Are we prepared for life's changing cycles and unforeseen situations? The answer is no. Less than 1.0 per cent of the population of the country is insured. Insurance penetration has been declining for the past several years, even though the country's major economic indicators have been growing steadily for over a decade now.
Insurance penetration, life and non-life combined, stood at 0.72 per cent in 2015, down from 1.13 per cent in 2010, according to Swiss Re (a global reinsurance company). The penetration rate has continued to slide down since 2010. The rate was 1.02 per cent in 2011, 0.95 per cent in 2012, 0.85 per cent in 2013 and 0.70 per cent in 2014.
Globally, insurance penetration rate is 3.8 per cent, according to the Organization for Economic Cooperation and Development (OECD).
The penetration rate is, however, much higher in other South Asian countries. Last year, the rate was 3.4 per cent in India and 1.06 per cent in Sri Lanka.
Contribution of the insurance sector to the economy of Bangladesh is still below 1.0 per cent. On the other hand, Insurance Development and Regulatory Authority (IDRA) claims the total insurance premium to be 0.90 per cent of the country's gross domestic product (GDP). A total of 77 insurance companies are operating in the country, of which, 46 are non-life and 31 life insurers, including state-owned.
There is a huge untapped insurance market in the country. A lack of awareness among the people about insurance is a major reason behind the poor premium growth. The insurance companies, on the other hand, tend to do business in the traditional fashion and hardly invest in research and development to tap new business from the hugely unexplored sectors.
Industry insiders blame a number of reasons for poor insurance business in the country, such as saturated market, falling private investment, declining premium income from multinational companies, no effort to bring untapped sectors into insurance and poor claim settlement records by insurers.
It is interesting to note that international insurance companies, operating in the country, deal with traditional products but internationally, they run 200 products.
The Insurance Development and Regulatory Authority (IDRA) and the Bangladesh insurance association (BIA) should come forward vigorously to develop new products in order to bring more people into the sector. Measures should be taken to garner public confidence through establishing a sound insurance structure.
The writer is Deputy Secretary, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
harun.bkmea@gmail.com