Real Estate Factor for Non-Tariff Insurance

The non-life insurance market in Bangladesh currently comprises a number of companies that significantly exceeds prevailing market demand.

This imbalance has intensified competition within the sector, and in some instances has led to practices that may be considered irregular or inconsistent with ethical standards.

Such behaviour has contributed to a negative public perception of insurance companies and, regrettably, diminished trust in the profession.

Consequently, insurance practitioners are often undervalued socially compared to professionals in other sectors.

However, a closer examination of the property insurance segment reveals a more structured and disciplined reality.

Large policyholders typically pay premiums in accordance with established tariff rates.

Insurers assess risks based on standardized underwriting principles and regulatory guidelines before determining premium levels.

In contrast, when businesses obtain bank financing, they are often required to provide collateral significantly exceeding the value of the loan.

Insurance, therefore, represents a comparatively efficient and cost-effective mechanism for risk mitigation.

Insurance should not be viewed merely as a financial product, but rather as a strategic instrument that supports business continuity and economic resilience.

In the event of loss or damage, insurers provide compensation in accordance with policy terms in exchange for relatively modest premiums.

By safeguarding businesses, infrastructure, and personal assets, insurance serves as a critical pillar of financial stability and confidence.

Accordingly, the non-life insurance sector should be regarded not simply as a competitive marketplace, but as an essential framework for risk management and financial protection.

Sustainable development of the industry depends on sound regulatory policies, efficient corporate governance, professional underwriting standards, and enhanced customer awareness.

The insurance sector is a vital driver of national economic development.

By mitigating financial risks faced by individuals and enterprises, insurance enables entrepreneurs to invest, expand, and innovate with greater certainty.

A stable insurance industry directly contributes to broader economic growth and resilience.

To expand insurance penetration and bring more customers under coverage, it is necessary to foster a market-oriented environment.

Premium rates for domestic insurance products should gradually align with global free-market principles.

In this context, transitioning the non-life insurance sector toward a non-tariff regime represents a timely and strategic reform initiative.

It is understandable that some insurers may initially be cautious about adopting a non-tariff system, and certain industry professionals may fear a potential reduction in business volume.

However, empirical evidence and market experience suggest that when risks are accurately assessed, premium rates are properly determined, and claims are settled promptly and transparently, a non-tariff environment can significantly expand business opportunities.

Greater pricing flexibility encourages transparent competition, promotes technological advancement, facilitates international knowledge exchange, and ultimately strengthens customer confidence and market dynamism.

Engagement with global insurance practices, advanced risk management tools, and modern governance standards will further enhance professional expertise and institutional capacity.

This progression will enable Bangladesh’s insurance industry to align more closely with international standards.

From a regulatory perspective, it is essential that all insurance companies publicly disclose their solvency margins, with strict oversight to ensure compliance.

Transparent reporting of financial strength enhances policyholder confidence and provides assurance regarding claims-paying ability.

Additionally, further liberalization of the reinsurance market would strengthen risk distribution mechanisms and support the long-term sustainability of the sector.

Finally, the insurance industry plays a critical role in restoring financial stability following natural disasters, accidents, or unforeseen losses.

By providing timely compensation, insurers help individuals, businesses, and communities recover more rapidly.

For this reason, a robust and well-regulated insurance sector is indispensable to building a resilient and prosperous economy.

(The author is Chief Executive Officer, Bangladesh General Insurance Company PLC)