Insurance industry grows 9.16%, defying 2023 challenges

Despite facing economic difficulties, the country's insurance industry has seen significant growth last year. Gross premium income increased by 9.16%, marking the third consecutive year of premium gains for both life and non-life insurers, following a decline in 2020.

According to the provisional data gathered by the Insurance Development and Regulatory Authority (Idra), life insurers collectively had Tk12,280 crore in premiums during 2023, marking an increase from Tk11,401 crore in the preceding year.

Outshining the growth of life insurers, the general insurance sector, responsible for covering all insurable risks except for death, recorded a total gross premium of Tk5,204 crore, marking a year-on-year increase of 12.8%.

However, the sector witnessed a diminished growth rate in 2023 compared to 2022. During 2022, both life and non-life insurance collectively achieved a growth rate surpassing 16% compared to 2021. Specifically, life insurance recorded an increase of over 11%, while non-life insurance witnessed growth of approximately 30% in 2022.

Inflation hurts life insurance growth 

"In 2023, high inflation and mounting financial strain on typical households posed challenges for life insurers in terms of premium collection," said SM Ziaul Hoque, CEO of Chartered Life Insurance — a new generation entity that made its debut in the public domain in October 2023.

"Typically, new business tends to flourish in the final months of a calendar year, but the uncertainties surrounding pre-election economics dampened this growth," he said, noting that more clients struggled to maintain premium payments during challenging times.

The number of policies that lapsed due to nonpayment of premiums surged by over 9%, reaching over 12.6 lakh last year. Consequently, the total count of active life policies decreased by 5.6%, falling to less than 74 lakh in total, as reported by the IDRA.

Also, life insurance clients' total claims dropped by 12.36% to Tk12,117 crore while settlement by companies dropped 5.4% to Tk8,754 crore thus raising the rate of life insurance claim settlement to 72% from 67% a year ago.

However, Ziaul Hoque has observed that an increasing number of middle-class people are interested in paying premiums to their trusted insurers and bancassurance should boost the business as it would let insurance reach more people in a smarter and more trustworthy way.

Several life insurers, due to corruption and mismanagement over the years, have been failing to pay back their client claims, even after policy maturity and it hurt people's confidence in insurance.

Life insurance penetration more than halved to slightly above 0.4% of Bangladesh's GDP in 2023 in the last 12 years.

Fire insurance fueled non-life business

Mohammodi Khanam, CEO of Desh General Insurance, said amidst a more stringent import framework, non-life insurers experienced subdued revenue in the initial half of 2023, given that underwriting import risks constitutes a significant portion of their operations. 

However, during the latter half of the year, with some relaxation in exchange rates and improvements in the export environment, the business began to regain momentum. This resurgence ultimately resulted in securing double-digit positive growth, Mohammodi said.

Ahmed Saifuddin Chowdhury, CEO of Bangladesh General Insurance Company, said fire insurance, perhaps, was the main growth driver for his industry last year.

"I am yet to analyse the segment-wise revenue data, but our company, like many others, found entrepreneurs more interested in getting their factories, and properties under fire insurance coverage as several fire damages over the recent years opened their eyes," he added.

The non-life insurance industry had 12.14 lakh policies in total, up by nearly 3% last year.

However, having 16.87% higher claims last year, the industry settled 38.2% more claims worth Tk1,481 crore. It helped raise the non-life claim settlement rate to 41% from 35% last year.

Mohammodi Khanam said that reputed insurers do not take much time for claim settlement as soon as they get their surveyor report along with the necessary documents as proof of damages a client faces.

It helps good companies earn client's trust which is vital for growth in the business, she added.

Non-life insurance, where a client does not get back the paid premium after the policy contract, is less popular in Bangladesh as reflected by the industry premium and number of policies.

The settlement rate for overall insurance claims increased to over 65% in 2023, from 61% in the previous year, according to the IDRA, officials of which are increasing monitoring of insurers for smoother services and fair settlement of unpaid claims.

Non-life insurance penetration was stuck at around 0.1% of the country's GDP for years as the popularity of insurance did not grow with the economy.

The government, however, is pushing for the introduction and spread of diversified insurance products.

Bangladesh has 36 life and 46 non-life insurers including two state-owned reinsurers which also provide direct insurance coverage in the two separate industries.

However, their contribution to the GDP is one of the lowest in the world as insurance penetration as a percentage of GDP was at 0.5% last year, which was 4% in India, nearly 2% in the Philippines and 1.4% in Indonesia, according to Swiss Re, a Swiss reinsurance company.

The situation should rapidly improve as the regulator was pushing for positive changes within the regulations and industry practices, said the insurance industry CEOs.