Observers appointed at 4 life insurers

The Insurance Development and Regulatory Authority (Idra) has appointed four of its officials as observers at four life insurance companies for their failure to protect the interests of policyholders.

The companies are Progressive Life Insurance Company Limited, Sunlife Insurance Company Limited, Padma Islami Life Insurance Limited, and Golden Life Insurance Limited.

The appointments came about through letters dated June 1. The officials will work towards fast settling claims and resolving related complaints, explained an Idra official on condition of anonymity.

The Idra received complaints over the years from policyholders and initiated probes into the companies in question, said sources in the regulatory body for the insurance sector.

It found that Progressive Life Insurance had to pay Tk 430 crore in claim settlements in the next five years but had only Tk 46 crore in assets, which include government securities, mutual funds, shares, debentures and real estates.

In the last 10 years, the company's unauthorised management expenditure amounted to Tk 100 crore.

Sunlife Insurance had to pay Tk 200 crore in insurance claims in the next five years but had assets worth Tk 100 crore in total.

In the case of Padma Islami Life Insurance, the amount payable was Tk 102 crore. Although the company's assets amounted to Tk 160 crore, the Idra assessed that only Tk 20 crore could be liquidated.

Golden Life Insurance had to pay Tk 70 crore but had assets amounting to Tk 48 crore. In the last 10 years, its unauthorised management expenses amounted to Tk 112 crore.

The Idra found that of the four companies, only Padma Islami Life Insurance settled 70 per cent of the claims to date. For the rest, it was an average of 30 per cent to 40 per cent.

According to Section 72 of the Insurance Act 2010, there is an obligation to pay claims within 90 days of the expiry of the policy. If paid after 90 days, interest will have to be paid.

The insurance industry's considerable potential is being wasted for a lack of confidence caused by the low claim settlement rates of some companies, according to an official of the Idra.

Such companies are in trouble because they are making bad investments out of a large portion of their premiums, he said.

Bangladesh's life insurance penetration is 0.5 per cent, well behind the emerging market average of 3.3 per cent. In 2020, India's life insurance penetration was 3.2 per cent while it was 2.4 per cent in China.

Currently, there are 35 life insurance and 46 non-life insurance companies active in the country. Of them, 49 are listed on the stock market.

The insurance industry contributes only 0.4 per cent to Bangladesh's growing gross domestic product.

"The four life insurance companies are not in good shape, so they are unable to settle many policyholders' claims. As a result, customers' interests are not being protected," Idra Chairman Mohammad Jainul Bari told The Daily Star.

"Observers have been appointed so that the companies can overcome their current predicaments. The main goal is to bring good governance to the companies."

The four companies were under observation, which resulted in the appointment of the observers, said Jahangir Alam, a spokesperson of the Idra.

The Idra has the authority to settle claims by seizing and selling properties of errant companies, said Main Uddin, a professor in the banking and insurance department at the University of Dhaka.

"If needed, the Idra can sell the personal properties of board members to clear customer's debt. However, how much of this can be implemented in the context of Bangladesh remains to be seen."

The Daily Star called and sent SMS to top officials of the four companies. Only one responded.

"I joined the company in October 2020. I came and saw that there are many claim settlements pending," said Amzad Hossain Khan Chowdhury, chief executive officer of Golden Life Insurance, yesterday.

"We don't have cash. But we have assets. Now about Tk 24 crore worth claim settlements are pending."

Some of the top officials of the Idra knew about the problems of the companies, said the CEO of an insurance company on condition of anonymity.

"When observers were required, they were not appointed. How will the companies settle the insurance claims since they don't have the money? And now what will the observers do?" he asked.