To make the concept of InsurTech familiar and to unravel the scopes, challenges & required reforms for instilling its foundation in Bangladesh, Green Delta Insurance Company and ICE Business Times have joined hands and organized a month-long signature webinar series titled “Instituting InsurTech in Bangladesh”
As we desperately wait for an effective vaccine to be invented, our world has already changed forever. COVID-19 has made some permanent changes that will be a stark reminder of these times long after the pandemic is over. None of the changes is more evident than the mass adoption of technology will have changed consumer preference forever. The pandemic has accelerated the trends which were already shaping our financial sector. The integration of technology has become pivotal for companies to survive and thrive. The phenomenon is more vivid in the insurance industry with the proliferation of insurtech.
InsurTech is in its primary stages in Bangladesh. To make the concept of InsurTech familiar and to unravel the scopes for instilling its foundation in Bangladesh, Green Delta Insurance Company and ICE Business Times are organizing a signature webinar series of 4 episodes titled “Instituting InsurTech in Bangladesh” in association with Shurokkha (an online insurance portal) and with support of iDEA project of ICT division and BASIS (Bangladesh Association of Software & Information Services).
The first episode of the webinar series on InsurTech jointly organized by Green Delta Insurance Company Limited and ICE Business Times was held last saturday (October 17, 2020), which shed light on “Concept & Analysis of Demand and Supply Side Prospects of InsurTech in Bangladesh”.
The Keynote of the session was presented by Mr. Md Masud Rana, Joint Director, Policy and International Wing, Bangladesh Financial Intelligence Unit., while Dr. M Mosharraf Hossain, Chairman, Insurance Development & Regulatory Authority (IDRA) was present as the Chief Guest of the panel.
Along with them, there were two more panelists: Md. Mezbaul Haque, General Manager, Payment System Department, Bangladesh Bank, and Farzanah Chowdhury, Chartered Insurer, MD & CEO, Green Delta Insurance Company Ltd. The webinar was organized in association with Surokkha and with support of iDEA project of ICT division and BASIS.
What is InsurTech
The keynote presenter, Md Masud Rana, started the session by explaining the concept of Insurtech and its implications in Bangladesh.
Insuretech is the technology that lies behind the creation, distribution and administration of insurance business.It includes things like smartphone apps, consumer wearables claims processing tools online policy handling and automated processing. These technologies help insurance providers collect and analyze customer data so they can target the right customers at the right price and encourage them to behave in a less risky way. It helps to cut the cost of claims .
Of course insurers always analyse information about policyholders but in this era of big data they’re now looking to tap new sources of information such as social media use advanced technology to process all this data use machine learning and artificial intelligence to make better predictions and apply this knowledge to improve decision-making and business planning.
Therefore, it’s probably no surprise to learn that insurance firms are backing insurer tech startups working together for a more efficient insurance platform.
For example, a firm has created automatic digital insurance agents chat BOTS but use personalised user data to tailor conversations with customers other startups that have built apps that offer insurance on for example an hourly basis ideal if a customer wants to borrow a friend’s car for the afternoon.
Also there’s blockchain which may be useful in the battle against theft and insurance fraud,it’s basically a peer-to-peer public distributed ledger, a decentralized record of information that is open to multiple operators, it allows the creation of a tamper-proof database. Insurtech can revolutionise the insurance sector by incorporating the latest technologies that will enhance transparency,accountability and competence.
Dr. M Mosharraf Hossain:
The entire idea of insurtech is incredibly thought-provoking. We now live in a world where any financial activity without digitalisation would be analogous to crossing the road while keeping your eyes closed. Digitalisation has become an essential part of modern life, it has become one of the basic needs of human life.
I do not completely agree with the notion that the insurtech sector is “unexplored”. Rather, there have been bits and pieces of technology-driven operations in the insurance sector for the past few years. It is imperative to bring the operations under formal structure and regulation to ensure accountability. From my experience, the insurtech service providers are providing sets of solutions. One for reporting to the regulators and tax department and the other for authentic evaluation. Such malpractices must be eradicated from the industry to ensure credibility. It can be achieved by facilitating licensed insurtech operations through a robust legal framework and accountability.
I strongly believe, our panel member, Masud Rana is very seasoned in looking after the MLCFT issues at the end of the Central Bank. He has also written a book on the topic, another awaiting publication. The statistics mentioned in this session will help formulate a robust growth strategy for our insurance sector.
Md Mezbaul Haque:
Bill Gates once stated, “Banking is necessary for our lives but banks are not”, it was a reflection of the shifting dynamics of the global banking system. In the era of the fourth industrial revolution, growth will be driven by technology. Millennials and the generations following them will not likely visit any financial institutions in person. They are tech-savvy and seek every solution on their cell phone. Stakeholders in the financial industry have to factor in the changing demand due to technological advancement. You have to deliver the services to them through their smart devices and that is only possible through incorporating technology in your services. Failure to achieve technological integration will prove fatal for the industry, it can render the sector obsolete. Fintech or Insurtech has posed a challenge to the industry, it cannot evolve to adopt the transformation, the industry will inevitably fade away due to the lack of competitive advantage.
