Insurance claim settlement rises in 2023
It, however, has remained far below the global average
The claim settlement rate in the insurance sector of Bangladesh has risen by more than four percentage points within the span of a single year although the ratio has remained far below the global average.
The claim settlement rate stood at 65.19 percent in 2023, which was 61.16 percent a year earlier, according to the Insurance Development and Regulatory Authority (Idra).
The jump was led by both life and non-life insurers: the life insurance segment saw a 72 percent settlement in 2023, up from 67 percent in 2022. For non-life insurance, it rose to 41 percent from 35 percent.
However, the global average for claim settlements is 97-98 percent. In India, it stood at 98.45 percent in 2022-23, according to media reports.
In 2023, policy-holders made insurance claims involving Tk 15,699 crore. Companies settled claims amounted to Tk 10,236 crore.
"The claim settlement ratio is low in Bangladesh as some insurers don't clear a large part of the claims on time," said Mohammad Jainul Bari, chairman of the Idra.
"This is creating a bad perception about the overall industry."
To improve the claim settlement rate, the Idra initiated some regulatory reforms and rolled out corporate governance and policyholder protection guidelines for the sector.
A company's licence was suspended and two companies are under special audit. Some other companies have been fined a large amount.
"All of these have been done so that all other companies speed up settlements," Bari said.
The Idra has even instructed some companies to sell properties and settle claims.
"However, the regulator alone can't do everything for the development of the sector. The companies will have to have a desire to improve the situation," he said.
He also says if there is no mindset to serve people and do business honestly, no matter how many laws the regulator enacts, the problem will remain in the sector.
On December 11, Bangladesh rolled out bancassurance as the central bank allowed banks to sell insurance products. Bancassurance is an arrangement between a bank and an insurer, allowing the former to sell products of the latter through its vast network.
Industry people say bancassurance may solve the problem facing the insurance sector as banks are more professional and can boost people's confidence about insurance products.
The contribution of the insurance sector to GDP is measured by what is popularly known as the penetration rate. It is 0.46 percent in Bangladesh whereas it stands at 4.2 percent in India and 0.91 percent in Pakistan.
At present, there are 35 life insurance and 46 non-life insurance companies in Bangladesh.
"The insurance sector was not prioritised or organised as strongly as banks even until 2010, so it is taking time to gain a good shape," said Sheikh Kabir Hossain, president of the Bangladesh Insurance Association, a platform for insurance companies.
In the last 14 years, rules and regulations have been framed and the Idra was set up.
"Now, the situation is improving," Hossain said.
There are some sick life insurance companies whose claim settlement ratio is less than 10 percent. These firms have prevented the overall claim settlement rate from reaching a significant level.
Hossain urged the Idra to be strict when it comes to compliance.
"The capacity of Idra's officials should also be enhanced."
Some 17.11 million people in Bangladesh are currently under insurance coverage.