Transformation of insurance in Bangladesh

The insurance, a major tool in financial risk management, has expanded wings over the years, starting with marine insurance hundreds of years ago. 

Father of the Nation Bangabandhu Sheikh Mujibur Rahman, who himself started his career as an insurance officer, realised the importance of insurance for rebuilding a war-torn country establishing state-run the general issuance agency in independent Bangladesh. 

In the last fifty years, the scope of insurance has increased from private sector to state-owned bodies for asset risk management. From healthcare to the agricultural economy, everywhere insurance has vibrant presence. Besides, the practice of marine insurance supports risk reduction in import and export segments of international trade. 

Urbanization is considered as one of the indicators of economic expansion. And the use of cars in urbanization has created demand for motor insurance. And the country’s insurance sector has flourished through introducing new services. 

However, the contribution to the national economy is comparatively less. In other Asian countries, where the insurance sector contributes up to 10 per cent of GDP, the contribution of insurance is less than 1 per cent. 

The motor insurance is a part of general insurance. If a car falls in accident, the owner has expense to repair the vehicle. However, if the car is under insurance coverage, the insured will get that amount of money from the policy. Keep in mind, however, that an insurance policy will pay only according to its pre-determined terms. 

General insurance covers health, trade, industry, agriculture, vehicles. There are a total of 78 insurance companies in Bangladesh, of which 32 are life insurance and 46 are general insurance companies. 

From customer inclusion to premium collection, there has been a change in the insurance sector in Bangladesh. Now most of the insurance companies are collecting the savings of the representatives at the end of the day. Everything is on the computer, in many cases on the mobile phone. 

Marine insurance is one of the major contributors in the country’s economy by supporting the international trading. Although many services have been shut down due to the coronavirus epidemic, many agencies have survived in the competitive market through the marine insurance scheme. 

Talking to the sector insider, it has been learned that if the insured property or products is completely damaged or damaged, it is called total loss. 

And if it is possible to be rescued but not rescued because the rescue cost is too high, then it will be the overall loss to be recovered. Voluntary dumping of goods to protect ships and their cargo from sinking or to avoid major dangers is called shipwreck. This makes the ship lighter. 

In this case, the other party will compensate the person whose product has been discarded proportionally. If such risk is insured, compensation is available from the insurance company. 

Generally, earning foreign currency through the provision of services is called invisible export. The goods are insured in shipping and shipped to the importer by ship. 

The price of the product and the insurance cost are recovered from the importer. The amount of money collected for the value of goods is visible exports and the amount of money collected for insurance costs is invisible exports. 

Regarding the contribution of insurance sector in economy, Meghna Insurance chairman Sabrina Rahman said that insurance companies contribute to the economic prosperity of the country by investing their own earned money in various sectors.  

“As a result more human consumption increases which in turn increases the quality of life,” 

Sabrina said general insurance companies carry the risk of overall financial loss to all types of manufacturing companies, including the import and export of individuals, society and the public sector.  

“As a result, new industries are formed, incomes increase and economic development is affected. It can be said that the insurers are indirectly responsible for the financial security of the national assets,” she added. 

Sabrina, an agro-entrepreneur, thinks that all productive sectors including agriculture, industry, trade and commerce, transportation are trying to increase production in a financial risk-free environment by coming under insurance facilities. 

In the modern age, insurance has been playing an important role in the social as well as personal, business and economic sectors. Insurance plays a security role in protecting social and state resources. Society and state resources are properly maintained through fire insurance. 

Investment in various sectors of insurance creates new employment opportunities. As a result, insurance also contributes to the reduction of unemployment in the country. Takaful insurance has spread through conventional general insurance through maximum observance of Islamic Shariah. 

Islamic insurance is not limited to the financial transactions of the depositor, but there is an opportunity to share the profit and loss allowed in Islam. 

And the principle of partnership is the basic foundation of the Islamic insurance system. Therefore, the Islamic insurance system is playing an important role as an alternative system to establish social justice and balanced rights in Islam.