Chartered Insurer
Green Delta Insurance Company Limited
General Update on our 2023 Performance:
The company had to contend with a year that was full of ups and downs. Markedly, our Gross Written Premium (GWP) for 2023 was the highest ever in our history at BDT 4,545 mn, which belied the challenges in the external environment. While this may be apparent, what was actually the case was that we reported an extraordinary gain due to risk underwriting for a couple of large infrastructure and power plant projects during the year whose premium was linked to the US$. We could book the gain due to a strong US$ against the BDT.
On the other hand, there were a series of fire incidents during the year that triggered higher claims that needed to paid in this segment. We have a large business in Bangabazar, a popular market for RMG in Dhaka. However, a devastating fire gutted the market in April 2023 and we had to settle claims of almost BDT 19 crore due to the incident. The year also saw a number health claims being raised. These two had a significant impact on paid claims, comprising almost 96% of the total claims paid for the year.
Thus, higher claims and higher operational expenses due to inflationary pressures depressed our bottom-line that growth by 51% during the year to BDT 47 crore.
I also want to touch upon how we commenced the revamping of our branch distribution model where our ambition is to transform our branches to profit centres. In this regard, we are undertaking numerous initiatives in operational efficiency. Further, we are also re-examining our branch cluster business where the idea is to add marketing and sales personnel so that these become a front-end marketing hub with maximum efficiency and the branches become the usual customer engagement and back-end centers.
We have also implemented our proprietary Core Insurance Software that is enabling us to lead the charge in InsurTech and automate and digitalize processes to not just become increasingly a paperless environment, but also helping save costs.
Review of the External Environment:
COVID-19 appeared to fade out of public memory in 2023. However, considerable geopolitical polarization and macroeconomic volatility, exacerbated by the Russia- Ukraine conflict and now also the Israel-Hamas war, has subdued post-pandemic global recovery. Within this backdrop, an energy crisis has fuelled inflation beyond expectations, driving further interest rate increases and resulting in heightened currency and market volatility. This has made the operating environment all the more complex and challenging.
In Bangladesh too, the economic environment remained less buoyant, with inflation elevating the cost of essentials and forcing a rethink on consumption. Corporates too, especially in the medium and small sector, prioritized cost savings to readjust their business to the pressured environment.
Coming to the global insurance industry, earthquakes in Turkey and Syria, storms in the US and other natural calamities caused an estimated US$95 billion in insured losses in 2023, above the long-term average, as per Munich Re. Total losses from natural disasters, including those not covered by insurance, were US$250 billion in 2023. This is similar to 2022 and the average of the previous five years, but above 10-year and 30-year trends. The earthquakes in Turkey and Syria were the most destructive events, causing 58,000 deaths, US$50 billion in overall losses and US$5.5 billion losses covered by insurance.
Climate change has truly arrived. The year 2023 was the planet’s hottest year on record by a substantial margin and likely the world's warmest in the last hundredthousand years, as per the European Union’s Copernicus Climate Change Service (CS3). A re-pricing of risk seems imminent for insurers to protect their balance sheet.
In Bangladesh, the general insurance industry remained relatively tepid in 2023, with insurance continuing to remain a push product. Ultra-low insurance penetration, general lack of trust in insurers and misplaced risk perception have bogged down the industry. However, it is undoubted that the long-term prospects of insurance in Bangladesh are bright as there is scope to transform the challenges into opportunities.
A look at Bangladesh’s General Insurance Industry:
The general insurance industry in Bangladesh is poised for significant growth with a projected CAGR of 8.8% from 2023 to 2027, according to GlobalData Insurance Intelligence Centre. This growth will likely see gross written premiums rise from US$620.8 million in 2023 to $809 million in 2027.
General insurance penetration stood at 0.15% in 2022, which is significantly lower compared to the penetration in regional economies such as India (0.95%), China (1.17%) and Japan (1.73%). To increase insurance awareness and attract new customers, it is commendable that the government and IDRA have proposed a series of steps to boost general insurance growth. This growth will be supported by favourable regulatory developments aimed at improving market practices to enhance customer confidence and boost insurance penetration. To augment penetration, the IDRA is also promoting micro insurance products targeting low-income individuals. These products cover risks related to property damage, including crop and livestock losses due to extreme weather events, making insurance more accessible to a broader segment of the population.