The regulators have to find a balance between customer protection and regulation risk. Similarly, market operators will face the challenge of absorbing this technology. They can either partner with insurtech companies or develop their technology, either way, it is an inevitable progression of the sector.
Insurtech is not limited to digital insurance or making a product available in the digital space. Its implications go far beyond the general premise, insurtech allows us to consider the needs of the individual customer. With the help of Big Data, IoT and AI, numerous insurtech solutions will revolutionise the industry. I completely agree with our chief guest, Dr Mosharrof Hossain, that insurtech is slowly being implemented in Bangladesh. Speaking of demand-based insurance, there are a lot of examples around the world which can have considerable impacts on our lives. In Australia, people have access to on-demand mobile-only property insurance.
As a CEO, I have suggested increasing the range of products from yearly contracts to a much shorter period based model. It is very much possible to have an insurance structure where farmers can make claims based on weather and satellite forecasts.
Becoming a tech-savvy nation s key to ensuring a better quality of digital services. The first-ever digital insurance platform was unveiled by Green Delta Life Insurance Company Limited, we take great pride in that. However, becoming tech-savvy is subjected to a significant amount of investments.
The government of Bangladesh has commenced two amazing projects to catalyse digital adoption among the youth. A blockchain competition where I was one of the judges, called upon university students to find out tech solutions and implementation of insurance technology was a big part of it. It was followed by another competition involving university startups.
Concurrently, there have been a lot of collaborations between insurance and tech companies. Zhong An is China’s first property insurance company that sells all its products online along with handling claims. China’s Internet service and insurance titans co-launched the country’s first online insurance company indicating that the booming Internet-based financial services market is further expanding. They have 206 million customers and 1.6 billion policies in place. There are numerous success stories of insurtech across the world and Bangladesh governments success in digitising the country will play a big role in implementing insurtech in Bangladesh. Our start-up scene has seen a rapid boom and insurance companies can incorporate technology in their operations through joint collaborations. However, the insurance companies have to undertake a multidimensional approach incorporating every stakeholder in the digitising process. The proliferation of insurtech and be enhanced by providing government incentives for the digital transformation which will, in turn, play a pivotal role in ensuring better services including agriculture insurance. Lack of awareness among the general population has been the biggest impediment to the growth of the insurance industry in Bangladesh. Digitalisation will play a pivotal role in enhancing insurance penetration in our country.
The panelists also answered key questions asked by the viewers on the topic:
Insurance policies are subjected to advance payment from the policyholder. Can our insurance companies and payment ecosystems work together to make the process more efficient? How can the Central Bank properly guide its implementation?
Md Mezbaul Haque:
Our payment ecosystem has experienced massive changes over the last decade. We are now operating four electronic payment systems simultaneously for wholesale and retail payments. They cover all kinds of payment methods, including real-time and preferred. We also have a real-time gross settlement system which enables instant settlements of large wholesale payments. Therefore, our payment ecosystem is quite robust and accommodates every payment method of the insurance industry. However, it is imperative to make the stakeholders aware of the features that exist in the system which we are eager to elaborate on upon inquiry.
Financial literacy among our general population has impeded the proliferation of digital financial services. How can we improve the financial literacy among the masses provided it might be pivotal to the adoption of more intricate services?
Despite the challenges, I believe, the prospects of our financial sector are very bright. We have a growing youth population where more than 65% of the country’s population is under twenty-three years. The last decade has seen a massive adaptation of mobile phones amongst all ages. More than 86% of adult men 50% of adult women use mobile phones. The internet penetration is increasing, which now stands at 58%. Technology has enabled people to adopt digital financial services irrespective of their educational background. Most low-income households in our country use MFS services to send money to their families. International development organisations are funding companies to support Micro, Small and Medium Enterprises (MSME) operations. Ensuring financial literacy is a fundamental SDG goal, and MFS services are playing a pivotal role in improving financial literacy in developing countries. Ensuring financial literacy is not exclusively the government’s responsibility; it also depends on individual perseverance. I believe, within five years, the digital financial sector is going to experience significant growth as Bangladesh is one of the fastest-growing economies in the world, and the implementation of digital Bangladesh has made everything possible.
Recently, the authorities took a move that police cannot file cases against third party insurance companies. As a regulator, how does IDRA evaluate this decision?
Dr. M Mosharraf Hossain:
It is a critical contemporary issue which has been a significant talking point in the industry. The core problem lies in the misinterpretation and misuse of an article of the insurance law by the transport owners. The Honourable Prime Minister directed the authorities to end third party insurance as it fails to provide the expected service; rather, its existence is abused to fulfil compliance requirements. However, we also have to address the risks passengers are exposed to due to the lack of insurance. Therefore, the stakeholders of the industry have to come to a solution for the more significant good for the people.
