Insurance Sector In Bangladesh: Challenges and Mitigation Strategies

 Rokibul Huda Majumder

The first thing that comes to our mind about country's financial sector is Bank and Insurance. It means, Insurance is one of the most important financial services in the country.

Insurance is the transfer of the risk of possible loss of life or property for a certain amount of money. Again, insurance is a legal agreement between two parties where one party is the insurer (insurance company) and the other is the insured person or entity. In this case, the insurer takes the risk and the insured pays a certain amount of premium in return for that risk.

In this subcontinent, Insurance is an ancient and respected profession as well as in the rest of the world. After the Independence of Bangladesh, Insurance was brought under state control by a Presidential Ordinance in 8 August 1972. Although this ancient industry is an financial service profession but its development growth is not satisfactory with the economic growth of Bangladesh. Insurance contributes 0.56% of the country's GDP which is very nominal. According to the "Insurance Development and Regulatory Authority" of Bangladesh, only 12% of the total population of the country is covered by insurance where 48% of the adult population now under the banking umbrella. That means, as a whole the insurance sector lags behind the rest of the financial sector. Bangladesh's insurance sector is much smaller than other global or comparable countries. However, overall good governance and efficient management of the insurance sector can make this sector a huge potential.

A comparative analysis of the insurance sector since independence shows that, the achievement in this sector have been upward sloping in the last few years. Because, almost all the achievements in this sector have come one after the other. In Bangladesh, The Insurance Act was enacted in 2010 and the Insurance Development and Regulatory Authority was established at the same time. And then the "National Insurance Policy 2014" was formulated. National insurance policy is the key to achieving the goals and objectives of this sector. The Government of the People's Republic of Bangladesh has honored this profession by recognizing March 1 as "National Insurance Day".

Despite these achievements, the crisis in the insurance sector has not ended yet. In order to develop the insurance industry as a profitable and people-friendly industry of the country, a number of challenges have to be face.

Adopting and implementing the right action plan is an important challenge for the insurance sector. In case of work plan, it can be divided into several stages such as: project based work plan, short term plan, long term plan etc.

In the project based action plan, Important departmental quality improvement plans related to the insurance sector can be undertaken Such as: - Development officers skill based development project Or review of actuary department activities, quality improvement and creation based projects etc. can be taken.

The short term plan can be taken to determine the current crisis in the insurance sector and to implement it in a fixed period (2/3 years).

In the long-term planning, an action plan similar to the government's five-year plan can be taken. In this case, the government's expectations from the insurance sector in the next 10 years or 20 years and the prosperity of this sector will be prioritize.

Skilled manpower is required to achieve any goal of this sector. So, creating this skilled manpower and getting them involve in this industry is one of the challenges. In order to implement this, countries young highly educated talents have to be involved in this profession. On the other hand, the reluctance of a section of the country's youth towards this profession is noticeable. Therefore, To participate young people in this profession, they need to ensure attractive salaries and allowances. The more talented young people participate in this profession, the more insurance will be enriched as an industry.

Insurance needs to be more involved with technology. Bangladesh has already debut as a Digital Bangladesh. So, there is no substitute for digitization to make this profession more people friendly or to ensure this service at the doorstep of the people. In this case, e-insurance should be customer friendly so that the customer can take the desired policy and deposit the premium sitting at home like a bank.

Bangladesh is one of the most vulnerable countries in the world to climate change. Since insurance takes risk of human life and property, It is necessary to take into account natural disasters and identify disaster prone areas and adopt special policies for those people and resources such as "Climate Risk Insurance" or "Inclusive Climate Insurance".

Besides, there is less research on insurance in the country. Research related to this needs to be increased. Research will find out the major problems in the insurance industry and determine what to do. To enhance research, various fellowships and scholarships can be arrange.In addition to research, international and regional communications need to be increase. For this, various seminars, symposiums and business summits can be organise.

Moreover, Insurance sector in Bangladesh at present is still suffering from a notable image crisis or distrust. The biggest challenge is to restore this faith. Therefore, everyone involved with this sector has to play a responsible role from their respective places. Government also needs to be proactive in making the image of this sector attractive and sustainable.


Rokibul Huda Majumder, Dhaka School of Economics, University of Dhaka.