Another significant development in increasing insurance penetration was the introduction of a bancassurance regulation in Bangladesh in 2023, which will allow local banks to partner with general insurers to sell insurance products. This regulation will improve the financial literacy of the population and raise awareness, further supporting the growth of the insurance industry.
Thus, we believe that government schemes for low-cost insurance products, regulatory support and bancassurance will play a pivotal role in enhancing insurance penetration in Bangladesh over the coming years.
Impact of Macroeconomic Factors on Performance:
Though macroeconomic factors weighed on the economy, we at Green Delta Insurance continued to focus on our strategic drivers to accomplish our performance goals despite the adversities. These drivers included digital transformation, product innovation, customer-centricity, partnerships, sustainability, data security, regulatory compliance, and employee development. These enabled us to stay competitive and adapt to the evolving market dynamics. Our focus on new business clients, growth in existing client businesses and expansion of our marine and motor class businesses contributed to our financial results in 2023.
Key performance highlights include:
A sound financial performance has enabled our dividend paying capacity. Dividend announced for the year 2023 stands at 25%. Shareholder value creation is always a prioritized focus area for the management and we will continue to seek out value creation opportunities for our shareholders.
Major Improvements of the year amid the Challenges
A major accomplishment of ours was the company achieving a 237% growth in digital sales in 2023. This is not only a validation of our conviction in digital insurance and InsurTech, but also a representation of the growing maturity of the insurance market in Bangladesh. It testifies to the digital lifestyle adoption.
Our success in digital insurance extends beyond our own online platforms like the Green Delta website, InsuMama app and partner micro sites. In fact, we are building a comprehensive insurance ecosystem, partnering with telcos, MFS (mobile financial services) providers, insurance marketplaces and aggregators to offer a wider range of products and value-added services. This includes bundled insurance options across all types of retail insurance, from health and accident to motor and travel. Our vision is to empower our customers to purchase insurance policies and raise claims from the comfort of their homes or offices in just a few clicks.
Few other developments in our digital transformation journey are discussed below.
Nature of our Activities and Peculiar Problems Faced
Green Delta Insurance is Bangladesh’s largest general insurance company. Our insurance solutions offer protection to our policyholders against operational and financial risks. They can get a policy coverage several times the value of the nominal premium they pay. This is the key underlying appeal of insurance that we are trying to promote as our key activity to raise awareness and build trust in insurance and our company. We try to settle claims in the lowest possible time after our due checks and this is something that helps repose client trust in us too. In fact, we have the lowest TAT (turnaround time) at 5 days, that is the period between which a claim is raised and successfully settled.
Bangladesh's corporate landscape in 2023 witnessed consolidation in retail and pharmaceutical sectors, intensifying competition, digitalization across sectors and new opportunities in export diversification. The Bangladeshi entrepreneurial spirit must be applauded as focus on opportunity spotting and value creation remained strong despite the broader macroeconomic challenges and infrastructure limitations. A peculiar aspect about Bangladesh’s general insurance industry is that despite the increase in risk events we see every year, that is occurrence of fire hazards, floods and
other natural calamities, the uptake of insurance continues to remain negligible. Heightened risk events should have automatically increased insurance sales but there is no correlation between the two in Bangladesh. We believe that the benefits of insurance once fully understood by the public will be a potential driving force in the insurance industry. We do this by publicizing claims, etc.
Risks and Opportunities in Reference to PESTEL
Bangladesh’s insurance industry is one of long-term opportunity with a major factor being the very large protection gap. Hardly 0.15% of the population is covered by insurance. A rise in insurance awareness through consistent efforts by the industry and the regulator will support closing the protection gap. The insurance industry is a vital part of any economy as it contributes to the financial system stability through investment, etc. It is also an extension of the government safety net, especially micro insurance products.
Rightly so, the IDRA has given in-principal consent to bancassurance in Bangladesh that is a tried-and-tested model elsewhere in the world. It is a large contributor to insurance sales and is an established channel in which both the banks and insurers benefit.
The bancassurance model offers significant opportunities, including tapping into unserved markets with low insurance penetration, leveraging crossselling potential through integrated financial solutions, expanding distribution via established bank channels, fostering innovative product development, contributing to financial stability for both banks and insurers, capitalizing on technological advancements for enhanced efficiency, etc. Additionally, the model promotes financial inclusion by reaching even peripheral populations through existing banking channels that have deeper penetration in rural areas. Overall, bancassurance provides a comprehensive and synergistic approach to financial services, driving growth and innovation in the industry.
