Insurance penetration in Bangladesh in GDP percentage declined to 0.40% in 2020, from 0.49% a year ago, according to a recent sigma report by Swiss Re Institute.
The number is the lowest among reported South Asian countries. India has 4.2% while Sri Lanka 1.2% of their GDP.
Hong Kong has the highest insurance penetration of 20.8% in 2020 followed by 17.4% in Taiwan.
In Bangladesh, total insurance premium in 2020 fell by 3.1% in nominal terms and when it comes to inflation adjusted change, it was 8.2% lower than the previous year.
In 2020, total life insurance premium was Tk11,300 crore, a 3.1% lower from 2019.
Both life and non-life insurance premiums were lower in 2020 than that of 2019.
Bangladesh is now 66th largest economy in terms of the total insurance premium volume in 2020.
For around one and a half years, people have been suffering from a health crisis due to the Covid-19 pandemic.
At the same time, the world is struggling to recover from the pandemic with the help of swift development of vaccines and fiscal stimulus packages.
As a result, the world economy is on the path to a strong recovery following the Covid-19 pandemic.
At this very time, Swiss Re Institute expects global insurance premiums will grow at 3.3% in 2021 to a total of $6.9 trillion in line with the global economic growth of 5.8% in 2021.
The report forecasts 3.9% insurance premium growth for 2022.
In 2021, key market insurance premium growth is forecast at 6.3% for China, 1.7% for the US, 2.8% for Western Europe and 5.6% for emerging markets.
Inflation is a key medium-term risk for non-life insurers
In the sigma report, Swiss Re Institute has pointed out how factors such as inflation and digitalisation are influencing insurance industry development.
They said, longer-term tolerance of inflation by governments and central banks as they prioritise progressive policies is a risk, particularly for longer-tail liabilities exposed to rising claims.
However, it expects worldwide non-life premium volumes to grow 2.8% this year after 1.5% expansion in 2020, as strong price increases in commercial lines remain the dominant tailwind.
Life insurance is benefiting from the Covid-19 effect on consumer risk awareness
The Covid-19 pandemic has paved positive paradigm shifts for insurance due to the positive development in consumer awareness of the Covid-19 health risk.
As a result, global health and protection-type insurance premiums grew by 1.9% and 1.7%, respectively in 2020 despite social distancing affecting distribution.
And they are expecting global life insurance premiums to above-trend growth of 3.8% in 2021 and 4.0% in 2022.
"We expect the insurance industry to earn a record $7 trillion in premium by the end of next year. The best preparation for the next economic shock is having economic buffers in place," Jerome Haegeli, Group Chief Economist at Swiss Re Institute.
"However, fiscal and monetary buffers are being depleted, which means the private insurance sector is increasingly important. Narrowing protection gaps needs to become an economic policy goal."
In this regard, SM Shakil Akhtar, executive director (Joint Secretary) and spokesperson of the Insurance Development and Regulatory Authority, said, "I think the information provided by Swiss Re is correct. This is because the country's premium income has come down a lot due to the closure of third- party motor insurance."
He said as a result, premium income of around Tk300 crore has decreased in the life insurance sector. But third-party motor insurance is compulsory all over the world.
On the other hand, due to the coronavirus, imports and exports have also decreased a lot which has affected the non-life insurance premium income of the country. Life insurance workers are unable to sell policies in the pandemic.
Moreover, companies are not able to popularise new products to customers. All in all, the insurance sector is facing challenges in the pandemic.
Sheikh Kabir Hossain, chairman of the Bangladesh Insurance Association (BIA), said the pandemic has changed a lot in the insurance sector. In the meantime, the companies are not able to increase the number of new customers.
The business of life insurers in particular has declined. The import-export business has also been affected by the closure of third-party motor insurance and the pandemic, he added.
Md Moniruzzaman Khan, head of Digital Business and Communication of Green Delta said, "Firstly, tariff revisal of marine insurance has had a significant adverse effect. In addition, cancellation of agency commission led to a decreased renewal of insurance policies and lastly removal of third party motor insurance also had some effect."