On the other hand, we observe a visible progress in industrialisation and infrastructural development. Our RMG sector, in particular, has posed great challenges to many competing countries in the world market. Alongside the sectors including agriculture, industry etc., the insurance industry has also grown extensively, but its contribution to the economy is not satisfactory at all. According to Bangladesh Economic Review (BER) 2024, the banking sector contributes 2.60 per cent to GDP while insurance industry's share is just 0.25 per cent. However, insurance sector has grown 5.31 per cent against 4.55 per cent of the banking sector as reported by BER, 2024. This growth can easily be magnified significantly if we adopt a new strategy of revenue growth. This is discussed here with hypothetical examples.
In the Non-life sector, there are currently 45 Companies operating in the private sector in addition to the state-owned Sadharan Bima Corporation (General Insurance Corporation). It is believable that despite many obstacles there is ample opportunity to make a positive contribution to the national economy by increasing the government's direct and indirect revenue from the insurance sector. It can be done with ease and simplicity if some minor changes are made in the existing laws and regulations. Some thoughts on growth strategy are presented below:
1. Every year a significant amount of reinsurance premium is repatriated from our country in terms hard-earned foreign currency. If such outflows could be reduced to some extent, the country will be benefitted. As a first step, we can reduce the Facultative Premium Outgo (because FAC is not obligatory, rather optional) on a trial and error basis for a good start-up. It may be possible with a newly designed idea/method. As a result of implementation of this proposed idea, the total sector as a whole, especially all the private Non-life companies have a chance to get benefitted. Though we are aware of such drainage of reinsurance premium, no initiative has yet been taken to bring some reinsurance premium from outside.
Let's demonstrate a hypothetical example - if 10 per cent Reinsurance premium outflow can be reduced and if 10 per cent of reinsurance premium can be brought from outside, then the country's one years' overall reinsurance premium outgo in foreign currency can be reduced by 20 per cent.
In this connection, an overview of specific financial data of Non-Life Insurance sector for 5 years (2018 to 2022) is presented in Table 1 & 2, to give an idea about the overall Reinsurance Premium outgo which includes the Facultative premium (to abroad in foreign currency) too.
2. We are so far confined to some traditional insurance products only like Fire, Marine, Motor etc. which are not in the wide choice-mix of many insurance seeking people. If we can create some opportunities for new and customer-friendly insurance products to kick off to a good start, the sector will be benefitted gradually and significantly.
3. There is no substitute for professional education and training to create skilled manpower and for that purpose, it is very important to implement mandatory professional education in the Insurance sector. Moreover, there must be logical as well as strict guidelines especially in the Private sector for recruiting, developing, delegating and posting of insurance professionals to improve the image of the sector.
4. Although the proposed ideas are mainly in Non-Life sector, there are innovative thoughts to work on Life sector as well if facilitated by enabling environment. None can deny that insurance offers financial guarantee for the risk either of Life or Non-life subject matter. Loss of human life is primarily emotional but the survivors very soon feel the problem of finance to face the crude reality. In that case, Life Insurance and/or Personal Accident Benefit Insurance, even Health & Hospitalisation Insurance can be the means to mitigate the crisis to some extent.
5. It is very urgent for the professionally qualified to create awareness among the people about insurance, insurance products, confidence building etc. We must remove the conventional fears in the minds of people about frauds and cheating of dishonest insurers. It is also necessary to build 'Insurance Social Bonding'. People's trust is the prime need for development of insurance industry.
6. Thoughts and ideas described above are not exhaustive at all. It is essential to follow a research approach to develop and diversify customer needs. We must understand the changing needs of people for new and attractive insurance products.
In fine, we can conclude that in modern times, every company has to maintain active Research and Development (R&D) wing. Without new ideas, methods and approaches, no company, be it insurance or not, can survive and grow because competitiveness is vital. Insightful analysis and actions can enhance the desired pace of business growth. Are we on this track?
Ahmed Faruk. faruk020261@gmail.com