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Trust deficit is the most significant flaw that leaves the insurance penetration in Bangladesh stymied at a peanut 0.5 per cent, belying the sectors economic potential, experts say.
Insurance penetration is one of the parameters used to assess the level of development of the insurance sector in a country.
A 1.0-percent increase in penetration helps raise savings of around US$4.4 billion in the country, a study shows. Such 1.0-percent increase in insurance penetration helps reduce uninsured losses, too.
Also, the research mentions that a 1.0-percent increase in insurance penetration raises the growth in national GDP by 2.0 per cent.
Such findings came up in a research conducted by privately-owned North South University (NSU) in partnership with the US-based MetLife Bangladesh.
The research paper was presented at the Cirdap Auditorium in Dhaka by Dr Md Nurul Kabir in partnership of Dr Nazlee Siddiqui and Quazi Tafsirul Islam.
Insurance Development and Regulatory Authority (IDRA) Chairman Mohammad Jainul Bari, who joined the research-launching function as chief guest, said that the people have lower trust in insurance as many insurers delay in settling claims.
The chief of the regulator said the insurance industry lacked good governance.
The IDRA has prepared corporate governance guidelines recently to improve the quality of services.
"The regulator is mulling over evaluating risk-based supervision," the IDRA chief told his industry-academia audience.
Mr. Bari said some 19 life insurers, however, had settled between 80 and 99 per cent of claims timely. There are 10 more life insurers who have a record of settling more than 70 per cent timely. There are 35 life insurers in Bangladesh.
Insurance is the fifth financial priority while people plan to invest or save their hard-earned money to meet their future risks, according to the research.
The research, conducted by the North South University (NSU), found that the number-one financial priority is DPS (deposit pension scheme) of banks where people save their money to mitigate future financial risks.
Investments in property and FDR are the third and fourth top-ranking options respectively.
It shows that more than 80 per cent invest or save money in DPS. Nearly 40 per cent of people invest in properties, nearly 32 per cent in bonds, and nearly 32 per cent in FDR. Approximately 23 per cent of people choose insurance products as a financial tool for their future risk.
The research suggests three areas where the insurers can work embedding micro-products, sandbox initiatives, and health insurance.
It also suggests that, for creating awareness, digitalization, added service, distribution channels and governance for boosting the insurance industry.
The findings show people are mostly concerned about unexpected health issues in the future followed by children's education.
They have also financial concerns about post-retirement and asset acquisition,
Mr. Amal Krishna Mandal, an additional secretary of the division of insurance and capital market of financial institutions, and Prof Dr. Helal Ahammad, Dean of the School of Business of the NSU, attended the meet as special guests. MetLife Bangladesh CEO Mr. Ala Ahmad delivered the vote of thanks.