3.64 lakh insurance policies discontinued in January-March

Some 3.64 lakh policies of 36 life insurance companies of Bangladesh lapsed in the first quarter of 2024 due to a myriad of factors, including the worsening financial health of clients and agents' tendency not to disclose key information while making sales.

In January-March, Sonali Life Insurance Company saw 67,555 of its policies lapse, the highest, while Delta Life Insurance came second on the list with 57,981, figures from the Insurance Development and Regulatory Authority (IDRA) showed.

A policy lapse occurs when policyholders fail to pay their premiums on time, leading to the cancellation of insurance coverage.

National Life Insurance ranked third, witnessing 31,667 policy lapses, IDRA data showed.

The Daily Star tried to contact SM Ferdous, administrator of Sonali Life, but he did not respond.

Ferdous was appointed administrator after an audit found that former chairman Mostafa Golam Quddus and six of his family members, who served as directors of the company, had embezzled at least Tk 187.84 crore from the insurer.

Anwarul Haque, chief executive officer of Delta Life Insurance, said it had 13.43 lakh policies in the first quarter of this year, of which about 58,000 were discontinued. He added that around 67,000 policies that had lapsed in the past were revived in the same quarter.

Of the policies that have lapsed in the third quarter, he hoped some of them would be revived in the future.

"The higher the number of policies of the company, the higher the number of discontinuations. This is normal," he claimed.

He added that there is a section of customers who do not pay premiums unless pushed. Agents are responsible for pushing them. If customers still fail to pay, the policy lapses.

He also explained that the commission agents receive at the end of the first year of a policy is less than what they get in the second year. As a consequence, they are more interested in selling new policies rather than renewing existing ones.

Kazim Uddin, chief executive officer of the National Life Insurance Company Limited, opined that consumers' lack of confidence in insurance companies was increasing as many companies were failing to pay claims timely.

He added that National Life was also feeling the effects of that and the IDRA is taking different steps to restore customers' confidence in the sector.

Apart from this, policies may have lapsed due to the increased costs of living, he added.

The heightened price of daily necessities due to persistent inflation. Annual inflation hit a 12-year high in 2023-24, rising to 9.73 percent

The IDRA report added that Mercantile Islami Life Insurance, Jamuna Life Insurance Company and BAIRA Life Insurance Company had the lowest number of policy lapses.

Zahangir Alam, spokesperson of the IDRA, told The Daily Star that an explanation would be sought from companies with the highest number of policy lapses.

Then they will be asked for a plan to overcome this situation. After that, the next step will be taken, he said.

In 2023, 15.42 lakh customers saw their policies lapse, according to the IDRA data.

SM Ibrahim Hossain, director of the Bangladesh Insurance Academy, a state-run institute which trains insurance professionals, said the reasons why policies lapse include agents' bent not to furnish potential customers with key information that may lead to non-subscription of the products in the first place.

This can lead to customers purchasing plans they cannot afford to continue.

"Agents often don't share all the rules when they sell policies. Agents may also sell a product that may not suit the customer's requirements, so the buyer may not have the financial capacity to continue it."

There are other reasons for policy discontinuation, one being embezzlement by agents. Non-payment of premiums and customer's loss of income also play a role, he said.

Lapsed policies are bad for both customers and insurers. For customers, a policy lapse means losing the safety net that could protect them against unforeseen events. For insurers, it leads to lost revenue and negatively impacts financial stability and customer relationships.