The Insurance Development and Regulatory Authority (IDRA) has ordered four life insurance companies to not spend any amount from their income through premiums, investments and life funds unless they settle claims of policyholders by the end of December.

The companies are Progressive Life Insurance Company Limited, BAIRA Life Insurance Company Limited, Swadesh Islami Life Insurance Company Limited and Golden Life Insurance Limited.

"Despite repeated instructions to pay insurance claims, there has been no improvement in the settlement of claims of the company," IDRA said in separate letters sent to the companies between December 6 and 20.

An IDRA official told The Daily Star that the major hurdle was a lack of willingness among companies to settle claims. Besides, he added, companies are unable to settle insurance claims due to an ongoing liquidity crisis.

Until the third quarter of 2023, Progressive Life had settled only 1.33 percent of insurance claims.

In other words, it paid Tk 2.25 crore against claims amounting to Tk 170 crore, according to the letter, which termed the settlement ratio "very unsatisfactory" and "very disappointing".

Progressive Life has been asked not to pay more than 20 percent of first-year premiums as commission to its agents, said the letter, despite the law stipulating that over 35 percent cannot be paid.

Payment of the remaining 15 percent will have to be deferred and adjusted with the commission on premiums of the following year, the letter added.

If documents are required for settlement of an insurance claim, the claimant should be contacted by telephone quickly and the necessary papers should be collected to ensure quick settlement, it said.

If the documents are already available, the claim settlement should not be delayed by more than 90 days, the letter said. The insurance law stipulates that insurance claims must be settled within 90 days.

The IDRA gave similar orders in a letter sent to Golden Life on December 20.

Until the third quarter of 2023, Golden Life had settled only 3 percent of claims, paying Tk 1.24 crore against claims amounting to Tk 35.88 crore.

Meanwhile, until the third quarter of this year, BAIRA Life settled only 1 percent of insurance claims, paying Tk 53 lakh against claims amounting to Tk 70.43 crore.

Swadesh Islami Life settled 37 percent of claims until the third quarter of 2023, paying Tk 31 lakh against claims amounting to Tk 86 lakh.

The Daily Star tried to contact the four companies. Only Golden Life Insurance responded.

Amzad Hossain Khan Chowdhury, chief executive officer of Golden Life Insurance, said there was some mismanagement in the company a few years ago which caused the opening of new policies to decrease significantly.

As a result, cash flow also decreased. As such, claims are not being paid at the rate at which they are coming in.

It is not possible to pay all claims before April 2024, Chowdhury said.

SM Masudul Haque, director for the life department of IDRA, told The Daily Star that considering the overall situation, IDRA has asked to pay all insurance claims by December 31.

If none of the companies can do so, a decision will be taken based on the situation, he said.

Overall, there is a lack of good governance in the financial sector and that is even more pronounced in the insurance sector, said AB Mirza Azizul Islam, finance adviser to a former caretaker government.

If these companies have any properties, they should be confiscated, he said. He added that IDRA should consider filing criminal cases against the companies if necessary.

Md Main Uddin, a professor at the Department of Banking and Insurance at the University of Dhaka, said barring re-investment from income would put pressure on the companies.

If IDRA follows this rule strictly, most of the problems will be solved, he opined.

BAIRA Life settled just 4.11 percent of its total claims in 2020, but has failed to settle even 2 percent in the following two years.

Meanwhile, Golden Life settled 39.95 percent of its total claims in 2020, which fell to 37.76 percent in 2022.

Progressive Life settled 71.31 percent of its total claims in 2020 but that number dropped to 39.11 percent in 2022.

Finally, Swadesh Islami Life, which had settled 50 percent of its total claims in 2020, witnessed a slight drop to 48.15 percent in 2022.