New entity wants to enter saturated insurance market

Although there is an unusually high number of life insurance companies in Bangladesh and despite the fact that many of them are suffering from a lack of clients' trust, a new company has applied for a letter of consent to register as a life insurer.

A company named SafeLife Insurance sent the application to the Insurance Development and Regulatory Authority (IDRA) on March 24.

The proposed chairman of the company is Sheikh Kabir Hossain, who is currently serving as chairman of Sonar Bangla Insurance Limited ‍and Fareast Islami Life Insurance Company Limited. He is also the president of the Bangladesh Insurance Association, a platform for insurance companies in Bangladesh.

At present, there are 36 life and 46 non-life insurance companies in Bangladesh, which stands in stark contrast to just 24 life insurance companies in India, 10 in Pakistan, and 16 in Sri Lanka.

However, despite the larger number of insurers, the average claim settlement ratio in Bangladesh lags far behind the global standard of around 97-98 percent.

In India, the average claim settlement ratio stood at around 98.45 percent in fiscal 2022-23, according to media reports.

But in Bangladesh, the ratio stood at a meagre 65.19 percent in 2023, according to data from the IDRA.

An expert said there are already more insurance companies in Bangladesh than necessary and that the country's economy was facing a challenging time on many fronts.

For these reasons, the expert opined the application should be dismissed out of hand.

According to its application, SafeLife Insurance aims to establish a life insurance company offering comprehensive coverage and financial security to individuals and families across the country.

"Despite many compelling reasons, we believe the market is currently under-penetrated. Our steadfast conviction is that financial inclusion in the insurance sector can be further boosted through the digitalisation of products and offerings, strengthening governance, increasing transparency, and expanding to rural areas through education and awareness centre expansions," it added.

Sheikh Kabir Hossain told The Daily Star that they had not yet received any response from IDRA.

He said barring a few companies, most life insurers are in a very bad condition at present.

"If I can start a new company, I can manage it properly. The people of the country will benefit from this," he added.

Zahangir Alam, spokesperson of IDRA, told The Daily Star that they received the application but could not provide any information beyond that.

However, seeking anonymity, a senior official of the IDRA underlined the unofficial process.

First, verbal instructions are given to the IDRA from the Prime Minister's Office (PMO) before the issuance of a letter of consent for any new company.

Afterwards, a summary about the company is sent from the IDRA to the Financial Institutions Division. Then, it is sent to the PMO.

"But the PMO has yet to give any verbal instructions regarding this company," the official added.

On condition of anonymity, the chairman of an insurance company said that 10-12 life insurance companies are in a very bad condition, with some on the brink of bankruptcy.

"It is very sad to ask for a letter of consent for the registration of another life insurance company," the chairman said, adding that if the IDRA did not take proper steps against weak companies and instead licenced another, it would not be good for the industry.

"If we talk about compliance, then insurance companies are lagging far behind compared to banks," said Prof Md Main Uddin, a former chairman of the Department of Banking and Insurance at the University of Dhaka.

Many banks are going towards mergers to reduce the number of banks and it is also important to reduce the number of insurance companies through mergers, Main added.

At present, the overall economic situation of Bangladesh is not good, he said while adding that applying for a license during such a time is illogical and audacious.

He opined that if the license is granted, the condition of the insurance market is likely to worsen.

"We do not see any signs that the new company will do well because it is being born at a very unfavourable time," Uddin added.

The Daily Star attempted to contact Sheikh Kabir Hossain to get a further reply to the concerns voiced by experts in the sector, but he could not be reached.