Though insurance coverage cushions a person or business against financial shock, especially during crisis time, yet its penetration in Bangladesh is on the decline. Put simply, insurance penetration is measured as a percentage of total premiums collected to a country's gross domestic product (GDP), where the insurance premium is the amount of money an individual or a business must pay to obtain an insurance policy that covers the policyholder's investment, healthcare, life, home, etc.
According to an estimate, insurance penetration in the country came down to 0.40 per cent in 2022, from 0.55 per cent in 2018. That was undoubtedly low according to global standards. This poor rate of insurance penetration in the country is generally attributed to the public's lack of awareness about the importance of the service. But in many cases, it is also due to a lack of public trust in the service, which has to do with the poor performance of some companies or even fraudulent practice on the part of their agents when it comes to providing the proceeds to the policyholders. As a result, as some estimates hold, in the case of life insurance, the penetration has almost halved in the past decade. This is indeed ironical when the country boasts 81 insurance companies (35 life insurance and 46 non-life ones). Interestingly, with more than eight times the population of Bangladesh, India has only 57 insurance companies, while Malaysia with a trillion-dollar economy has only 17.
Evidently, Bangladesh has more insurance companies than it needs leading to undue competitions and performance anomalies. So, when all these negative aspects are factored into the estimation, it is not hard to understand the progressive decline of insurance penetration in the country. Oddly enough, even as penetration is dropping, premium earnings from both life and non-life insurance policies have, reportedly, been growing over the years.
As could be gathered, the report on the development came out at a recent presentation made before the financial institutions division of the finance ministry. There it was told that the premium growth was 10.71 per cent in 2018 and excepting a falling trend in the pandemic-stricken years, it again started to gather pace rising to a 9.56 per cent growth in 2021 followed by 10.6 per cent in 2022. Considering the continued negative growth on the country's insurance penetration front vis-à-vis the rising trend in premium growth though dichotomous, it becomes evident that the insurance industry is falling behind the GDP growth at a faster rate. Notably, the country's GDP, which stood at Tk29.5 trillion in the FY 2017-18 grew to Tk44.44 trillion in the FY23. The point is how to reduce the gap. The responsibility, of course, falls on the industry's regulatory body, the Insurance Development and Regulatory Authority (IDRA). Going by a recent report carried by this paper, it is good to learn that IDRA is actively pursuing to build the sector's positive image before the public. It is important at this point to identify the insurance companies involved in questionable dealings with clients and rid the industry of those bad elements. Given the IDRA data that compared to 2010 when life insurance penetration was 0.94 per cent, in 2021 it dropped to 0.5 per cent, it only points to the fact that public awareness of and trust in the insurance service is now at its nadir. Understandably, to rebuild the image of the insurance service, the challenges ahead are enormous. The industry leaders and the sector's regulator should take note of it.