Enhancing insurance penetration
It is believed that the Bangladesh insurance industry is overcrowded in terms of the number of insurance companies for the size of its economy. But the sector is yet to develop. The insurance sector reports suggest there be a lot of scopes for development.
Too many players are competing for the same piece of cake.
According to some reports published recently, the present insurance penetration stands at 0.40% which is probably the lowest among the SAARC countries.
The Bangladesh insurance sector appears to be struggling with apparently no solution in sight.
There are various ways and means for enhancing insurance penetration.
But this article is solely focused on proposed compulsory insurances namely “Professional Liability” and “Product Liability” and how it can make a difference to the present dismal condition.
Professional Liability and Product Liability insurances are made compulsory by law in many countries around the world. But this territory remains largely unexplored or untapped hitherto. Courts in various countries have a tendency to award higher compensation for the victims or their dependents for professional negligence or faulty products.
Professional Liability or Professional Indemnity (PI) Insurance
Risks covered under Professional Liability insurance
Professional Liability or Professional Indemnity insurance covers the risks of professional negligence, errors and/or omissions committed by the professionals during their course of duties.
Organizations/professional bodies that come within the purview of this insurance
- Professionals namely doctors/physicians/nurses/technicians working for Hospitals/Clinics/Diagnostic Centers etc.
- Lawyers/Solicitors working for a Law Firm
- Architect and Consulting Engineers working for an engineering firm.
Other professional bodies who may be included are:
- Chartered Accountants
- Insurance/Reinsurance Brokers
- Financial/Investment Consultant
- Credit Rating Agency etc.
Examples of professional negligence and its harmful effects
- A physician dispensing a wrong prescription which may aggravate medical conditions and or death to a patient.
- A physician making a wrong diagnosis which may lead to wrong treatment and cause bodily harm and/or death to a patient .
- A lawyer giving wrong advice landing a client to financial difficulties.
- An architect selling a wrong design for a building which may lead to cracks or even collapse of a building.
Legal recourse for the victims and their dependents
In all the above examples professional negligence is evident. The victims and their dependents have a right to legal action against the defaulting parties. But in reality most cases are not fought in the court apparently because of financial constraints of the victims and the time and hefty expenses involved in cumbersome legal processes.
In most cases the defaulting parties get away without paying any compensation to the victims or to their dependents.
In case of making these insurance compulsory by law, victims or their dependents will face less hassle and may directly approach the defaulter’s insurance company for compensation thus saving time and trouble in going for litigation.. .
Product Liability Insurance
This insurance is particularly suitable for large and small organizations engaged in manufacturing or production of consumer products/goods.
Product liability insurance is like a safety net for companies. Imagine a company is selling products, like toys or food. Sometimes something can go wrong with these products, and people might get hurt. The product liability insurance will help protect the company if someone gets hurt.
For example, imagine someone buys a toy from the store and it breaks when they play with it. If the toy was made poorly, then the person could get hurt. If the company has product liability insurance, then the insurance could help pay for any injuries caused by that toy.
In this way, product liability insurance protects companies from having to pay too much money if someone gets hurt because of their products.
Manufacturing companies that come within the purview of this insurance.
- Pharmaceutical companies engaged in manufacturing drugs/medicines
- Industries engaged in manufacturing heavy machinery and equipment
- Manufacturers of aircraft engines
- Manufacturers of dairy/milk products
- Manufacturers of food products/ beverages etc.
Examples of product liability and its harmful effects.
- An aircraft falling from the sky due to faulty engine
- A patient suffering from taking faulty medicine or drug
- A fire caused by faulty machinery in a factory
- Death or injury to a person by eating foods containing harmful elements etc.
What is covered under a Product Liability insurance
Product Liability insurance covers the following aspects:
- Manufacturing defect or fault
- Faulty technical manual
- Faulty or defective warranty etc.
Extension under a Product Liability insurance
Product Liability insurance may be extended to include “Goods sold and Supplied”
This extension is useful for Hotels/Restaurants/Outdoor Caterers/Resorts/Motels etc. who sell and supply food items etc
Examples of harmful effects of goods sold and supplied.
A hotel or a restaurant may sell or supply stale/rancid food to a customer causing food poisoning. Leading to health problems or even death.
The Bangladesh insurance sector is past its infancy stage.
With the economy growing steadily, it is time to move to the next phase and try some unique and new insurance products which have so far been largely untried. and untested.
Staying with the old traditional insurance products will not help the cause and get the insurance sector out of the woods.
Professional Liability and Product Liability insurance have a tremendous potential .They can generate
hundreds of crores of taka in premium for the insurance industry and a big revenue for the government.. .
This will not only provide a much needed boost to the insurance sector but it will also support and strengthen “Consumer Protection Rights”.
Taking all these positive factors into consideration, the government should consider making these insurance compulsory by enactment of necessary insurance law.
This decision of the government will not only benefit the insurance sector in terms of enhancement of insurance penetration, but it will also benefit other concerned parties as well.