Lack of customers’ trust, Covid-19 put insurers in crisis
The number of insurance policyholders declined significantly over the last four years
Like many other sectors, insurance companies suffered a blow from the Covid-19 pandemic. However, the crisis for them began a couple years before the pandemic hit due to a lack of customers' trust which stemmed from irregularities committed by insurers.
According to the Insurance Development and Regulatory Authority (IDRA), 17.75 lakh people bought new policies across the country in 2018. In 2019, though, the number declined to 16.73 lakh; in 2020 it further dropped to 14.07 lakh. In 2021, it increased slightly to 14.95 lakh.
Sultana Akhter, a housewife in Chattogram, subscribed to a life insurance policy in 2019, but she could not pay the premium since July 2020 as her husband Majidul Anwar lost his job during the first phase of the Covid-19 lockdown. Consequently, her policy lapsed this year.
Sultana said, "I took out insurance thinking about the future of my children, but after my husband lost his job, it became impossible to maintain it. Currently, we can only manage to survive, but we cannot think of saving."
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In the last four years 52.85 lakh insurance policies have lapsed in the country.
Besides, many policyholders have complained that they did not get the maturity benefits they had been promised by the insurers.
Illius Khandaker, a journalist, said he paid over Tk60,000 in installments over five years under an insurance policy of American Life Insurance Company (later acquired by MetLife). He was supposed to get around Tk80,000 as maturity value, but he received only Tk50,000. When he asked the insurer why he had received less than his investment, the company gave no explanation.
Moreover, many policyholders complained that the insurance companies do not return customers' money on time.
Md Jalalul Azim, CEO of Pragati Life Insurance, said, "Image crisis is a big problem for the insurance sector. While IDRA and other agencies are trying to pull this sector out of this crisis, last year's incidents at Fareast Islami Life Insurance Limited and Delta Life Insurance Company Limited, two of the country's top companies, made it even more difficult."
The two aforementioned insurance providers did not pay any dividends to their policyholders last year.
Reliance Insurance Limited CEO Mohammad Khaled Mamun said, "In 2020 and 2021, there was only one challenge – Covid-19. The motor insurance business suffered the most at the time. In addition, many insurance companies were not compliant, which also had an effect on business. However, this would not have been the case if the IDRA guidelines had been followed properly."
Insurance sector hit hard by Covid-19
As the number of new insurance policyholders dropped, the number of lapsed policies dropped to 9.48 lakh in 2021, which had been 13.91 lakh in 2020.
The amount of premium submission in 2018 was Tk8,992 crore. In 2019 it increased to 9,589 crore, but in 2020 it came down to Tk9,501 crore, according to sources.
According to IDRA, there are 33 life insurance companies in the country. In 2020 and 2021, the rate of premium submission of almost every company has decreased.
The number of new policies of the leading company MetLife Insurance in 2019 was 2.05 lakh, which decreased to 1.42 lakh in 2021. Another company, Baira Life Insurance, had 2,160 new policyholders in 2019, but it was only 259 in 2021.
Sultan Ahmed, professor in the Department of Banking and Insurance at Chittagong University, told The Business Standard, "Although the importance of insurance is increasing day by day in the modern world, in Bangladesh it is going in an opposite direction."
"The number of insurance policies has naturally decreased during the Covid-19 pandemic. However, the lack of trust in the insurance companies has made the situation more difficult," he added.
Pragati Life Insurance CEO Md Jalalul Azim said, "The insurance sector did a little better in 2021 and the situation is expected to improve further in 2022. But we have to get out of the traditional way of selling our products and focus on digitisation to fare better in the market.
