THE non-life insurance sector in Bangladesh faces a number of structural limitations that continue to hinder its growth. One pressing concern is the practice of offering additional paybacks over the prescribed commission rates, even as insurance premium rates in the country remain significantly higher compared to overseas markets. This imbalance affects competitiveness and undermines market confidence.
In reality, the non-life insurance sector does not require agents for the procurement of business. These roles could be phased out, with the associated costs redirected towards recruiting skilled marketing executives who can actively secure business in a more professional and sustainable manner. At the same time, there is a notable limitation in the range of non-life insurance products currently available. If the sector is to expand, there is a vast opportunity to identify logical and viable new markets, and certain categories of insurance could be made mandatory to stimulate growth.
Expanding the insurance market will, however, require a careful review of some of the rules and regulations governing the sector. If the relevant authorities address these limitations through effective measures, the non-life insurance sector could make a stronger contribution to the country鈥檚 economic growth.
A key issue concerns government business. Under existing arrangements, the state-run Sadharan Bima Corporation underwrites 100 per cent of such business. Around half of this is then distributed among non-government non-life insurance companies at an equal rate. This system, however, should be reconsidered. Removing the mandatory distribution could strengthen the competitive position and efficiency of the non-life insurance sector as a whole.
Discipline and transparency are also essential to market stability. Bangladesh currently maintains a non-tariff market in non-life insurance, but the sector would benefit from further measures to encourage an increase in total premium income. In the area of reinsurance, present laws require that 50 per cent of reinsurance business be ceded to Sadharan Bima Corporation. This should be revised to a mandatory 30 per cent, with the remaining 70 per cent open to the overseas market. Within that 70 per cent, companies should have the flexibility to re-insure either with Sadharan Bima Corporation or with foreign reinsurers, according to their strategic needs.
When introducing new non-life insurance products, the originating company should be permitted to market the product immediately, notifying the insurance authority in advance. If the product proves successful, formal approval could then be sought. A defined trial period would allow for measured evaluation before full regulatory clearance.
The grading of non-life insurance companies should be based principally on their ability to settle claims promptly. Achieving this will require reforms in the submission of claim information, papers and supporting documents, making it easier to process claims quickly and efficiently.
Under current law, premiums collected must be deposited into the company鈥檚 account either on the date of collection or the following day. This is restrictive and may not reflect operational realities. A more flexible approach could allow up to one month for depositing premiums, coupled with a provision for financial penalties, such as a 1 per cent daily charge on the net premium, for further delays. If a company fails to deposit premiums within one month, the Insurance Development and Regulatory Authority (IDRA) could impose an additional per-day penalty at a rate that ensures compliance.
If these reforms are pursued in a coordinated manner by the authorities and stakeholders, the non-life insurance sector could become healthier, more competitive and more attractive to policyholders. Increased confidence among the insured would encourage greater uptake of appropriate insurance coverage, leading to higher premium volumes and stronger sector growth. Ultimately, a robust non-life insurance industry would make a significant contribution to the national economy.
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Ahmed Saifuddin Chowdhury is the CEO of Bangladesh General Insurance Co PLC.
