A top executive of a leading insurance company has demanded that mandatory reinsurance with state-owned Sadharan Bima Corporation (SBC) be relaxed in order to ensure competitive and professional reinsurance services and support by the non-life insurance companies in Bangladesh.
"It is mandatory by law for every non-life insurance company to place at least 50 per cent of its reinsurance requirement with SBC. Moreover there is acute shortage of well qualified professionals in SBC. Hence non-life insurance companies have limited flexibility to negotiate with the reinsurance terms," Managing Director & CEO of Green Delta Insurance Company Ltd (GDIC) Farzana Chowdhury told The Financial Express in an interview recently.
She further said SBC enjoys dual authority since it is the reinsurer of the non-life insurance companies and at the same time competitor for business in private sector.
"This dual role of SBC creates an uneven field towards a competitive environment. Moreover, this unique system does not prevail in any other country," Farzana said.
She said SBC may be converted into either as National Reinsurance Corporation or as an insurance company to underwrite public sector business only.
Farzana also said that the insurance regulator-IDRA--be equipped with adequate manpower with knowledge of insurance to monitor insurance activities of the private sector business from time to time.
"IDRA should be more strict in reducing any unhealthy practice in the market and penalty/reward system should be there for the insurance companies. Yearly auditing of the private sector companies should be done by IDRA in order to combat in-discipline, corruption and unethical competition."
Here is the full text of the interview.
Financial Express (FE): How do you assess your esteemed company's contribution for the development of country's insurance sector? What are the new and innovative market products of GDIC?
Farzana Chowdhury: Green Delta Insurance Company is one of the first generation non-life insurance companies of Bangladesh in private sector. It has been the pioneer in many fields of non-life insurance. Our founder Managing Director & CEO Mr. Nasir A. Choudhury, who is currently the Advisor, acted as catalyst in the amendment of national policy of insurance. He played a vital and dynamic role for enactment of Insurance Act, 2010 by replacing Insurance Act, 1938. He also took personal initiatives to convince the Govt. to bring insurance sector under the administrative control of Ministry of Finance from Ministry of Commerce.
GDIC is the first non-life insurance company in private sector to Underwrite Aviation Insurance, Industrial-All-Risk Insurance, Comprehensive Machinery Insurance etc. With appropriate and adequate re-insurance support/arrangement, GDIC faced no problem to settle claim of whatever amount it be.
There is a large contingent of well qualified and professionals to manage insurance, re-insurance, claim settlement activities with utmost satisfaction of the insuring community. With this motto, Green Delta earned great confidence of industrial and commercial groups and also individuals to buy insurance products from Green Delta with wider cover at minimum cost.
GDIC pioneered many innovative insurance products like Bank Locker insurance, Micro health insurance for the rural people named 'Niramoy', Health insurance for the garments workers, crop insurance etc. Crop insurance was not available in the private sector of the insurance industry before.
We launched a comprehensive insurance scheme for the first time in Bangladesh namely "Nibedita" for the women of Bangladesh. In Bangladesh, 52% of the population is women and upon realising their need, we conducted an extensive survey before bringing this product in the market and already it generated a positive buzz.
We also launched Personal Accident insurance policy for the University students at a very minimum cost. Basically, we are working hard to build strong awareness regarding the concept of insurance. We are taking up retail focused approaches keeping the lack of awareness of the general people in mind. This is the first time a private non life insurance company is setting a strong foot in the retail market. We have taken this initiative as this is still a much untapped market and a lot is yet to be explored.
FE: What more policy supports from government are needed to develop our insurance sector?
Farzana Chowdhury: It is mandatory by law for every non-life insurance company to place at least 50 per cent of its reinsurance requirement with SBC. Moreover there is acute shortage of well qualified professionals in SBC. Hence Non-life insurance companies have limited flexibility to negotiate with the reinsurance terms.
SBC has got dual function; Reinsurer of the non-life insurance companies and at the same time competitor for business in private sector. This dual role of SBC creates an uneven field towards a competitive environment. Moreover, this unique system does not prevail in any other country.
Every year the private insurance companies are entitled to get a certain percentage of the profit from SBC. Although this was a good initiative taken back then but it also instigated few companies to get into this business just to enjoy the percentage of the profit at the end of each year. These companies barley do any business or have any activities.
Previously we had a product called Bancassurance. But it has been stopped due to a decision of the Bangladesh Bank. Restarting its operation will be a great achievement for the insurance industry.
For banking sector, Central Bank plays important role to bring discipline and eradicate corruption from both Govt. and private Banks and other financial institutions but for insurance sector we are yet to experience the similar standard.
