Sell assets to settle insurance claims, if necessary: Stakeholders

Payment of insurance claims should be given top priority to develop the insurance sector and restore customer confidence, stakeholders have said.

If necessary, the assets of the insurance company should be sold to settle customer claims, they said at a recent meeting between the executives of the Bangladesh Insurance Association (BIA) and the regulatory agency, Insurance Development and Regulatory Authority (Idra).

According to Idra, the total amount of insurance claims till September 2024 was Tk8,589 crore. Of which, claims have been paid to the tune of Tk2,373 crore, or 28% of the total claims.

Of the total, the claim amount of life insurers was Tk5,449 crore, of which Tk2,058 crore has been paid. As such, around 62% of the claims remain unpaid. 

Besides, the total claim amount of non-life insurers was Tk3,140 crore, of which Tk315 crore has been paid. As such, around 90% of the claims remain unpaid.

During the period, Baira Life Insurance Company paid 1.54% of insurance claims, Fareast Life 1.49%, Golden Life 2.18%, Padma Life 0.81%, Progressive Life 4.70%, and Sunflower Life 1.19%.

Those who paid almost 100% of insurance claims during the time are – Alpha Islami Life Insurance, Life Insurance Corporation, Mercantile Islami Life, Popular Life, Rupali Life, Sonali Life, and Trust Islami Life Insurance.

At the meeting, Idra Chairman M Aslam Alam said, "Currently, the insurance sector is passing through a critical time."

He highlighted the difficulty of paying claims in the life insurance sector, excessive administrative costs, high policy lapse rates, and the complications regarding the appointments of CEOs of life and general insurance companies.

He said the first step in the development of the insurance sector is to identify the problems faced by the companies on their own, bring those to the relevant authorities' attention and take necessary steps for solution.

He said the Bangladesh Insurance Association (BIA) can play an effective role in identifying the limitations and problems of insurance related laws to reform them. There is an urgent need to undertake reforms for them.

BIA President Nasir Uddin Ahmed agreed with the opinions of the Idra chairman, and asked the members of the BIA executive committee to express their views.

BIA executive committee member, Belal Ahmed, underscored the need for speedy reformation in the insurance sector. "The authorities of the sector, as the guardians, should be more strict in taking necessary steps."

Green Delta Insurance Company CEO Farzanah Chowdhury pointed out that the tendency to pay extra commissions in the non-life insurance sector as well as dues in the business is causing various problems.

She also underscored the need for innovation in the non-life sector by acquiring expertise in marine, motor, and fire insurance.

Pragati Life Insurance Company CEO MJ Azim recommended a three-year timeframe for the authorities to identify the existing problems in the sector and ensure implementation of necessary measures in phases.

He suggested that companies that are failing to settle claims have to reduce management expenses such as conferences, and foreign trips.

He also highlighted various problems of the UMP system, and proposed to simplify the agent licencing process and to reduce the fees involved. 

Asia Insurance Company CEO Imam Shaheen identified the commission as the main problem in the insurance sector. "Certain companies may manage to survive, while others would find it difficult if commissions were diminished or eliminated."

In the non-life insurance sector, the level of problem is relatively low as claim settlement is not mandatory, he mentioned.

"The Insurance Corporation Act has enabled General Insurance Corporations to establish a monopoly of reinsurance, which has caused serious problems for private insurance companies."

Popular Life Insurance Company CEO BM Yusuf Ali highlighted the issues related to rank and commission of insurance companies.

"Inconsistencies are seen in the insurance companies in following the circulars of the authorities. Insurance agents are transferring policies from one company to another in the hope of higher commissions, which is causing serious problems."

Though managing directors are often blamed for this problem, BM Yusuf also pointed to the lack of corporate governance.

BIA executive committee member Syed Bazlul Alam highlighted the worrying state of the insurance sector, and proposed to solve the problems within the actuaries. 

He also called for stopping the commission. "Otherwise, many companies may collapse," he warned.

First vice president of BIA and Chairman of City General Insurance Company Hossain Akhtar called for formulation of an appropriate roadmap for Idra and strict adherence to the recommendations discussed in the meeting. 

He proposed using a portion of the insurance companies' incomes for professional development.

BIA President Nasir Uddin proposed the re-introduction of third-party liability insurance in the country, and proposed that insurance schemes be properly evaluated by actuaries.

He also recommended keeping the commission within a certain limit without stopping it completely, and suggested opening the bancassurance guidelines limit.

Eastland Insurance Company Chairman Mahbubur Rahman underscored the need for internal reforms, and proposed a new policy incorporating both non-comprehensive and third-party insurance for vehicles.

He also called for inclusion of all insurance companies in the digitisation process.