Compulsory insurance for all, customer satisfaction key to expansion

Md Sajjad Yahya

Operating since 1999, Paramount Insurance Company Limited is one of the country's well-known non-life insurance companies. Its managing director and chief executive officer Md Sajjad Yahya in a recent interview with New Age highlighted the problems that are preventing the sector's expansion to its potential and suggested how to overcome those. Excerpts follow:

What are the major challenges for the insurance sector of Bangladesh?

Sajjad Yahya: One of the biggest challenges in selling insurance products in the country is a continuous change in the expectations of customers. Insurance companies need to be able to deal with evolving expectations — whether clients are becoming more price-sensitive, or are changing their communication preferences, or anything else.

For this purpose, insurance companies rely heavily on its marketing staff. But the key problem is that most of them are not well-trained or have little idea about the sensitive issue. They can't convince the public. As a result, the growth of this sector suffers.

Besides, a lack of market research, unhealthy competitions and risk management are the other major problems for the sector.

Why does insurance sector development remain negligible in the Bangladesh economy? Why is insurance penetration very low in the country?

Sajjad Yahya: Yes, compared to the global insurance industry, the progress of the Bangladesh insurance industry is indeed negligible. Here in this country, the per capita insurance cost is only 9 [US] dollars. The volume of the national-level insurance premium in proportion to the gross domestic product is about 5 per cent.

Insurance is compulsory in developed countries. Without insurance, a car cannot be driven on the road. Without insurance policies for their employees, industrial establishments are not allowed to operate, or their [employees’] children cannot be admitted to school, or they can't buy a house.

But in most cases, insurance is not mandatory in our country. So, the need for insurance is not felt in all classes of people. For the development of the insurance industry in our country, making insurance compulsory is necessary in every case like in the developed countries. A tradition should be created for selling insurance products through development workers and officials.

Insurance claims should be settled at the earliest and insurance claim settlement events should be regularly publicised through various media outlets.

The Insurance Act of Bangladesh needs to be modernised and updated.

In order to expand the insurance market, new insurance products must be created. Since non-life insurance is not compulsory, the customer is not always interested in subscribing to such policies. Therefore, measures can be taken from the state level. For example, taking insurance should be made mandatory during all sorts of registrations, including trade licence registration, import registration, export registration, etc.

How can customers’ negative perception of the country's insurance industry and lack of confidence in it be removed?

Sajjad Yahya: Those insurance companies in the country which have become most successful today have built their entire business around the customer. And for the customer, experience is the single most important factor in having loyalty.

There is a massive divide between customer expectations and what most products actually deliver. This is the case with today's insurance companies.

For many decades, insurance customers had viewed insurance as a commodity product they had to buy based on what was available. But over the past few decades, the market has saturated with more insurance products and different options, turning the buyer more sophisticated, who wants to fulfill a large range of needs and wants.

To be able to cater to the changing needs, insurers need to be more flexible, work faster and provide a superior customer experience — and this should be their top priority.

Besides, by creating access, using technology, to the right data at the right time for the policyholder, insurers can create more personalised insurance products. This in turn will increase the trust of the customer who will voluntarily share more data in the future. Introducing intelligent workforces and meeting customers at the right time on the right channels with a personalised message or content allows insurance companies to move beyond a transactional relationship with their policyholders.

Designing products and services around the customer experience helps to turn insurers into trusted advisers and will generate customer loyalty and, eventually, drive purchasing decisions.

Would it be a burden to have a significant number of insurance companies which offer products of similar nature? Does it result in an unhealthy competition and malpractices?

Sajjad Yahya: Insurance activities in Bangladesh are regulated by the Insurance Development and Regulatory Authority, or the IDRA, Bangladesh. When any insurance plan or product is approved by the IDRA, the plan or product becomes open to all insurance companies.

A spontaneous participation of a significant number of insurance companies in the process of marketing similar products does not pose any problem for the business of insurance companies. Rather, such practice accelerates the progress of the insurance industry.

As all terms and conditions of insurance plans or products are regulated by the IDRA, there is no scope for an unhealthy competition or unfair practices or malpractices in promoting and selling insurance plans or products.

Research suggests that a majority of Bangladeshis don't trust insurance agents and companies. What is your view on the issue and how could it be addressed?

Sajjad Yahya: Insurance means that if an insured property falls into an accident, the insurer will return the insured to its previous position. Here both the insurance customer and the insurer need to honestly present truthful information.

But in practice, customers sometimes conceal correct information in a bid to reduce premium amounts. On the other hand, insurance collectors/agents do not properly explain the terms of a policy to collect the business. As a result, due to information inconsistencies, complications arise in the settlement of claims, if any, due to which the lack of trust is a constant.

In most cases, the insurance customer does not check the terms of the policy after receiving the copy of the policy and the receipt of an insurance premium payment. Information inconsistencies lead to complications during claim settlements, undermining confidence in insurance personnel.

If the policyholder observes the terms and conditions of the policy, any inconsistencies can be resolved through negotiation with the insurance company.

Training should be imparted at the official and field levels so that the sector can generate skilled manpower to overcome the problem.

The process of settling claims in Bangladesh is tiring and long. What is your company's position regarding the issue and how can the industry resolve the issue?

Sajjad Yahya: A customer takes an insurance policy for the safety of his assets. The insurer indemnifies the insured property under the terms and conditions of the policy for damages. Insurance is to restore assets to their pre-disaster condition. So, the insurance customer will provide correct information while insuring their assets or property.

On the issue, our company's position is totally professional. We try our best to settle a claim as soon as possible, if the claim is payable according to the terms and conditions of the policy and also after receiving all the required documents from the claimant and the surveyor.

What is your opinion about bancassurance ?

Sajjad Yahya: Bancassurance is a relationship between a bank and an insurance company, which is aimed at offering insurance products or insurance benefits to the bank's customers. The concept of bancassurance is relatively new. In May 2022, the Bangladesh Bank finalised the guidelines for local banks to provide this service.

This is an excellent initiative that will provide new business opportunities for the stagnant local insurance industry and also boost revenue of banks as a result of the partnership.

The main advantage of bancassurance in Bangladesh is convenience. Customers can buy insurance products while conducting their regular banking activities. This opportunity saves their time and makes the process of buying insurance products much easier and quicker.

But there are some challenges, too, including the lack of regulation and oversight in the sector. This can result in mis-selling of insurance products and a lack of customer protection. Furthermore, some customers may not fully understand the terms and conditions of the insurance products which they are purchasing.

With a right approach, bancassurance is likely to play an important role in expanding financial literacy and providing insurance services to people who, otherwise, may not have access to them.

How can insurance companies avoid irregularities and earn reputation and profits?

Sajjad Yahya: Various steps can be taken to gain reputation and profits, such as including knowledge of insurance in school and college textbooks and introducing insurance education at the undergraduate and postgraduate levels at every university of the country.

Organising insurance-related campaigns in electronic media, talk shows, seminars, symposiums with the presence of qualified insurance professionals and arranging higher training abroad for domestic insurance officials under government initiatives are also important.

The Insurance Academy can play an important role in the overall development of insurance professionals at all levels so that they can become competent enough to play their respective roles.

Making insurance compulsory in every sector like in developed countries and compel compliance with appropriate insurance tariffs, and insurance policy terms and conditions are also important.

An unprecedented development of the country's insurance industry is definitely possible by equipping the insurance personnel with the knowledge of contemporary and international standard insurance product management.

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