Mohammadi Khanam Some regulatory compulsions, if implemented diligently, will help a lot to change the complexion of country's neglected insurance sector.
"We need a disciplined and thriving insurance sector to spur the economy of our country, but without some regulatory compulsions, it is not possible to increase the depth of the present market," Mohammadi Khanam, chief executive officer of Prime Insurance Company Ltd told the FE recently.
She said proper implementation of Banker's Blanket Bond Policy, Bancassurance, earthquake insurance coverages with fire policy, health Insurance , Hajj & Umrah insurance policy are quite impossible without the mandatory directives from Bangladesh Bank, Finance Ministry and Insurance Development and Regulatory Authority (IDRA).
"Finance Minister AMA Muhith, however recently in a seminar assured us that the government will launch Bancassurance," the Prime Insurance CEO informed.
The national insurance policy of 2014, prepared by the government of Bangladesh has given importance to Bancassurance because it would broaden financial inclusion.
Bancassurance, a combination of banking services and insurance through an identical distribution channel or to a common client base, is generally conceptualized as selling of insurance products (associated with banking products and services) by banks and vice versa.
In India, Bancassurance is being widely used for quick penetration into the rural market to fulfill the regulatory requirements of rural insurance.
The prospect of this concept can be enormous in the country since the penetration rate of insurance in Bangladesh is too below compared to some other South-Asian countries.
In Bangladesh, only 4 out of 1000 persons avail life insurance protection.
Insurance market in Bangladesh seems to be almost saturated with 77 companies competing in the same market. Despite that major indicators of the economy have been growing steadily, insurance penetration in Bangladesh has remained significantly low. In 2015, overall insurance penetration, both life and non-life, came down to 0.72% from 1.13% recorded in 2010, according to leading global reinsurer Swiss Re.
This poor penetration implies a huge growth potential of insurance products in the country, where Bancassurance can be an easy vehicle to reach the target.
For banks, Bancassurance assures another window of profitability without increasing any capital or risk.
Authorized banks will have a competitive edge over its competitors. It will create opportunity for sophisticated and additional product with diversification. Through Bancassurance, bank will have a bigger customer life cycle and most importantly bank will have a low-cost fund.
On the other hand, insurance companies will have a faster and immediate distribution channel to achieve geographical reach within minimum time and cost.
Moreover, for insurance companies it acts as a tool for increasing their market penetration and premium turnover and for customer it acts as a bonanza in terms of reduced price, high quality products and delivery to doorsteps.
Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high.
Regarding Bankers Blanket Bond Policy, the Prime Insurance CEO said, the company launched the product in 2014 which covers all the financial risk as per the Bangladesh Bank requirement under one umbrella with wider coverages.
"Our BBB policy will also reduce the premium at least 30 per cent with compare to existing policies and four commercial banks have already adopted our policy," she said.
"If banks take BBB policy, the bankers will be comfortable for buying the additional risks from the insurer time to time as per requirement of cash handling/secured vault money. Moreover, we have a robust reinsurance support that has the capacity to handle any amount declared by banks," she said.
The BB has already issued a circular for financial risk insurance that has been mandatory for all banks.
"Banks even can take cyber crime and directors and officers liability, professional indemnity policy additionally along with BBB," the Prime Insursance chief executive said.
Regarding Hajj & Umrah and earthquake insurance policies, the Prime Insurance CEO said her company offers a very lucrative policies in both the areas but if the regulatory bodies do not issue mandatory directives in this regard, the outcome will not be up to the mark.
"For example, Prime Insurance offers a very attractive Hajj & Umrah policy, which is sharia based fully reinsured with abroad reinsurers, but the Hajj agencies are not cooperating us to broaden this facility," Mohammadi Khanam said adding both IDRA and Religious Affairs Ministry should consider this issue deeply so that the financial inclusion gets a thriving momentum.
Regarding the dual business, run by state-owned Sadharan Bima Corporation (SBC), the Prime Insurance CEO said it should be stopped for the welfare of the insurance industry in the country.
"It is not a level playing field when you allow a state-owned company to run both re-insurance and insurance business," Mohammadi Khanam said.
SBC now does a monopoly business under which private insurance companies are bound to place 50 per cent re-insurance business with the SBC whereas in the neighbouring countries, the state-owned entities retain only 5.0 per cent while 95 per cent is optional.
She also suggested that for the development of insurance industry, all the government bodies should change and modify the rules & regulation.
Prime Insurance Company Limited, a second generation private sector non-life insurance company enjoys a solid financial position underpinned by a prudent policy.
The company won First Prize from 17th ICAB National Award for best presented Annual Report 2016 and Third (3rd) Prize from 16th, 14th& 13th ICAB National Award for Best Presented Annual Report for 2015, 2013 & 2012 respectively.
The company also won Silver Award for Corporate Governance Excellence from ICSB National Award for the year 2016, 2014 & 2013, Certificate of Merit Award from South Asian Federation of Accountants (SAFA) for the year 2012, 2013 & 2015 and Certificate of Merit-2012 as the Best Corporate in General Insurance Sector by the Institute of Cost and Management Accountants of Bangladesh (ICMAB).
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