Experts call for policy changes to enhance insurance sector’s GDP share to 10pc

Gazi Anowar :

The insurance sector in Bangladesh contributes only 0.5 percent to the country’s Gross Domestic Product (GDP), a figure that industry experts are now calling for a series of strategic measures to increase the contribution of this sector to 10% of GDP, a target that many believe could propel the country’s economy forward while providing financial protection to millions of citizens and for sustainable economic growth.

At present, the sector lags behind regional peers due to low penetration, lack of awareness, and regulatory challenges.

According to the Bangladesh Insurance Association (BIA), the insurance sector’s contribution to GDP currently stands below 1%. In comparison, countries like India and Malaysia have insurance penetration rates significantly higher than Bangladesh.

Industry insiders attribute this low contribution to several factors, including public distrust in insurance policies, lack of innovation, limited financial literacy, and weak enforcement of mandatory insurance policies.

AKM Mortuza Ali, Director of Bangladesh Insurance Academy told The New Nation, “The primary challenge is public perception. Many people see insurance as an unnecessary expense rather than a financial safety net. We need strong regulatory oversight and incentives to build trust in the system.”

Experts suggest several key reforms and initiatives to expand the insurance sector’s contribution to the economy:

Enhancing Public Awareness and Financial Literacy
Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), emphasizes that awareness campaigns are crucial.

“Many people in rural areas do not even know about life or health insurance. The government, along with insurers, should run financial literacy programs to educate the public,” he said.
Mandatory Insurance Policies

The government can enforce insurance coverage for workers in key sectors, including agriculture, garments, and construction.

Mortuza Ali suggests, “Introducing mandatory health and accident insurance for formal and informal workers will significantly boost the sector.”
Introduction of Microinsurance and Digital Insurance

Microinsurance can provide affordable coverage to low-income groups.
Digital platforms, mobile banking, and fintech integration can simplify the purchase and management of insurance policies.

“With over 190 million mobile connections in Bangladesh, leveraging digital solutions is a game-changer,” says Ziaul Haque, CEO of Chartered Life Insurance, a leading insurance company.
Regulatory Reforms and Tax Incentives

Strengthening regulations under the Insurance Development and Regulatory Authority (IDRA) can improve transparency and prevent fraudulent activities.

Providing tax benefits to policyholders can encourage more people to buy insurance.
Expansion of Agricultural and Climate Insurance

Given Bangladesh’s vulnerability to climate change, experts recommend a strong push for crop and disaster insurance.

“Climate change is a major risk. Proper insurance coverage for farmers can protect them from financial shocks,” says AKM Ehsanul Hoque, FCCI, the former Director of Sadharan Bima Corporation.

Developing Insurance Literacy
One of the most significant barriers to insurance adoption in Bangladesh is the lack of understanding of its benefits. In rural areas, where financial literacy is lower, people often view insurance as a complex and unnecessary expense. To bridge this gap, experts recommend comprehensive insurance literacy programs, especially targeting low-income households and small businesses.

“A large portion of the population, especially in rural Bangladesh, is unaware of how insurance can safeguard them in times of crisis. The government, along with private sector players, must invest in education campaigns that can demystify insurance products and showcase the tangible benefits of risk coverage,” stated Kazim Uddin, CEO of National Life Insurance.

The insurance sector has the potential to play a transformative role in Bangladesh’s economy. By adopting reforms, increasing awareness, and leveraging technology, the industry can reach its target of 10% GDP contribution.

However, achieving this goal will require a coordinated effort from the government, private sector, and regulatory bodies.