Teetering on the verge of a crisis, Jamuna Life Insurance Company Limited has been prescribed some remedies by the insurance regulator, including preparation of a business action plan at the earliest for the next three years. 

Steps must be taken to ensure continuation of over 60 percent of policies, such as by deferring 10 percent of first-year premium commission payments to agents till the second year, said the Insurance Development and Regulatory Authority (Idra).

Moreover, average management expenses must by reduced by 30 percent while customer claims settled timely, it said.

The directives were passed following a hearing at the Idra office on May 22 based on the regulator's analysis of the insurer's financials for the 2017-2021 period.

"We think we can overcome the current problems in the next two years (by following Idra directives)," said Kamrul Hasan Khandaker, chief executive officer of Jamuna Life Insurance Company.

Such investigations were directed by Financial Institutions Division on July 24, 2022 on 13 life insurance companies approved in 2013 and 2014 over a number of allegations.

These include irregularities, corruption and commission payments to agents and administrative expenses exceeding that stipulated in Insurance Act, 2010.

Insurance companies base their business models around assuming and diversifying risk. It involves pooling risk from individual payers and redistributing it across a larger portfolio, according to investopedia.com.

Most insurance companies generate revenue in two ways -- charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets, it says.

Like all private businesses, insurance companies try to market effectively and minimise administrative costs, it adds.

None of these could be efficiently attained by Jamuna Life Insurance Company Limited.

The company's website does not contain any annual report from which its financials could be understood.

However, according to Idra's investigation documents on the five-year period, just 14.08 per cent of the insurer's policies were continued by customers on an average in their first year.In 2021, the policy discontinuation rate stood at 41.84 percent.

Investments of premiums during the period yielded an average return of just 10.34 percent. In 2021, the insurer had assets worth Tk 22.61 crore and customer liabilities of Tk 8.3 crore.

What is more shocking is that the insurer has no life fund. Life funds are set up to pool a part of premiums from which associated policy claims and expenses can be later paid out.

And when it comes to management expenses, the insurer exceeded that stipulated in the insurance act by about 45.60 percent on an average during the five years. In 2021, it reached Tk 23 crore, exceeding the limit by 50.17 percent.

The expenses were incurred "to survive in the competition with many other companies", as per the insurer's chief executive officer, Kamrul Hasan Khandaker.

Talking to The Daily Star recently, he also blamed customers for the low rate of policy continuation.

"We think we can overcome the current problems in the next two years (by following Idra directives)," Khandaker said.

"Currently Jamuna Life does not have any pending claim," he claimed.

Business was slow, so the company's assets, investments and life funds did not increase, Khandaker told the May 22 Idra hearing.

It is unacceptable to spend more than what is approved by law, said Mohammad Zainul Bari, chairman of Idra, at the hearing.