"The success of Islamic Banking in Bangladesh indicates that people here are passionate about the philosophy of Islamic economy and success of Islamic banking has led to increased interest in Islamic insurance institutions," said Abul Kalam Azad, Chief Executive Officer (Current Charge) of Takaful Islamic Insurance Limited in an exclusive interview with Bangladesh Post.
Azad observed that the unethical and unfair competition is destroying the insurance industry like cancer. This is why the insurance industry has not developed at the expected pace.
Replying to a set of queries, the Takaful Islami Insurance CEO described the problems, prospects and current scenario of the country's non-life insurance industry.
The excerpts of his interview is as bellows:
Bangladesh Post: Please brief us about the prospects, demands and acceptability of Shariah-based insurance business both in life and non-life sector in Bangladesh.
Abul Kalam Azad: The success of Islamic Bank in Bangladesh shows that many people of Bangladesh highly favour Islamic system in the affairs of the national economy. The success of the banking sector of the Islamic economy has led to increased interest in Islamic insurance institutions.
As a result, Islamic insurance was approved in 2000 which continues to this day. In this continuation of Shariah laws in the economy, almost all banks have introduced Islamic banking branches. In the field of insurance, conventional insurance companies have gradually converted to Islamic insurance.
This trend is particularly advanced in the field of life insurance. Met Life Company has also introduced Islamic insurance. Already 4 more non-life insurance companies have converted to Islamic insurance. Consumer interest in Islamic insurance is also increasing day by day.
So, undoubtedly the demand and potential of Shariah law in insurance sector is brighter. It is hoped that Islamic insurance in Bangladesh will achieve unexpected success, inshallah.
Bangladesh Post: It is observed that the third or latest generation insurance companies, especially in non-life sector, are surviving through facing unhealthy competition. How would you evaluate this?
Abul Kalam Azad: From the first generation to the latest approved companies are engaged in unfair and unethical competition. This competition is noticeable in almost all non-life insurance companies except a few companies. Companies are losing their premium due to this competition while the government is losing revenue. For this reason most of the companies, except a few companies, are not able to generate any profit from underwriting business. Almost every company is accounting with Gojamil.
Thus, the insurance industry is facing extinction in the near future. In neighbouring countries where the contribution of the insurance industry to GDP is above 6 percent, Bangladesh has taken less than 1 percent.
In this regard, my opinion is that if the chief executive officers of the insurance companies take a sincere decision, then it is possible to play a significant role in the national economy by protecting the insurance industry from such unfair and unethical competition.
Bangladesh Post: As an expert in non-life insurance sector of the country, would you please describe what could be the new avenues be in respect to the industry’s scopes to widen its network?
Abul Kalam Azad: Since Bangladesh is a major agricultural country, crop insurance, cattle insurance, natural calamity insurance can be introduced. Introduction of personal accident insurance, personal health insurance at micro level is the need of the hour. Having big buildings but no insurance, house hold contents insurance can be introduced. It is possible to cover all the daily consumables of the people under insurance which is available in the developed world.
Bangladesh Post: We know that Takaful Islami Insurance is cherishing the vision to providing economic security to the nation conducting Tabarrur-guided Islamic Shariah based-schemes. Can you please elaborate the issue? What are other set goals, your company is pursuing?
Abul Kalam Azad: Shariah based insurance system does not involve gambling, gharar and interest. The premium paid by the client is considered as deposit. There is a clear commitment to pay back customers with dividends at the end of the term. As the company does not have the right to spend the premium money. There is no ambiguity in the policy of distribution of dividends to the customers by investing the money deposited by the customers.
Therefore, customer deposits are 100 percent safe. Profits on investments are distributed proportionately in light of the principles laid down by the Shariah Council. Due to this, on the one hand, the interests of the customers are protected and on the other hand, due to the policy of using the shareholder's funds, the company has clarified.
There are different models of Islamic insurance. It is not possible to discuss on a small scale. Details can be discussed at a later stage.
Bangladesh Post: Please tell us about the challenges of market expansion of non-life insurance companies on the perspective of Bangladesh, specially mentioning the policy guidelines by the government.
In my view the obstacles to the development of non-life insurance companies in Bangladesh are as follows:
A) Number of companies: In light of the number of businesses in the country, the number of companies is very high due to which the business has to resort to unethical competition.
b) Lack of manpower in regulatory agencies: Number of banks in Bangladesh is 77 and number of insurance companies is 86. Bangladesh Bank employs thousands of officers and employees to control 77 banks, 24-storey building, own establishment in divisional city and IDRA does not have 86 officers/employees. Therefore, supervision is not being done properly.
c) Timely Tariff Issue : Due to variation in premium rate of tariff rate our premium rate is not international standard. Due to which our country is losing premium.
d) Inefficient Management: lack of properly educated and skilled management is not being developed for the insurance industry. Talented people feel shy to work in the insurance industry due to lack of confidence. Part-time or part-time jobs do not foster professionalism. Well qualified people do not come in this profession. Insurance profession is respectable in other countries of the world, but in Bangladesh, hearing about insurance profession is frowned upon.
e) Lack of confidence: People have not developed confidence in the insurance industry in Bangladesh. This industry is not growing due to lack of trust. People do not insure due to lack of trust. they only insure the assets and not the liabilities.
f) Unfair and Unethical Competition: Unethical and unfair competition is destrying the insurance industry like cancer. This is why the insurance industry has not developed and is not happening now, it should be stopped immediately.
g) Reinsurance Company: In our country 50 percent reinsurance is compulsory with Shadharan Bima Corporation. Undertaking of property insurance risk will be easier and time efficient if initiative is taken to establish reinsurance companies in the private sector.