The Microinsurance Market in Bangladesh: An Analytical Overview

This paper provides an analytical overview of the current state of the microinsurance market in Bangladesh comprising of products offered by commercial insurance companies, microfinance institutions (MFIs) and those by INAFI’s MIME programme. For the commercial life insurers, available products are characterised by a mix of inadequate risk coverage, excessively high premium rates unrelated to any plausible model of mortality of the insured, lengthy process of claim settlement and, above all, high costs of intermediation. Such products therefore appear unattractive to the vulnerable. The MFIs, on the other hand, mainly offer loan insurance thus minimising lenders’ risks and having a much quicker claim settlement process. Some MFIs also offer a variety of other products (notably, term life, health and livestock insurance). However, the health plans reviewed in the paper clarify that most of these are not examples of true insurance products since the bulk of the risk eventually remains with the insured. The requirement of cash transactions in each step of the way is a further drawback eroding popularity of the products. Finally, it is seen that, while INAFI has been implementing both term and endowment life policies, the premium structure appears rather steep vis-à-vis the cost of risks, presumably reflecting high costs of intermediation. In view of very limited competition in the market for commercial life coverage, regulatory directives may be targeted at improving competition in each segment of the market, thereby fostering innovation and fair play.