Stringent monitoring and evaluation of the regulatory framework is required to create standards that can help curb corruption and negligence by insurers, said Mr Mamun Rashid, an economic analyst and partner at PwC.
Writing in the Dhaka Tribune, he said that there must be clarity and integrity in insurance sales practices. Insurance is fairly more complex in nature than most other products and services, which provides a platform for information asymmetry. This means that unfair policies and malpractices could be undertaken by riding on customers’ comparatively minor level of technical knowledge, hence generating inefficiency in the insurance market.
He also said that the system needs to become more customer-oriented. This includes re-examining the traditional framework and reconstructing an insolvency regulation which is in alignment with evolving and varying customer needs.
Bolstering insurance regulation
Further research and development will be required in the technical and financial paradigms to bring about more innovative features to providing insurance solutions; an increase in insurance awareness initiatives, and much importantly, a robust programme for extracting and refining a pool of innovative and sincere professionals.
Mr Rashid said that the institutional infrastructure of Bangladesh’s insurance sector, namely the Insurance Development and Regulatory Authority (IDRA), is struggling, especially in terms of an impoverished regulatory capacity, as well as the lack of qualified personnel — which itself might be critically stemming from the weak operational capacity of the Bangladesh Insurance Academy (BIA).
He also said that the geographical position of Bangladesh exposes the nation to a wide range of natural disasters, like floods, earthquakes, and cyclones. By bolstering insurance regulation, and modernising the system to deepen penetration of microinsurance, a strong level of economic resiliency could be gained in the face of unanticipated forces, especially in rural Bangladesh.
Insurance regulatory reform is not just an aid for a catastrophic aftermath but it can also be a driver of exponential economic growth. By streamlining the regulatory infrastructure in terms of data warehousing, governance, systems, resources, and processes in adjustment with international insurance standards, Bangladesh can exhibit a reliable and well-balanced insurance platform. This, in turn, can boost investor confidence, leading to an increase in both local capital investments as well as foreign investments. A