Insurance policies need to be gain-based for expansion of coverage 

At present, the insurance sector is very negligible in size, in the context of the Bangladesh economy and the size of its GDP. Since 2016, the country's GDP growth rate has been 7.1 to 7 percent. Other economic indicators have also risen. But compared to that development, the contribution of the insurance sector is very poor. 

The insurance sector contributes 9.6 percent to GDP growth globally. On the other hand, the number is 0.57 percent in Bangladesh. Even ten years ago, this sector's contribution was 0.9 percent. 

Although the contribution has not decreased remarkably, the sector has failed to flourish compared to the size of Bangladesh's economy. 

If we look at the scenario in neighbouring nations, we find that the contribution of the insurance sector is 3.69 percent in India, 5.29 percent in Thailand, 4.57 percent in China and 2.36 percent in Indonesia. Bangladesh is definitely lagging behind its neighbouring countries. 

In the developed countries, a minimum of eight percent of their population are brought under insurance coverage, while in Bangladesh, the coverage is less than eight percent. Moreover, per capita insurance expenditure in Bangladesh is lower than other Asian countries. Last year, per capita expenditure for a new life insurance was only Tk150. If we consider the amount in Bangladeshi currency, it was Tk51,928 in Singapore and Tk3,693 in Malaysia. The statistics show that insurance coverage in Bangladesh is still very limited. 

Coverage of insurance is one of the parameters to determine whether a country is developed or underdeveloped. In many European countries most of the jobs are secured by insurance. 

For economic development, we should put more emphasis on the insurance sector. Then the contribution of insurance to GDP will increase, so will economic growth. 

Unfortunately, product diversity in the insurance sector is poor. There is no credit insurance against bank loans in the country. Majority of the buildings and purchased vehicles are still out of insurance coverage. Although, recently the Insurance Development and Regulatory Authority of Bangladesh (Idra) has made first party insurance for new cars mandatory, Idra needs to implement this decision effectively.

With nominal premium, students of school, college and universities can be brought under insurance coverage. But the culture is not developed here. Fishermen have no insurance facilities. But some fishing boats are brought under insurance coverage. Still a major portion of garments units and workers are left out of the umbrella. Despite huge health risks, construction workers are deprived of insurance facilities. Often crops are brought under the coverage, but we have failed to facilitate the farmers with insurance benefits. 

Public transportation users facing accident risks are out of the coverage. In contrast, insurance for passengers is a popular practice globally. For example, in many developed countries, passengers of Uber are brought under insurance coverage soon after they start trips. There is no such facility in Bangladesh. In many foreign countries, stock market investors are also brought under insurance coverage. 

There is no gain-based insurance policy in Bangladesh. Interest against deposit is a benefit for a bank client. The insurance companies could facilitate their clients with such benefits by utilising their funds.

Bangladesh has no giant insurance companies. The existing entities, lacking a standard amount of paid activators, are not very capable of doing business. Consequently, the government needs to get insurance support from foreign-based giants during implementation of mega construction projects. 

However, the government has planned for increasing the number of paid activators. I strongly suggest implementing this plan immediately. Because, every insurance company needs to grow on a solid foundation. 

As far as I know, at least 30 percent of life funds must be kept at the government treasury. But many companies fail to comply with this provision. As a consequence, when the fund matures, weak companies cannot entertain insurance claims. The good practice is that the authorities will settle the claims as soon as possible. 

Moreover, marketing executives of the companies often try to secure clients giving false promises. Facing this reality, clients become demotivated. 

There are allegations that some marketing officers who sell insurance policy at the grassroots, embezzle clients' money. The affected clients share such bad experiences with others, which ultimately discourage expansion of insurance coverage. Insurance executives should get out of such bad practices.

Why should people have insurance? We have friends in our good time. But in general, we seldom have friends in our difficult times. Insurance is a friend of a bad time. 

The persistent inflation, for sure, would cut a major portion of the interest on bank deposits. There would be limited gains if the interest rate is low. On the other hand, if you buy an insurance policy worth around Tk5 lakh to 10 lakh, you would withdraw a handsome amount of compensation. This is the benefit of insurance.  

Another question that comes from people: While a bank client gets benefits (interest) by money deposit, why should he or she buy insurance policy? The answer could be provided through diversification of insurance products. Rather than risk-based coverage, we could make gain-based or capital-based solutions popular to attract clients. Recently, Delta Life Insurance has introduced such insurance. 

Why do our insurance products lack diversity? Because, there is scarcity of actuary who design the insurance offer. There are only three actuaries in Bangladesh. The number of skilled professionals who could innovate insurance products is also limited here.   

As the sector has been neglected, insurance companies cannot bring promising people on board. For example, if anyone asks a fresh graduate about his job choice between a bank and insurance company, he or she will certainly choose a bank. Insurance companies cannot offer good salaries at present. I would rather say that the insurance sector fails to make a profit because of good manpower shortage, and low profit earning hampers recruitment of good manpower. In such a situation, government's intervention is crucial. 

We need to consider that the service income is also a part of GDP. When people buy premium, it would certainly help increase GDP growth. It would save policy buyers from being bankrupt. In the coronavirus pandemic, many small and medium businesses incurred huge losses while many private service providers lost their jobs. If there was income insurance, affected people could get compensation.  

Despite many limitations, the insurance sector is still very promising. Idra, Bangladesh Insurance Association and other related organisations should address the limitations. Effective policy formation is also needed to increase the sector's contribution to at least four percent to the GDP. The positive outcome would be remarkable for economic growth. The government is trying to boost the insurance sector. We need a comprehensive initiative with a little more incentives, for a bright future of this sector. 

Md Mizanur Rahman is the chairman of Department of Marketing, Dhaka University.