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Opportunities in the Bangladesh insurance industry are as vast and undertapped as they were a half century ago, that’s according to Farzana Chowdhury, Managing Director and CEO of Green Delta Insurance Company (GDIC). Irrespective of the country’s political and economic challenges, the industry boasts much in the way of potential, and it shows no signs of slowing up in the years ahead. We spoke to Chowdhury about the country’s changing insurance industry and GDIC’s place within it.
How has the insurance industry developed in Bangladesh?
Despite being among the most populous countries in the world, with a population density (individuals per sq km) of about 1,200, insurance penetration is a mere one percent or so. However what gives us the confidence that the scenario is changing much faster today than in the past is that structural long-term drivers are firmly in place, including the demographic dividend, sustained economic performance, rising household incomes and an easing of monetary policy. The Bangladeshi insurance sector continues to evolve as it adapts to the ongoing regulatory, socio-economic and political changes.
Most of the population, especially at the grassroots level, do not even know there is something
called insurance
Why is there a general lack of awareness regarding insurance in the country?
The insurance industry is at a very nascent stage. Most of the population, especially at the grassroots level, do not even know there is something called insurance. Concurrent with this challenge are the facts that formal social security is almost non-existent, quality healthcare costs are extremely high and typically out of reach of the masses, and, in the case of corporate contingencies, especially in the small- to medium-sized segments, they tend to lose almost everything without any hope of getting back on their feet.
The reason lies in the mindset of the population. Most consider this product as something that’s good to have rather than a necessity. In Bangladesh, the number of insurance companies is more than the necessity, meaning that companies indulge in unethical business practices, which has triggered a negative perception in consumers’ minds.
How do you intend to address this issue?
Having been in this market for the past three decades, we understand the value of insurance and realise its immense contribution towards providing financial, as well as social security. So when we say that our intent is to provide insurance for all, what we’re really saying is that we are focused on safeguarding not just the interests of the citizens of our country but ringfencing the interests of the nation too.
Over the past decade or so, we were in the institution-building mode and focused on growing awareness on the potential benefits of insurance for our countrymen. In doing so, our topline grew substantially from BDT 515.30m in 2004 to BDT 2681.37m in 2014, positioning us as the largest and most trusted non-life insurance enterprise in Bangladesh.
In the next phase of our evolution, which began sometime in early 2013, we’re focusing on controlled growth with a concurrent focus on profitability. I am happy to state that this overarching objective is already bearing results. Hence, 2014 can be summarised as the year during which we focused on the quality of our portfolio and, coupled with a tight control on our operating costs, we recorded a 4.46 percent growth in our net profit after tax to BDT 239.25m.
Could you tell us how Green Delta has developed and grown over the years?
GDIC is one of the leading private non-life insurance companies in Bangladesh. Incorporated in 1985 as a public limited company, under the Companies’ Act 1913, business started in 1986, with a paid up capital of BDT 30m. Now, GDIC has amassed about BDT 807m with a credit rating of AAA and ST1. GDIC holds the proud distinction of being the first ever company to raise its paid up capital to such a level.
Under the charismatic leadership of Nasir A Choudhury and myself, GDIC has been leading the winds of change in the insurance industry of the country in terms of service standard, innovative products and legislative restructuring. After a glorious journey of three decades in the insurance sector, GDIC has now become a big family of visionary board members, 600 plus committed staff, numerous valued clients and thousands of esteemed shareholders. By now, Green Delta has been able to uphold the brand image as a prompt claim settler, superior service provider, and diversified product supplier – almost like a one-stop solution provider in the non-life insurance sector in the country.
You aim to provide insurance for everyone. How do you deliver on this promise?
To offer one example, women constitute around 52 percent of our population and to cater to this large and growing segment, the time was just right to launch a product exclusively for them. Nibedita is the first such product in the non-life insurance industry of Bangladesh focused on providing comprehensive coverage exclusively to women (with trauma allowance). Hence, bundled with the product, we also provide counselling and therapy sessions for their holistic well-being. Nibedita is also not just a standalone comprehensive insurance product but an assurance that women can cope with the crisis at hand and are able to restore their confidence.
To give another, Shudin is a health insurance programme exclusively covering workers in the ready-made garments (RMG) sector. This product is clearly in response to the Rana Plaza tragedy of 2013 where over 1,100 workers were killed and several others injured when the building, largely comprising RMG factories, collapsed. We are also actively working with the Bangladesh Garments Manufacturers Association and the International Labour Organisation to co-develop a policy that is truly effective for the target segment and help them realise the underlying value of insurance.
Thus we address national issues and come up with new and innovative products to cater to the Insurance need of people from all walks of life.
What does the future hold for Green Delta?
Despite a politically and economically challenging environment, the Bangladeshi economy has consistently reported an average of six percent growth over the past few years, making it among the fastest growing economies in the world (see Fig. 1). Given the high growth and increasing income levels, the household income flowing into insurance is expected to continue to increase in the future. One demographic advantage in Bangladesh is that the working population is expected to rise in the coming years, translating into an increasing customer base for the industry.
For the coming financial year, growth is now projected at 6.4 percent, slightly higher than earlier forecast, as a revival in worker remittances is expected to bolster private consumption, while private sector investment will pick up on greater political stability. Moreover, the government will continue its efforts to step up project implementation. Currently we are seeing a consistent 13-15 percent growth every year in the insurance industry. The consistency of the growth gives us hope regarding a brighter future of the industry. However, if the growth in the sector reaches 20 percent every year, that will be remarkable. We are determined to play a vital role in helping this industry reach the desired growth. The market penetration of insurance is currently less than one percent. With our flagship project ‘insurance for everyone’ and the government’s recent praiseworthy initiatives related to safety net insurance to give coverage to the bottom of the pyramid group, we are hopeful regarding the possibilities of a five percent market penetration within five to 10 years’ timeframe.
GDCI holds 13-14 percent of the market share of the insurance industry and is the leader of the non-life insurance sector in the country. In the decade ahead, if our projections work out properly, we will be more aggressive in the market and aim to capture the 22-25 percent of the market share. But we don’t want to grow alone; we want the whole industry and the other insurance companies to grow with us. That will eventually help us realise the concept ‘insurance for everyone’.
