People continue to abandon life insurance policies amid economic hardship

Life insurers in Bangladesh saw some 3.47 lakh policies discontinued in the January-September period this year amid worsening financial health of clients, political changeover and repeated flooding devastating lives and livelihoods in vast areas of the country.
Besides, unclear policy data and fragile customer confidence in the local insurance sector contributed to policy discontinuations, according to sector insiders.
In 2023, some 15.42 lakh customers of a total of 36 life insurance companies saw their policies lapse, according to regulatory data, and the trend did not see much improvement this year.
In the first nine months of 2024, Delta Life Insurance Company Limited topped the policy lapse list, with 56,338 of its clients shelving different types of insurance payments.
On the list, National Life Insurance Company Ltd and Popular Life Insurance Company Ltd appeared second and third respectively, according to the Insurance Development and Regulatory Authority (Idra).
Pragati Life Insurance PLC saw 23,023 of its policies lapse, the fourth highest, while Alpha Islami Life Insurance Ltd saw 21,917 of its life policies discontinued.
A policy lapse occurs when policyholders fail to pay their premiums on time, leading to the cancellation of insurance coverage.
“Lapsed policies are bad for both customers and insurers,” said SM Ibrahim Hossain, director of the Bangladesh Insurance Academy, a state-run institute that trains insurance professionals.
For customers, he explained that a policy lapse means losing the safety net that could protect them against unforeseen events. For insurers, it leads to revenue loss and negative impacts on financial stability and customer relationships, he added.
However, Uttam Kumar Sadhu, chief executive officer of Delta Life Insurance Company, is optimistic about getting back “a large number” of their lost clients by the end of 2024.
“Customers often face financial crises due to various reasons. Due to this, they understandably cannot pay the money on time,” said Sadhu, whose company had around 12.43 lakh policies in September after subtracting the discontinued ones.
“After three to four months, a large portion of them will revive,” he said. “This has been observed in the past as well.”
The CEO said initiatives have been taken to provide rewards and incentives to revive the lapsed policies. The results of the improvement will be available by the end of December.
Nura Alam Siddikie Ovee, chief executive officer of Alpha Islami Life Insurance Limited, said the main reason behind policy discontinuation is the financial crisis.
“Many people are now in financial hardship due to high inflation and the economic fallout stemming from the political changeover in August,” he added.
In addition, as many insurance agents are changing companies, taking their customers to their new firms, this is another reason many policies have been discontinued, he said.
Ovee also pointed out that many policyholders were convinced to buy policies but later found those did not apply to them. “Some policies have also been cancelled due to this.”
Md Jalalul Azim, managing director of Pragati Life Insurance, said one of the reasons behind the policy discontinuation was the fierce nationwide protest in July-August, which ultimately hurt incomes and slowed down the overall economy.
Besides, he said flooding in August and September in many areas, including Cumilla, Feni, Lakshmipur, Noakhali, Chattogram and Sylhet, deterred their agents from collecting premiums from many clients on time, resulting in policy lapses.
Azim mentioned that those policies can be reactivated by paying late fees. However, they have waived the fees until December this year to encourage customers to renew the policies.
Md Kazim Uddin, managing director of National Life Insurance PLC, said many of their customers had their policies matured recently, but problem banks could not pay them due to a liquidity crisis. This has created a confidence crisis among customers, which has had a negative impact on the insurance sector.
In view of this, many customers did not deposit the insurance premium and a lot of policies have lapsed, he said.
Apart from this, due to high inflation, which has been above 9 percent since March last year, it has become difficult for many people to maintain their normal lives, he said.
People are breaking their savings to meet family expenses, he said, adding that as a result, many are unable to deposit premiums on time, resulting in policy lapses.
Zahangir Alam, a director and the spokesperson of the Idra, told The Daily Star last Thursday that they are pursuing insurers in various ways to keep the number of discontinued policies low.
Besides, companies that have the highest number of policy lapses are being monitored closely, he said.
In the last 14 years, more than 26 lakh insurance policies have lapsed in Bangladesh. In 2009, the total number of policies was nearly 1.12 crore while it fell to 85.88 lakh in 2023, according to Idra data.