Insurers can partner with banks to spread reach

A senior official of Metlife tells The Daily Star
Chris Townsend

Bangladeshi insurers should partner with banks in an effort to penetrate deep into the country's booming villages and rural towns, a senior Metlife official said recently.

The South Asian nation remains one of the least explored insurance markets in the world, despite its booming economy and 77 non-life and life insurers, including the global heavyweight -- Metlife.

Annual premium income of the sector stands depressingly at 0.5 percent of Bangladesh's Gross Domestic Product, compared to 3.5 percent in India and the same percentage in much impoverished Nepal.

In Bangladesh, overall insurance penetration, both life and non-life, stood at 0.72 percent in 2015, down from 1.13 percent in 2010, according to Swiss Re, a leading global reinsurer. Of the penetration rate, 0.53 percent came from life and 0.19 percent from non-life insurance companies.

The industry expects the income would grow to 3.5 percent of the country's nearly $220 billion GDP in four years, when the nation celebrates 50 years of its independence and the industry marks three decades since it was deregulated.

Chris Townsend, Metlife's Asia president, said the insurers' business tie-up with banks --- there are some 55 private and public banks in Bangladesh -- could throw up new opportunities for both the financial sectors.

“There is a huge opportunity to increase availability of insurance products for the customers through banking channel,” Townsend told the Daily Star during a visit in Dhaka.

“Now the challenge to grow the insurance penetration is to increase people's access to products. Banks can be a good distribution channel for taking insurance (nationwide)," he said.

At present, banks provide a simple form of life insurance credit to reduce the risk for borrowers should they fail to pay back loans. But the product makes up only a small fraction of the banks' business.

Bangladeshi banks have thousands of branches across the country, lending several billions of dollars every month. Insurers too have branches nationwide, but they mostly sell tiny micro life products -- just like micro-loan provided by micro-creditors like Brac -- to the rural people.

“There are more opportunities for life insurance companies to provide more sophisticated products to clients of banks. Bank insurance can play a vital role in improving penetration,” said Townsend.

He did not elaborate on the possible products, but banks and insurers in much of the Western world collaborate at grass-roots levels,  jointly selling lucrative products such as car insurance or home mortgages.

MetLife, which bought now defunct Alico's Bangladesh operations after the global financial crisis in 2008, has rolled out new products through its 15,000 agents in all of the nation's 64 districts.

Last year its net premium income grew to Tk 2150 crore ( $276 million), making it one of the largest multinationals in the country. It alone now accounts for 28 percent of the country's life insurance market.

The company has been the biggest insurer in terms of annual premium income, profits and tax payment for the last 20 years in Bangladesh. It has sold more than one million policies, much of it in the two main cities of Dhaka and Chittagong.

Townsend said MetLife's total premium stood about $1 billion last year, as the company's aggressive expansion in new territories has paid off. “We expect to grow it to 50 percent in the next four to five years,” he said.

Townsend said MetLife Foundation, the main corporate social responsibility arm of the New York-based company, has made a commitment to invest $200 million in boosting financial inclusion in the five years to 2018.

“A major part of the investment has taken place in Asia and a significant portion has been invested in Bangladesh,”

he said.

MetLife has invested $1.3 billion of its premium income in the country, including $1 billion in bonds, which has made the company one of the largest holders of Bangladesh government securities.

While Townsend agrees that Bangladesh insurance sector has the potentials to leapfrog many of its richer neighbours, he said the industry is held back by lack of skilled workforce including an acute shortage of actuaries.

MetLife has provided scholarships to students to pursue Actuarial Science in foreign universites as Bangladesh does not have any exclusive institution to train actuaries.

The MetLife Asia chief underscored the role of the agents, who work as distribution channel for the company to sell insurance products, in building trust between customers and the insurers.

“So agents should be trained so they can dispel negative perception about the insurance sector," Townsend said, adding the sector also needs to raise awareness about the importance of insurance and make various products easily available.

Bangladesh is the fourth most profitable market for MetLife in Asia, just after Japan, South Korea and Australia.

Townsend has also called for better customer care in the sector, asking the companies to make maximum use of software and new technology to provide services.

MetLife recently introduced a technology solution called Projaopti (butterfly in English) for its agents to make them more effective.

There are 31 life insurance companies and 46 non-life insurance firms in Bangladesh, with Metlife -- the successor of Alico -- being the oldest. It started operation in the then East Pakistan in 1952.