Cyber insurance scope in Bangladesh

Raj Kiron Das: Bangladesh’s insurance industry is approaching a critical moment, driven by forces that are reshaping risk across the economy faster than traditional insurance models can respond. Rapid digitisation, intensifying climate disruption, rising costs and persistent gap in customers’ trust are combining to make both a warning and an opportunity: unless insurance evolves into a modern risk-management service, the country’s mounting exposure to shock will deepen the protection gap for households, businesses and public system. At the same time, if the sector adapts rapidly, Bangladesh could see the emergence of new demand areas, including cyber insurance, climate-resilience coverage and mobile-first protection products designed for a fast-changing economy.

Over the past decade, Bangladesh has undergone steady urbanisation and expanding commercial activity. More people own homes, vehicles, consumer goods and businesses. As cities grow and supply chains become more interconnected, the value at risk rises sharply. This should naturally make momentum for broader adoption of property, marine, motor and liability insurance. Yet insurance penetration remains modest compared with the scale of assets now embedded in the economy. The challenge is not only regarding affordability. It is also about how people perceive the industry’s reliability during the moment that matters most: after a loss.

In Bangladesh, insurance still carries an image problem shaped by complex policy language, procedural bottleneck and long-standing uncertainty around claim settlement. Many customers associate insurance with paperwork and delays rather than timely recovery support. The agent-led sales model, while necessary for distribution, has also contributed to miscommunication and mismatched expectations when policies are sold without clear disclosure of terms and exclusion. This resistance deteriorates trust and without trust, even robust economic growth does not automatically turn into higher uptake. For insurers, credibility has become as important as pricing and product design.

This is where digital transformation could become a turning point. Bangladesh has built one of South Asia’s most dynamic mobile-led economic ecosystems, with widespread use of mobile financial services, digital payment and e-commerce. That behaviour has made the condition to modernise insurance delivery and make it feel less like a complicated financial contract and more like an accessible service. Mobile-first platforms may simplify buying and renewing policies, verifying documents and filing claims. Digital factors may also reduce administrative cost and shorter settlement cycles, which directly address the trust barrier that has generally slowed adoption.

Beyond convenience, data and analytics may help insurers price risk more fairly and design coverage that better reflects real exposure. When customers believe pricing is transparent and justified and when services respond quickly during claim, trust may strengthen and adoption can rise. But digitisation is not a shortcut. It needs process reform, investment in skilled talent and a commitment to customer-centric product design. Crucially, it also needs stronger cyber-security, because the very system that expands access can also expand vulnerability.

That vulnerability is becoming more visible across Bangladesh’s digital economy. As banking, fintech, payment services and online commerce expand; cyber threats are increasingly capable of causing actual financial and operational disruption. Data breaches, fraud, ransomware incidents and supply-chain attacks may halt operation, trigger regulatory cost, damage reputation and lead to long-term loss of consumers’ confidence. Many businesses have scaled digitally faster than they have built mature cyber-security frameworks, leaving them exposed to incidents they are not equipped to absorb.

This situation is making a clear opening for cyber insurance. For Bangladesh, cyber insurance could become a new growth segment as companies recognise that cyber risk is no longer a technical issue but a business survival issue. However, cyber insurance is not easy to scale without capability upgrades. It needs stronger risk modelling, careful premium structure, credible incident assessment and strong claim verification. It also needs insurers to align coverage with practical cyber hygiene requirements so that risk mitigation and risk transmission work together. Without this, cyber insurance may become difficult to price and difficult to sustain.

Although cyber threat is rising, climate risk remains the most severe and unavoidable pressure. Bangladesh’s exposure to cyclone, flood, river erosion, storm surges and prolonged waterlogging is already reshaping financial risk across agriculture, infrastructure, industry and small business activity. These events do not only cause humanitarian suffering. They also increase financial volatility, disrupt supply chains and impose repeated losses that slow development. Insurance has a critical role in this context because fast financial recovery diminishes the long-term damage of disaster and may prevent families and businesses from falling into prolonged hardship.

Yet climate risk also exposes the limitation of conventional insurance. Higher exposure often leads to higher premium, reduced coverage and weaker underwriting enthusiasm. The places where insurance is most needed can become the hardest places to insure affordably. For Bangladesh, the sustainability question is urgent: how can the market produce climate-resilience products that remain viable for insurers and still affordable for vulnerable communities?

Innovative approaches are gaining relevance. Parametric insurance, which pays out when measurable indicators reach agreed thresholds, may speed up compensation and reduce dispute. Micro-insurance can expand access to safeguard for low-income households and small businesses with simplified, low-cost coverage. This model may work in climate-exposed areas, but their success depends heavily on accurate data, transparent triggers and customers’ understanding. If people cannot trust the measurement system or do not understand why they received a payout, the industry’s trust challenge will simply be repeated through new product formats.

Financial uncertainty is adding another layer of pressure. Inflation has pushed up the cost of healthcare, construction and vehicle parts, raising claim costs in health and motor insurance. At the same time, insurers face investment volatility linked to shifting interest rate and market conditions. This creates a difficult balancing act. Premiums must reflect rising claim cost, yet sharp increases may push customers away in a market where price sensitivity is high. Managing this tension will define competitiveness and sustainability in the coming years.

Regulatory reform will be central to whether Bangladesh can convert opportunity into long-term growth. Robust governance standards, clearer disclosure requirements, predictable claim timeline, digital policy documentation, consumer protection measures and market conduct rules can rebuild confidence and reduce mis-selling and customers’ frustration. In emerging markets, insurance expansion depends not only on commercial ambition but also on regulatory credibility that safeguards consumers and rewards responsible insurers.

Bangladesh’s insurance sector now stands at a crossroads. The country’s economy is growing, digital adoption is deepening, and risk is becoming more complex. Cyber threat and climate shock is no longer occasional disruption; they are structural realities. The insurers that will lead this next phase will be those that treat trust as a core asset, technology as a capability requirement and risk innovation as a necessity rather than an option. If that shift happens, insurance may become a foundation of everyday resilience for Bangladesh’s households and businesses. If it does not, the protection gap will widen at a time when the cost of uncertainty is rising across the entire economy.