At Green Delta, we want to lead in bancassurance. We are already focusing on forging strategic partnerships with top banks of the country, innovating tailored products for bank customers, integrating seamlessly with digital platforms, fostering collaboration through staff training and conducting thorough market research to guide strategic decision-making.
High and uneven competition continue to remain a major risk for the insurance industry. Price undercutting that is a natural consequence of the high competition for business erodes competitiveness of the sector as a whole. It impedes capacity to pay claims, impacts solvency and limits the ability of to invest in future growth. We try to highlight these points in our discussions with the regulator as well as in industry forums and we hope a better understanding of the impacts of undercutting will help good sense to prevail.
Portfolio Performance
Green Delta has 60+ general insurance products, within which our top-5 products contribute about 80% to revenue and top-10 about 90%. This is the trend we have seen remaining more or less constant and has also ensured we have a diversified product basket with no excessive concentration on a few products or market segments.
We have a strong innovation focus and look to launch new products or existing products with new variants for meeting evolving customer needs as well as for enhanced revenue contribution. New product development is a cost prone activity and we launch only those products where we are sure of a successful product-market fit. Regulatory approvals are also key in this cycle and we keep an eye to ensure we are compliant in all aspects. Our focus in new product development is always to see how best we can serve the needs of customers, especially the large middleclass population, ensuring the key aspects of how they would perceive the product in terms of need, value and affordability.
IT Systems and Controls and Data Privacy and Security
We rely heavily on IT systems to manage the sensitive data, including customer information, policy details, claims history and financial records. This is in addition to our own corporate records. Ensuring robust data privacy and security measures is hence paramount to maintain trust, comply with regulations and safeguard against cyber threats.
For us, implementing comprehensive data privacy protocols is essential. This involves establishing a clear policy regarding data management. Employees also undergo regular training to understand the importance of data privacy and their role in maintaining it. Access controls are implemented to restrict sensitive data to authorized personnel only. Furthermore, we maintain a robust system for monitoring and detecting suspicious activities. Our firewalls and intrusion detection systems help identify and mitigate cybernate in real-time, preventing unauthorized access or data breaches.
Compliance with regulatory standards is also an imperative and adhering to regulations such as the Bangladesh Bank's guidelines on information security and data privacy ensures legal compliance and strengthens customer trust. Regular audits and reporting to regulatory authorities also demonstrate our company's commitment to data privacy and security.
Harnessing our Institutional Strengths for Sustainable Growth
Green Delta Insurance has several key strengths that contribute to its success and growth despite a competitive market. I enlist a few below:
Business Strategy for 2024
We perceive the industry will remain in a challenging position in the current year. Geopolitical conflicts and elevated inflation and interest rates will keep the global economy subdued, which will have an impact on Bangladesh too as the country is reliant on global markets for economic growth. Having said that, the nation has demonstrated unparalleled resilience too with the government moving swiftly through policy actions as well as via securing a loan package from the IMF to stabilize
the economy.
As before, we will continue to carve our path ahead, moving with a resolute focus on executing our business plans irrespective of the challenges. We want to achieve the following in the current year.
Vote of Thanks
As the macro environment will continue to be shaped by the events of 2023 we must remain cautious and rigorously ensure prudent financial management while strengthening our integrated insurance model with a sharper focus on commercial and operational excellence. Even as we do this, we will exercise discipline in investing for our future growth, especially in the realm of our InsurTech strategy. As we gear towards seizing opportunities for sustainable growth, we will do so responsibly with integrity and professionalism.
Permit me to place on record my utmost gratitude to the employees of Green Delta for their dedication and valuable contribution to the company’s performance. I would also like to extend my appreciation to our Advisor, Mr. Nasir A. Choudhury, who continues to guide and shape the business with his profound wisdom. Thank you to our Chairman, Mr. Abul Hasan Chowdhury and all the members of the Board of Directors for their stewardship and counsel for the company to remain resilient amid the marked challenges.
I would also like to acknowledge the ManCom for their collective effort in strengthening our business and continuing to pursue progress towards our goals and targets. My sincere thanks to our valued shareholders too for their faith and conviction in us.
Finally, to our valued stakeholders – I would like to express my deep gratitude for the trust and confidence in Green Delta that will see us pave the way for more shared successes to come. Let us continue to make a positive difference by providing insurance solutions for the betterment of society today and for generations to come.
Thank you.
Farzanah Chowdhury
Managing Director and CEO
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