The biggest-ever insurance development project will kick off Wednesday as the earlier efforts to make the sector vibrant have signally failed.
The International Development Association (IDA) and the government are jointly funding Tk 6.32 billion to raise insurance coverage across the country.
"The objective is to raise insurance penetration through building confidence in policyholders," said Md Nayeb Ali Mondol, director of Bangladesh Insurance Sector Development Project.
"In all nations, insurance sector is a key financial sector but unfortunately it remained the poorest in Bangladesh," he noted.
Under the project, sources said, regulatory capacity will be strengthened and governance issues at the state-owned insurance companies be enhanced.
The state entities have long been performing much below their potential for lack of good governance and modernisation of services, they added.
The government made a new insurance act in 2010, replacing the age-old 1938 act for the overall development of the sector.
But many rules and regulations of the law are yet to be issued for the industry.
The government also enacted another act to establish the Insurance Development and Regulatory Authority (IDRA) to strengthen its supervisory function.
But eight years into its inception, the IDRA is yet to recruit its manpower as per the new organogram to supervise the sector.
However, the latest project aims to strengthen the institutional capacity of the regulator and state-owned insurance corporations.
It also targets to increase the coverage of insurance across the country, according to project manual.
The specific objective is to improve capacity and effectiveness of the regulator and Insurance Academy at Mohakhali in the capital.
It is expected that there would be around 22 million policyholders, both life and non-life, at the end of the project in December 2022.
The project will help upgrade the IDRA's supervisory function through improving its understanding of insurance core principles.
It will also help set up a research and statistical unit to collect data and update mortality and morbidity table.
Currently, Bangladesh has no morbidity table to assess the risks associated with the policyholders.
Some assume British table and some American to measure actuarial valuations.
The project will also help improve the IDRA's capacity to set up rules, regulations and guidelines to improve insurance products and market practices.
Bangladesh has no takaful-related rules and guidelines.
The project will help develop insurance channel like the bank assurance and set up claims management.
Project insiders argue that it will ensure improved protection of policyholders and the sector will be able to provide better financial services, greater opportunity for employment generation.
It will increase insurance coverage which ultimately helps families and individuals expand options for managing risks and avoid becoming destitute and falling into poverty when suffering a loss or retire.
The sponsoring ministry is the Financial Institutions Division and executive agency is the IDRA.
The IDA will fund Tk 5.13 billion and the government Tk 1.185 billion.
Sources said Tk 2.37 billion will be spent for improving capacity of the IDA and Insurance Academy while Tk 3.55 billion for modernising Sadharan Bima Corporation and Jiban Bima Corporation.
