Homeland Life Insurance: Over 37,000 clients unsure about settlement of claims

More than 37,000 clients of Homeland Life Insurance Company Ltd are facing uncertainty about whether they would get back their insured amount owing to a lack of liquidity at the insurer caused by alleged irregularities, the regulator found.  

The company is not settling claims involving Tk 79 crore, according to the Insurance Development and Regulatory Authority (Idra).

This prompted 6,820 policy-holders to lodge complaints with the regulator in the last one year as claims were not settled despite reaching maturity.

The insurance company has a life fund of about Tk 202 crore and it has invested Tk 112.23 crore of the sum in immovable and current assets.

Some Tk 81.77 crore has been invested in treasury bills and bonds and office space was bought in Cumilla at a cost of Tk 1.25 crore. Besides, land worth Tk 4.80 crore has been purchased in the Jallarpar area in Sylhet city, Idra documents showed.

A part of the remaining fund was spent to purchase cars, computers, furniture, and air conditioners.

But an Idra document questioned whether the company had actually invested the sum.

An investigation into an alleged misappropriation of a Tk 104 crore life fund is underway.

It came after Rahima Akhter, a policy-holder, filed a writ petition with the High Court against the company in March on behalf of 14 policy-holders for the alleged misappropriation.

The finance secretary, the chairman of the Idra, the chairman of the Anti-Corruption Commission, and the chairman and the vice-chairman of Homeland Insurance have been made respondents in the petition.

And based on the directive from the court, the Idra appointed an auditor to assess the financial health of Homeland Life Insurance, examine the complaint regarding the embezzlement, and sales of 120 kathas of land for Tk 48.60 crore in the Bashundhara Residential Area.

The Idra estimated that Tk 198 crore has been embezzled from the company, said an Idra official.

Recently, a group of directors of the company has written to the Idra about the fund mismanagement of Tk 104 crore from 1996 to 2009, an official of the Idra said.

Another group informed the regulator that about Tk 50 crore was mismanaged from 2010 to 2022, the official said.

At present, the company has 17 directors, including three independent directors.

The insurer had no long-term proper investment plan, resulting in the current situation confronting the insurer, said an Idra senior official.

The insurer's current and special notice deposit reserves were Tk 58.79 crore and Tk 58.56 crore in 2020 and 2021, respectively.

A special notice deposit account is an interest-bearing deposit account where advance notice is required for withdrawal.

Insurers have to set aside provisions against unsettled claims.

But according to the financial statement for 2021, the provision amount was Tk 4.14 crore, way lower than the actual unsettled claim amount.

Idra documents described it as a fake surplus, saying if the insurer had kept aside provisions against unsettled claims as per standard accounting practices, there would not have been any surplus.

On the back of the surplus fund, it paid dividends to shareholders, the regulator said, the dividend was given without complying with rules.

In addition, the directors of Homeland took Tk 40,000 instead of Tk 8,000 for attending a board meeting. From 2015 to 2022, the directors took an additional Tk 3.10 crore to this effect.

The company started its journey in 1996 but is yet to be listed on the capital market, a violation of rules. The company will have to pay a fine of Tk 3.88 crore for breaching the laws.

According to the Idra, the ratio of the policies that lapsed in the second year stood at 68 per cent, 62 per cent and 66 per cent in 2019, 2020 and 2021, respectively.

Some 72 per cent of the policies that were in their third year lapsed in 2019 and it was 80 per cent in 2020, it said, adding that only a small number of policies reached maturity.

Of the 2,980 agents, the licences of 2,903 expired.

NEW DIRECTIVES

The Idra issued a series of directives on June 13 to address the company's ongoing crisis with a view to protecting policyholders' interests.

The insurer has been asked to submit a business action plan for the next three years and raise the policy renewal rate to at least 60 per cent in the second year.

Currently, the policy renewal rate is around 30 per cent, according to an official of Homeland Life Insurance.

The regulator has asked the insurer to bring down management expenses within the permissible limit, adjust the additional management expenses for 2023 by the remainder of the year, and take the appropriate initiative to increase the life fund.

The unsettled insurance claims have to be properly provisioned and legal actions have to be taken against the people linked with the fund embezzlement after carrying out a probe, the directive added.

The insurer was ordered to settle all claims by June this year.

Homeland's Mondal, however, says it is not possible to settle all claims as per the Idra's directive.

"Currently, the company has assets worth Tk 81 crore that can be liquidated. So, the insurance claims involving Tk 79 crore have not been settled," he said, adding that some policy-holders got Tk 2 crore against their claims in May and June.

Mohammad Zainul Bari, chairman of the Idra, said there is internal conflict between the directors of the company.

"Instructions have been given to run the company properly so that the interests of the policyholders are not compromised. We are closely monitoring their activities."