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Bangladesh - Corporate - May 22, 2023

Dozens of insurance cos may beclosed

Zarif Mahmud: The financial condition of several life insurance companies operating business in the country have weakened due to various irregularities. The financial condition of the companies has become so fragile that they are not able to pay the insurance claims of the customers properly. In this situation, the regulatory body Insurance Development and Regulatory Authority (IDRA) may decide to temporarily close the business of about a dozen of insurance companies. Meanwhile, the business of a life insurance company has been temporarily closed.
According to IDRA sources, the government has instructions from the top to bring back a positive image in the insurance sector. But some companies are so bad that they can’t be improved. Within a few years, companies will be in crisis of existence. In the meantime, several companies are unable to pay customer claims due to lack of capacity. Considering the overall aspect, some companies are planning to temporarily stop their business.
The source also said that the plan to shut down the business of some companies is not IDRA’s own. Intelligence agencies and a section of the government have also asked for the temporary closure of the business of these companies. In this case, the financial condition is very weak, investment irregularities, excessive spending in the management, not being able to pay the customer’s claims, not having money in the life fund, excessive commission expenses in the companies which have additional financial irregularities, the business of those companies may be stopped.
According to the report prepared by IDRA, the claim payment rate of life insurance companies is decreasing consistently. In the last year 2022, insurance claims of 3 million 28 thousand 930 customers were raised in life insurance companies. Its financial value is Tk 13,826.45 crore.
Against these claims raised, the companies paid 18,92,992 claims. The financial value of which is Tk 9,259.32 crore. That is, the insurance claims of 11 lakh 35 thousand 938 customers have not been paid. According to this, the claim payment rate of life insurance companies in 2022 is 62.50 percent. In other words, 37.50 percent of customers did not receive insurance claim money.
Earlier in 2021, 24 lakh 68 thousand 410 claims were raised and 17 lakh 37 thousand 743 were paid. Claim payment rate was 70.40 percent. In 2020, 19 lakh 7 thousand 559 insurance claims were raised and 16 lakh 17 thousand 916 were paid. The repayment rate was 84.82 percent.
Earlier in 2019, 20 lakh 74 thousand 816 insurance claims were raised and 18 lakh 44 thousand 146 insurance claims were paid. The claim settlement rate was 88.88 percent. And in 2018, 24 lakh 26 thousand 637 insurance claims were raised and 21 lakh 69 thousand 56 were paid. Claim payment rate was 89.39 percent.
According to IDRA sources, according to the 2022 report given by the life insurance companies, the management expenses of 20 companies are above the legal limit. These companies have spent Tk 113.60 crore extra in the management sector by showing the expenses of commission, salary and allowances, office rent and various sectors.
Among them, state-owned companies Jibon Bima Corporation Tk 31.81 crore, Golden Life Tk 15 crore, Fareast Islami Life Tk 14.97 crore, Progressive Life Insurance Tk 8.94 crore, Jamuna Life Tk 6.38 crore, Bengal Islami Life Tk 6.35 crore, Padma Islami Life Tk 4.29 crore, Sunflower Life Tk 3.67 crore, Swadesh Islami Life Tk 3.55 crore, Protective Islami Life Tk 3.09 crore, LIC Bangladesh Tk 2.66 crore , Bayra Life Tk 2.60 crore, Akiz Takaful Life Tk 2.02 crore, Diamond Life Tk 2.00 crore, Zenith Islami Life Tk 1.93 crore, Astha Life Tk 1.80 crore, Best Life Tk 1.33 crore, NRB Islamic Life Tk 49 lakh, Mercantile Islami Life Tk 43 lakh and Sunlife Tk 29 lakh.
The Chief Executive Officer (CEO) of a life insurance company said that not all insurance companies doing business in the country are bad. But there is an idea born among common people that insurance means fraud. This is the situation in the insurance sector for a few companies. That is why the country’s insurance sector is not able to move forward. These insurance companies are not following any law. Regulatory bodies should take action against these companies. In order to remove the image crisis of the insurance sector, strong steps must be taken. Remember, empty cows are better than bad cows. Therefore, instead of keeping the companies immersed in irregularities, their business should be closed.
He said that the number of insurance companies is more than the financial condition of the country. However, some companies are doing very well. They are following all the rules. But some companies are ignoring the rules. Life funds of several insurance companies have turned negative. How will the life insurance company pay the customer’s claim if the life fund becomes negative? He has eaten all the customer’s money. If such companies continue to do business, it will do nothing but bad for the insurance sector.
Regarding the current situation in the insurance sector, IDRA Chairman Mohammad Zainul Bari said that a total of Tk 9,559 crore insurance claims were paid last year. Which was Tk 7,228 crores in the previous year. But if we look at the proportional rate, only 66 percent insurance claims were paid in 2022. In other words, if a hundred policies are claimed, 66 percent are settled. The previous year it was 68 percent. 87 percent the year before that and 89 percent the year before that. It means every year we are falling behind in paying insurance claims. That is, about 40 percent of people are insured.

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