Few people in Bangladesh use insurance schemes to safeguard against potential financial concerns as most prefer to keep their rainy-day funds in banks and bonds, according to a recent study.

And other than fixed deposits and government securities, people usually opt for investing in real estate as they believe such assets have lower risk compared to insurance products.

This is because difficulties in settling claims, unsatisfactory customer service, and other issues have eroded the peoples' confidence in the insurance sector, industry insiders said.

Conducted by the School of Business and Economics at North South University with the support of Metlife Bangladesh, the study featured about 1,280 participants from major cities across the country.

As per the findings shared at an event at the Cirdap Auditorium in Dhaka yesterday, just 22.89 percent of the respondents use insurance as a savings tool for unforeseen financial obligations.

It was also found that 53.06 percent of the participants use bank savings or sell their property to pay for financial emergencies, such as sudden medical conditions or property damage.

This is because some insurance providers face difficulties in settling claims on time, they added.

Styled "Unlocking the Future of Life Insurance in Bangladesh: Insights, Challenges, and Strategies", the study shed light on several important aspects of the country's insurance sector.

This includes identifying the major driving forces behind insurance purchases as well as deterrents for increasing coverage in order to improve the overall market scenario.

Nurul Kabir, chairperson of the department of accounting and finance at North South University, said one of the key reasons for the poor insurance penetration is that people are unwilling to make long-term financial commitments.

Besides, they lack awareness on the benefits of insurance while there have also been complaints of unsatisfactory service from agents and complexities in the claim settlement process, he added.

Kabir led the study carried out by a three-man team comprising Quazi Tafsirul Islam, senior lecturer of strategy and human resources of the same university, and Nazlee Siddiqui, senior lecturer at the University of Tasmania.

The study suggested several measures for boosting insurance penetration, including raising awareness on potential benefits, digitalising insurance services, offering value-added products, diversifying distribution channels and strengthening governance within the sector.

Although insurance penetration in the country still stands at just 0.5 percent, the findings suggest there is immense potential to bring more people under coverage.

Mohammad Jainul Bari, chairman of the Insurance Development and Regulatory Authority, said just 19 of the 35 life insurers in the country pay 80-99 percent of their claims on time.

Meanwhile, another 10 companies pay more than 70 percent of their claims in a timely manner.

"Some life insurers do not pay a large part of their policyholders' claims on time," Bari added while citing how this is creating a bad perception about the overall industry.

Regarding what steps have been taken to address the issue, he said they have ensured some regulatory reforms and rolled out corporate governance and policyholder protection guidelines for the sector.

Ala Ahmad, chief executive officer of MetLife Bangladesh, said people would be the main beneficiaries of growth in the insurance sector as they would be able to enjoy a more secured future.

"The research identifies immense potential for insurance, and we are delighted to support this research as it opens another avenue for all stakeholders to work together in strengthening the insurance sector," he added.