Dhaka,  Sunday
14 April 2024

Insurance sector suffers from growing mistrust

Md Mahfuzul Islam

Published: 07:54, 1 March 2024

Insurance sector suffers from growing mistrust

Photo : Messenger

The country’s insurance companies continue to suffer as they are yet to gain the trust of the people even after 53 years of independence.

Many individuals have turned away from insurance due to delays in receiving their dues even after the policy expires, despite a significant increase in the number of insurance companies over the last two decades.

Complaints from policyholders against insurance companies have persisted for a long time, with most companies failing to pay dues or insurance claims on time. As a result, ordinary customers have endured years of waiting to receive their insurance money. Moreover, corruption and irregularities within insurance companies, along with the rise in fraudulent insurances, are contributing to an all-time low in trust.

Those involved in the insurance sector believe that these issues are unlikely to be quickly resolved, prolonging the crisis of trust. Resolving these issues could pave the way for the next decade to be deemed the ‘Insurance Decade.’

Sheikh Kabir Hossain, President of the Bangladesh Insurance Association, told The Daily Messenger, “The Insurance Development and Regulatory Authority (IDRA) needs to enforce stricter regulations to restore confidence in the insurance sector. However, the problem lies in the authority's inability to enforce these regulations effectively. Nevertheless, there are signs of improvement, and the negative image is gradually diminishing.”

According to IDRA data, the gross premium income of insurance companies was Tk 6,317.48 crore in 2009, Tk 7,493 crore in 2010, and Tk 17,484 crore in 2023, indicating a 133.33 percent increase in premium income over 13 years.

The assets of insurance companies have also increased by 239.34 percent over the same period. In 2010, the assets totalled Tk 21,387 crore, which increased to Tk 72,576 crore in 2023. Consequently, the investment of insurance companies has risen by 226.82 percent.

In 2023, the amount of insurance claims reached Tk 12,117 crore, out of which insurance companies paid claims worth Tk 8,754.59 crore. This implies that companies have not paid Tk 3,363 crore in insurance claims owed to customers in the last year.

IDRA Chairman Mohammad Zainul Bari told The Daily Messenger, “We are striving to improve the situation in the insurance sector. However, the reality is that companies with a high number of customer claims are not fulfilling their obligations. Even if these companies' assets are liquidated, they are still unable to settle insurance claims. Nevertheless, the company boards have been summoned to address these claims, and plans have been formulated. Action is being taken against those who have violated the law.”

The IDRA Chairman also noted that there are currently 82 authorised companies providing insurance services in the country. However, public distrust towards the insurance sector persists for 10-15 companies. Presently, 1,71,10,000 people in the country are covered by insurance. To improve the image of the insurance sector, authorities are directing companies to prioritise insurance claims settlement. As a result, companies paid 72 percent of insurance claims in 2023, a 5 percent increase compared to 2022.

According to Bangladesh Bureau of Statistics (BBS) data, the country’s population is around 17 crore. IDRA feels that 10 crore insurance policies are feasible given the current size of the country’s economy. However, those concerned said that at least 5 crore policies can be made in the current context.

Regarding this matter, S M Nuruzzaman, CEO of Zenith Islami Life, told The Daily Messenger, “The life insurance policy becomes void if the premium is not paid. According to the existing law of life insurance, if no premium is paid within five years after depositing a premium, the first deposit becomes void. 60 to 70 percent of such policies could not pass a year after opening the policy.”

He also mentioned that one reason for insurance fraud is that the insurance policy exceeds what the customer can afford. As a result, after paying the first two or three installments, the policy lapses. Moreover, agents lack a service mentality. Customers entrust premiums to agents, but the agents fail to deposit the premium money, resulting in the policy becoming void.

Kazim Uddin, CEO of National Life Insurance Company, told The Daily Messenger, “It is the right of customers to receive insurance claim money without delay. Insurance companies need to pay more attention to this issue, especially in the prompt payment of claims by life insurance companies. I believe that settling an insurance claim promptly will lead to the creation of 10 new policies.”

He also said, “Although insurance is an important form of savings, society harbours a negative perception of it due to various adversities. This impedes the expansion of the sector. Ignorance, lack of understanding, and insufficient insurance education contributes to the formation of an anti-insurance attitude. We hope to see this situation improve soon.”

Meanwhile, BM Yusuf Ali, President of the Bangladesh Insurance Forum and CEO of Popular Life Insurance Company, believes that the next decade will be for the insurance sector. He said, “Despite the increase in the country’s GDP, the insurance sector has not progressed in line with it. Multiple parties are involved in the insurance sector, so no single entity can be solely blamed for any negative outcomes.”

“More companies have been authorised than necessary, including third and fourth-generation companies. The issues faced by these companies, coupled with the corruption within some older companies, have led to delays in the payment of insurance claims,” he added.

Professor Sheikh Hasina, Chairman of Dhaka University’s Banking and Insurance Department, believes that insurance education should begin from primary school. She said, “To increase the contribution of insurance to the country’s development, the population needs to be educated in insurance. Although the current government recognises the importance of the insurance sector, unfortunately, Bangladesh lags behind in providing true insurance education.”