There are also a couple of issues that need to be addressed. The driver and helper should also be covered compulsorily. We are in discussion to cover road passengers just like other modes of transportation (air, railway, water) with the respected authorities. It is imperative to ensure the safety of all the passengers and staff, and therefore, it should be included under comprehensive insurance. It is a pressing issue and hopefully will be resolved at the earliest.
Insuretech is still in its initial phases in Bangladesh, what kind of capacity building is required to ensure robust growth of the sector? How would you evaluate its prospects in Bangladesh?
Md Mezbaul Haque:
Fintech and Insurtech are experiencing immense growth in Bangladesh, and its implications are unlimited. We are witnessing a new concept being introduced every other day.
Data analysis and risk assessment are vital parts of the insurance business. Technologies such big data, IoT and AI, are being incorporated in the business at a rapid pace.
While working with fintech, Bangladesh Bank has noticed that the market gets exposed to innovations every single day. The innovations have to be evaluated, incorporated and regulated through a proper mechanism. Therefore, it is imperative to have such infrastructure in place. Bangladesh Bank has recently established Regulation of Fintech Facilities Office under the payment system department. Regulators play a crucial role in evaluating the compatibility of any innovation in our financial system. Innovation is essential, but it has to be based on customer needs. Bangladesh Bank has a committee of regulators across the financial sector which facilitates cooperation and coordination across different financial institutions, and it will continue to provide all the necessary assistance to all the stakeholders according to their requirements.
How crucial is it to establish trust between the customers and companies for the success of insurtech? Please tell us something about the logistical preparedness of the GDIC team for enabling InsurTech in Bangladesh.
Trust is crucial for the success of insurtech or the insurance industry in general. Interestingly, insurtech will enhance the trust of consumers by facilitating transparency and competence. Insurtech will guarantee an end to end transparency and security of contract and data; it will also enhance the competency of the providers with greater efficiency. However, the companies need to work in capacity building and have tech experts on their board to execute the process.
We (GDIC) have been working for over a decade to establish a tech-savvy platform. We have been successful in creating a paperless office because of the presence of skilled team members. For example, we inaugurated “Nibedita” in 2016, which is a comprehensive app with a lot of value-added services. It has some essential features like a panic button in case of any immediate danger. We often say “Nibedita ensures the dream of a woman”.
Similarly, we have settled the claims of the farmers affected by the heavy rainfall due to Cyclone Amphan. Therefore, proportionate claim settle is being made possible by the use of technology, and that is enhancing trust among customers. We have been able to create this platform by integrating knowledge, experience and youth and are dedicated to innovating similar projects in future.
As Insurtech is in its initial stages in Bangladesh, what kind of guidance the insurance companies can expect from IDRA regarding its implementation?
Dr. M Mosharraf Hossain:
Digitalisation is pivotal to the success of the insurance industry. IDRA has undertaken a 6 billion USD project in the sector, of which 65% of the resources are allocated for digitalisation of the industry. It is one of the largest projects in progress under the finance ministry. The amount of resources allocated in digitalisation underscores its importance. The project is focused around four state-owned organisations which will facilitate the digitalisation of the key regulators. It will, in turn, ensure greater efficiency and enable good governance in the sector. The process will ensure greater penetration and transform policyholders into advocates. The industry requires time to reap the benefits, but we are certainly moving in that direction.
Do you think we can establish a peer to peer insurance model in this fixed tariff insurance market?
I firmly believe we need policy reforms regarding our tariff regulations. I want to request Mosharraf Sir (Dr. Mosharraf Hossain) to evaluate the current structure and consider allowing different forms of the insurance contract and tariff market. We cannot go to de-tariff because of technological constraints. However, by providing a clear end to end guidelines, we can make it more efficient. We have to implement the use of big data, IoT and artificial intelligence. Ten new economic zones have recently been established in Bangladesh, insurtech can be established in each of these zones to ensure transparency and efficiency.
Consequently, there cannot be “one size fits all” approach to this, rather individual policies for each type of customer. The massive adaptation will also generate a demand for cyber insurance. Therefore there needs to be a re-evaluation of the fixed tariff policy to adapt to the new normal. I believe it will happen in stages but we must start with digitalisation.
Can you please comment on the scalability and implementation of Insurtech in Bangladesh?
Md Masud Rana:
Scalability depends on the pace of digitalisation and the adoption of the tools to personalise services, and the demand entirely depends on customers. Concurrently, customer trust depends on transparency and competency of service provided by the companies.
Therefore, the first condition on the demand side that you deliver products according to individual customer needs. It can be achieved by detailed market analysis and transparent claim handling. On the supply side, the sector needs to operate under legally binding regulations completely. Also, the introducers of Insurtech must be nurtured under favourable circumstances. It can be done through an incubation facility under IDRA. It will help them to assimilate their innovations by allowing them to test their prototype.