Idra, insurers call for measures to narrow protection gap

Insurers, regulators, and experts emphasise the importance of addressing and narrowing the insurance protection gap through various measures, including improving insurance awareness, transparency, digitisation, affordability, accessibility, and product innovation.

They acknowledge that the fundamental challenges of the sector require engagement with stakeholders across the insurance ecosystem.

This was highlighted during a day-long conference titled "Reimagining Paradigm Shift in Bangladesh Insurance Industry – Bridging the Protection Gap." 

The conference was jointly organised by the Bangladesh Insurance Association (BIA) and the Birla Institute of Management and Technology (BIMTECH). 

Professional Advancement Bangladesh Ltd, a subsidiary of Green Delta Insurance, served as the knowledge partner for the event, which was chaired by BIA President Sheikh Kabir Hossain.

Mohammad Jainul Bari, chairman of the Insurance Development and Regulatory Authority (Idra), said that Bangladesh's insurance penetration remained low at 0.40 in 2022, despite the country's economic success.

However, he said the sector's gross premium income increased by 17% to Tk16,815 crore from Tk14,407 crore in the previous year.

According to him, the total insurance protection gap in Bangladesh stood at around Tk180 lakh crore, which is around five times the country's GDP. To combat this gap, Bari stressed the need for a collaborative effort among all stakeholders in the insurance ecosystem.

The insurance protection gap refers to the difference between the level of insurance coverage needed to protect against potential risks and the actual insurance coverage that is in place. For example, if a person's home is insured for Tk20 lakh but it would cost Tk30 lakh to rebuild it, then there is a protection gap of Tk10 lakh.

Bari highlighted several strategies that could help reduce the protection gap, including government interventions, customer-centric product design, digital adoption, effective distribution channels, raising public awareness, and enhancing the skills and capacity of insurers and regulators. 

Idra, as the regulator, is actively working on the systematic development of the insurance sector and formulating rule-based regulations such as solvency margin, modern risk-based supervision, Takaful, bancassurance, and corporate governance.

Sheikh Kabir Hossain noted that many buildings suffer significant damage due to fire incidents, and government support becomes necessary. However, if those buildings were insured, the affected parties would be naturally compensated. 

He called for the mandatory requirement of insurance in certain cases to mitigate such risks.

Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah emphasised that insurance can play a vital role in economic development through investments and savings. 

He stressed the need to build confidence in the sector to increase insurance penetration.

The conference featured four panel discussions with the participation of high-ranking officials and professionals from the insurance industry. It aimed to address the most critical issues, challenges, and opportunities in Bangladesh's insurance industry. 

Professor Dr Abhijit K Chattoraj, chairperson of BIMTECH, was also present at the event.