrations before purchase, attentive customer service, or diligent follow-ups -- can help keep policyholders engaged and dramatically reduce lapse rates," she said.
Ensuring proper strategies and governance concerning investment decisions are considered other crucial areas for the insurers, Ms Rahman observed. Poor investment decisions have undermined the financial health of some insurers, she added.
"To ensure financial stability, insurance companies must prioritise structured investment governance aligned with their risk appetite and liability profiles," Ms Rahman said.
A substantial amount of investment is required in development of human capital, especially for specialised training programmes and hiring qualified actuaries and investment professionals, she explained.
"We believe that digital innovation will be a game changer, making insurance more accessible, transparent, and customer-friendly," Ms. Rahman said.
jasimharoon@yahoo.com
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