Padma Islami served show cause notice over Tk 211cr unsettled claims

The Insurance Development and Regulatory Authority (IDRA) has given Padma Islami Life Insurance five working days to explain why they should not be penalised for failing to settle claims amounting to Tk 211.82 crore last year.

The IDRA had served a show cause notice in this regard on April 8 based on the insurer's unaudited financial reports for the 2023 calendar year.

As per the Insurance Act 2010, claims must be settled within 90 days of a policy reaching maturity.

The claims owed to policyholders of Padma Islami amounted to Tk 233.70 crore in 2023, of which the company paid out just Tk 21.88 crore, according to an IDRA document.

The insurance regulator also mentioned that it is a punishable offence for Padma Islami to not pay these dues, especially as they have an investment portfolio amounting to Tk 190.69 crore.

On condition of anonymity, an IDRA official said Padma Islami was unable to settle claims due to an ongoing liquidity crisis resulting from irregularities, including intentionally making bad investments.

"They invested in sectors that are bad. This is not the work of a good company," the official added.

The official also informed that the company's life fund is in the negative.

A life fund is a fund that is paid to and invested by insurance companies for life insurance, and from which money is paid when a policyholder dies.

Noor Mohammad Bhuiyan, chief executive officer of Padma Islami, said they could not pay the majority of claims in 2023 because the company is facing a cash crunch.

"The company has some plots of land, which were offered for sale, but buyers weren't even offering the price that the company bought those for. That's why they can't sell. Due to this, a huge number of claims are pending," he said.

"I could not reply to the IDRA's show cause notice as I went to perform Umrah. A reply to the letter will be submitted to IDRA today [Wednesday]," Bhuiyan added.

Padma Islami settled 65 percent of its total claims in 2020, 46.89 percent in 2021, 72.80 percent in 2022.

Established in 2000, Padma Islami has 167 branches with 600 agents across the country. The company has paid-up capital of Tk 388.80 million.

There are 35 life insurance and 46 non-life insurance companies in Bangladesh.