"Stricter compliance and transparency in claim settlements are essential"

In modern-day living insurance coverage, life or otherwise, is an important issue. The growth of life insurance for reasons of lack of awareness and trust deficit has been well below the potential. Mr. M. J. Azim, Managing Director and CEO of Pragati Life Insurance in an interview with The Financial Express (FE) discussed the issues involving the country's insurance industry in details. Following are the excerpts:

FE: Bangladesh's economy is growing and the middle class is expanding. Yet, life insurance penetration remains low. Why is that?

M. J. Azim: That's a good question. Despite economic progress, several challenges are holding back life insurance growth. Many people simply aren't aware of its benefits or don't see it as a priority. There's also a lingering trust issue - non payment and long delay in claim payment have made some hesitant to invest in insurance. Additionally, many traditional products don't cater to the modern consumer's needs. And, of course, limited disposable income means people prioritize daily expenses over long-term financial security. Finally, lack of professionals in distribution channel and company operations have caused failure to achieve required premium.

FE: How much of this low penetration is due to trust issues, and how can insurers rebuild public confidence?

M. J. Azim: Trust is a major factor. People need to believe that their claims will be settled timely, fairly and hassle free. To regain confidence, we must ensure transparency in the claims process and focus on faster settlements. Strong corporate governance is key - we must follow strict regulatory standards and prove our commitment to ethical business practices. Educating customers about insurance benefits and appropriate use of technology to make processes more transparent will also help rebuild trust. Above all, excellent customer service, prompt claim settlement and digitization in all spheres can reassure policyholders that they are valued.

FE: Has digital financial services and mobile banking helped expand life insurance coverage? If not, what barriers remain?

M. J. Azim: Digital financial services have certainly made insurance more accessible, but some barriers still exist. Many potential customers lack digital literacy, making it difficult for them to navigate mobile-based insurance platforms. Integration between mobile banking and insurance services also needs to improve. Regulatory constraints can slow down innovation in digital insurance offerings. And trust issues persist-people are sometimes hesitant to purchase policies online. To overcome these hurdles, insurers, mobile banking providers and regulators need to collaborate more closely.

FE: What role do you see the Bancassurance model playing in expanding rural coverage?

M. J. Azim: Bancassurance can be a game-changer in rural areas. Banks already have a strong presence in these communities, so we can leverage their networks to distribute insurance more effectively. Simple, affordable products tailored to rural customers' needs can make a big difference. Using banking channels for premium payments and claim settlement makes transactions more convenient. Plus, banks are well-trusted institutions, which can help increase confidence in insurance.

FE : With inflation remaining high, are policyholders struggling to pay their premiums?

M. J. Azim: Yes, inflation is affecting policyholders, especially those from middle- and low-income backgrounds. We've seen an increase in policy lapses and decrease in new policy sale because people are struggling to keep up with premium payments. Many are shifting to lower-premium policies as more affordable alternatives.

FE : Do you think inflation has made life insurance less attractive for consumers who are prioritizing immediate expenses over long-term financial planning?

M. J. Azim: Inflation has definitely made people rethink their financial priorities. When faced with rising costs for essentials, long-term financial planning often takes a back seat. However, it's important to change this perception. Life insurance should be seen as a financial protection tool rather than an extra expense.

FE: What key reforms does the life insurance industry need to accelerate growth?

M. J. Azim: Several reforms can drive growth. Strengthening consumer protection laws and ensuring efficient claim settlements will build trust. We also need more product innovation-insurance solutions should be tailored to modern financial needs. Digital transformation is crucial to making insurance more accessible. Educated & skilled professionals can accelerate growth. Finally, Exemption of VAT on Health & Accident insurance can increase market size.

FE: What steps should the Insurance Development & Regulatory Authority (IDRA) take to strengthen governance and consumer protection?

M. J. Azim: IDRA plays a critical role in shaping the industry. Stricter compliance and transparency in claim settlements are essential. Regulatory frameworks should also support digital insurance initiatives, enabling more innovation. Consumer education programs must be prioritized to increase awareness and understanding. Encouraging fair competition among insurers will also drive better products and services. Strict enforcement of the Insurance Act 2010 and the rules and regulations framed under it, along with punishments for violators, is a must.

FE: Bangladesh is transitioning to a middle-income economy. How do you see the life insurance industry evolving over the next five years?

M. J. Azim: The industry is set to grow significantly. As economy grows & incomes rise, more people will be able to afford insurance. We expect increased demand for personalized and digital insurance solutions. Bancassurance and digital insurance platform will continue to expand. More focus will also be placed on health, child education and retirement-oriented insurance products, reflecting changing consumer priorities.

FE: How is technology, such as AI and big data, shaping the future of life insurance in Bangladesh?

M. J. Azim: Technology is changing the life insurance industry in Bangladesh in many ways. AI helps insurance companies assess risks more accurately, making policies more affordable and fair. AI & Big data helps detect fraud and speeds up the claim process, reducing delays. Digital platforms and mobile apps make it easier for people, especially in remote areas, to buy insurance. Online policy issuance and quick claim settlements also improve customer experience, making life insurance more simple, transparent, and accessible for everyone.

FE: Given the rising demand for Islamic financial products, is there potential for more Takaful (Shariah-compliant) life insurance options?

M. J. Azim: Absolutely. The demand for Takaful products is growing and we see great potential in expanding this market. Developing Shariah-compliant policies that cater to customer needs is crucial. At the same time, educating consumers about Islamic insurance principles will help build awareness. Collaborating with Islamic financial institutions can also enhance distribution and accessibility.

FE: Finally, what are the biggest risks and challenges facing the life insurance industry in the coming years?

M. J. Azim: The biggest challenges include economic and political instability which affect affordability as well as weak regulation which can hinder business growth. Trust remains a key issue, requiring insurers to continuously build credibility. Rapid technological advancements demand that insurers adapt quickly to stay competitive. Additionally, unethical competition among numerous existing players and the growing competition from alternative financial products highlight the need for continuous innovation to remain relevant.

FE: Before we wrap up, what message do you have for potential policyholders?

M. J. Azim: My message is simple: life insurance is not just an investment; it's a way to protect your loved ones and secure their future. Start planning early, choose a good insurance company and policy that fits your needs and make financial security a priority. At Pragati Life Insurance, we're committed to making this process easy, transparent and beneficial for everyone.