Dummy agents used to siphon money from non-life insurance companies

Infographic: TBS

Highlight: 

• NSI report exposes dummy agents siphoning funds in non-life insurance
• Finance ministry orders Idra to take immediate action
• Paramount Insurance misappropriated Tk68.15 lakh via inactive agents
• Illegal commissions of 60–70% paid despite 15% limit
• Paramount CEO confirms dummy agents removed
• Sector-wide malpractice risks tax evasion and money laundering
• NSI urges ban on dummy agents and NBR investigation

The country's non-life insurance sector is facing scrutiny following a National Security Intelligence (NSI) report, which exposed a widespread practice where senior officials allegedly use family members and close associates as "dummy agents" to illicitly siphon money from their companies.

The finance ministry has directed the Insurance Development and Regulatory Authority (Idra) to take immediate action based on the NSI report. The report highlights that this method of diverting company funds has previously been flagged in Idra's own special audit reports.

The report singled out Paramount Insurance, which allegedly employed nine female agents as inactive or dummy agents. Together with two company officials, they misappropriated Tk68.15 lakh, the report said. The husbands of these agents were found to be working at the company's head office and branches.

Although the Insurance Agent (Appointment, Registration & Licensing) Regulation 2021 prohibits officials from simultaneously receiving salary and commission, the rule is routinely violated. While agents are legally entitled to commissions of up to 15%, many non-life companies reportedly pay between 60% and 70% in illegal commissions. Only 15% is recorded officially, with the remainder laundered through dummy accounts – undermining companies' financial strength while enriching insiders.

When contacted, Paramount Insurance CEO Sajjad Yahya confirmed that the accused agents had been removed.

"Currently, there are no inactive or dummy agents at the company. We coordinated with Idra without delay and took necessary steps," he told TBS. Yahya added that existing laws do not explicitly prohibit relatives of employees from becoming agents, a loophole some had exploited.

Idra, however, noted that most of the irregularities occurred before the 2021 regulations took effect. During hearings, Paramount was cautioned and instructed to ensure full compliance with the new rules.

Wider industry malpractice

Sector insiders say the problem extends far beyond Paramount, urging regulators to investigate whether commissions paid in the names of officials' spouses are reflected in income records and tax returns. They warned that such practices risk facilitating tax evasion and money laundering, while discouraging the development of skilled professional agents.

The NSI report recommended that Idra enforce a ban on dummy agents across all non-life insurers, halt excess commissions, and reassess agent appointments. It also called on the National Board of Revenue (NBR) to investigate whether funds withdrawn by dummy agents were properly reported for taxation.

Sector at risk

Bangladesh has 82 insurance companies, of which 46 operate in the non-life sector. Forty-three are listed on the stock exchange. Non-life insurance covers risks including property, health, motor, marine, engineering, and liability. 

These policies protect individuals and businesses from financial losses caused by accidents, natural disasters, business interruptions, and other unforeseen events.