There are hardly any institutional facilities for the youth of Bangladesh to obtain degree/associate/fellow ship in insurance like India and Malaysia. In India, National Insurance Academy of Pune is a full-fledged institution for higher education and training in insurance field. Even this institution now offers/awards MBA Degree in insurance. This created Indian nationals employment opportunity in India and in other countries specially in middle-East.
So basically this industry lacks glamour and therefore it doesn't attract the youth. This sector didn't flourish like the banking sector. These days usually all the fresh graduates want to start their career from a well reputed local or multinational banks or telcos. Government needs to take up initiatives to attract the youth of our nation to the insurance sector.
In order to popularise insurance and qualitative services to the insuring community, the government may take up following steps:
* Mandatory reinsurance with SBC be relaxed in order to get competitive and professional reinsurance services and support by the non-life insurance companies in Bangladesh.
* SBC may be converted into either as National Reinsurance Corporation to underwrite public sector business only.
* IDRA be equipped with adequate manpower with knowledge of insurance to monitor insurance activities of the private sector business from time to time.
* IDRA should be more strict in reducing any unhealthy practice in the market and penalty/reward system should be there for the insurance companies. Yearly auditing of the private sector companies should be done by IDRA in order to combat in-discipline, corruption and unethical competition.
* Like Central Bank there should be appropriate guide line for controlling, supervising the activities of private sector insurance companies.
* A national insurance institute be established for educating young boys and girls and training of in-service people under strict control of IDRA.
* Insurance be made a subject in MBA courses of all private & public university curriculum.
FE: How do you tackle the problems like absence of skilled manpower in insurance sector?
Farzana Chowdhury: Absence of skilled manpower in insurance sector is indeed a big problem. So far Green Delta is concerned there is no shortage of skilled and professional manpower. Giving top most priority for the development of the human resources every year we send our promising employees to various institutions at home and abroad for obtaining training and acquiring knowledge in different fields of insurance. We also organize in-house training program for our employees. We give special emphasis for technological solution of every problem with the help of IT and MIS Department.
FE: How do you assess the IDRA decision on allowing foreign insurance companies in Bangladesh?
Farzana Chowdhury: We look at this decision of IDRA very positively. Foreign Insurance Companies can help to set better examples for the sector. We believe the scenario will be improved through experience sharing and best practices. With the set up of foreign insurance companies, technological advancement will be made. IT sector will be more developed. There will be employment generation and the industry will be more glamorous. If we look at the history of banking industry, after setting up of foreign banks in our country, the industry developed more rapidly. Local banks knew who to look up to. Eventually this brought about a positive change. I believe the same will happen for insurance industry as well. Â
On the other hand, there are some disadvantages too. It will be hardly possible for the local companies to compete with foreign insurance companies in procuring insurance business of multinational projects. Bangladesh insurance market is controlled by local tariff. Foreign companies, if set up, will definitely try to impose tariff provision as prevailed in their respective countries and even they will try to transfer the business from Bangladesh to foreign market. Needless to mention that local tariff provision of premium rates are comparatively higher than international insurance and reinsurance markets.
FE: Being the youngest MD of a big company, how do you compete with the competitors of Green Delta?
Farzana Chowdhury: Well, this is a quite a challenge for me. Being the youngest and also country's first female MD of an Insurance Company, I'm already facing a lot of challenges. But I love challenges. I always strive to go where no one has gone before. I always think of breaking barriers. I'm working to take the goodwill of GDIC to a new level through more standardized services, efficient customized products, state of the art technological solutions, prompt settlement of claims and innovation at work. We have been at the leading position in general insurance sector for few decades now. We want to grow with the industry and we want our competitors to grow with us as well. This year IFC joined hands with us as our equity partner and it was their first foreign direct investment in Bangladesh insurance sector. All these are strengthening us in the industry to do better every day. I'm trying my best to retain this glory and at the same time if possible take ourselves even higher.
FE: You may talk about any other issues you think important.
Farzana Chowdhury: We, at Green Delta, have taken initiatives to work for the youth and women of our country. We have separate products for these two segments. We are constantly pursuing to build strong awareness among the people regarding the significance of insurance. The youth of our country needs to be more interested in this sector. We have taken initiative for the same. We are an active member of United Nations Global Compact. I'm a member of their steering committee. We strictly follow their principles when it comes to Corporate Social Responsibility. Our association with UNGC has taken our CSR activities to a global standard. Our CSR approaches stress on Human Rights, Labor standards and Environment.
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