Welcome to Business Outlook
Related Articles
The claim settlement rate of life and non-life insurance companies in Bangladesh still lags behind the world standard as well as that of neighbouring countries such as India and this is the main reason for low public confidence in the sector.
From 2009 to 2019, clients submitted claims worth Tk 52,041 crore in total but only Tk 40,816 crore, or 78 per cent, had been settled, according to a publication from the Insurance Development and Regulatory Authority (IDRA).
In India, the settlement-to-claim ratio of the country’s top life insurers was in the range of 98.3 per cent to 99.3 per cent in 2020-21, according to reports in the Indian media.
“The main reason is the lack of proper claim evaluation,” said Sheikh Rakibul Karim, chief executive officer (CEO) of Guardian Life Insurance Limited.
Many companies still have manual systems so a settlement gap remains in the sector but the positive thing is that some firms that now operate with automated systems can settle claims quickly.
“So, the number of claims settled recently rose compared to previous years,” he added.
Besides, the IDRA has helped improve the local insurance sector through various drives and other measures since its inception.
As a result, the claim settlement ratio has been rising over the years and in turn, so too has the peoples’ confidence.
From 1973 to 1990, life and non-life claims worth Tk 790 crore were submitted. Of this amount, Tk 424 crore, or 53 per cent, was paid out.
Now, the claim settlement ratio stands at 78 per cent, the IDRA data shows.
“However, the global standard for claim settlements is 97-98 per cent,” Karim said while suggesting that if the regulator enhances its monitoring, then insurance companies would try to ensure better claim settlement.
In the case of Guardian Life Insurance, the claim settlement rate has been about 97 per cent for the last four years but the insurer wants to make it even better, he added.
“The claim settlement rate is not good enough in our country due to various types of corruption in the companies,” said Md Jalalul Azim, managing director and CEO of Pragati Life Insurance Limited.
The regulator also could not play a proper role in improving the situation of claim settlements, he added.
Claim settlement rates of all insurers should be improved further to increase confidence among the people as it should be above 90 per cent.
There is a rule to pay the claims within 90 days but many companies show a lack of professionalism in disbursing settlements.
Recently, the Bangladesh Insurance Association (BIA) and the IDRA have been making sincere efforts to this end.
As a result, the claim settlement rate has improved a bit from what it was just five years ago, Azim added.
Sheikh Kabir Hossain, president of the BIA, said the insurance sector was once neglected and so, the settlement rate was also lower.
“I don’t see it [78 per cent settlement rate] as bad. Instead, it is good thing that the settlement is now much higher than what it was previously,” he said.
Until the enactment of the insurance law in 2010, a British law governed the sector.
“When our insurance sector will be automated fully, all claims and achievements will become higher,” added Hossain, also chairman of Sonar Bangla Life Insurance.
In 1973, the total premium of the insurance sector was Tk 11.90 crore and it rose to Tk 5,317 crore in 2008.
In the last year, the collective insurance premium soared to Tk 14,392 crore, as per IDRA data.
On the other hand, Md Main Uddin, professor and chairman of the department of banking and insurance at the University of Dhaka, said a 78 per cent claim settlement rate is not a good one.
“The picture bears the feeling that the insurance sector has not developed. If clients are powerful, then the companies do not bother much with the claim. If not, then they make delays,” Uddin added.
Ala Uddin Ahmad, chief executive officer of MetLife Bangladesh, said digitisation makes the process of settling claims easier.
“So now, we allow our clients to pay their premiums digitally. What’s more, they can even submit claims online,” he said.
MetLife Bangladesh settled insurance claims of Tk 1,792 crore in 2021.
To make its services more convenient and trustworthy for customers, the company has started using artificial intelligence for the online submission of insurance claims.
As a result, customers can now receive their claims within three days upon uploading the correct documents.
“Sometimes, the process is complete within three hours and can clients get their money back digitally without having to be present at our office,” Ahmad said.
“Such activities increased peoples’ satisfaction and confidence,” he added.
Digitalisation in claim settlement may be an example in the industry to boost confidence among people.
Although the claim settlement rate rose in the life and non-life insurance sector, around 22 per cent of claims are still refused, which is the main cause for low confidence in the sector.
Shamima Nasrin, senior assistant vice-president of Prime Insurance Company, said an information gap is the main reason for claims not being settled or taking too much time.
“People in our country do not cooperate with insurance companies because they do not have a positive idea about insurance. But to settle claims, the customers need to be honest as well,” she said.
There is also a reluctance in many insurance companies to hire surveyors.
In addition, the insurers often do not convey the proper terms and conditions to customers.
So, the insured misunderstands the risk or scope of coverage and then claim what they are not entitled too.
“They assume that the company is refusing to settle the claims but sometimes, the reality is that they expect claims on uninsured matters,” Nasrin added.
(TDS)
