The Insurance Development and Regulatory Authority (Idra) is now seeking cooperation from ministries and public entities to expand insurance coverage for citizens and properties of the country in order to reduce the risks of damage and losses.
Currently, insurance penetration stands at less than 1% of the population of around 170 million.
The National Insurance Policy 2014 emphasises the economic and social benefits of insuring life, health, education, factories, residential and office buildings, agriculture, fisheries and livestock, and others, a letter from IDRA notes.
In a letter sent to the Financial Institutions Division on February 15, IDRA highlighted the necessity of insurance in meeting rising healthcare costs and ensuring compensation for vehicle drivers involved in road crashes and for farmers and public infrastructure faced with natural disasters.
The regulator also believes insurance must be made mandatory for people working in high-risk environments.
Currently, there are 35 life insurance and 46 non-life insurance companies in Bangladesh.
According to the latest IDRA data, payments against claims of around 1 million policyholders are hanging in the balance for a liquidity crisis plaguing 29 life insurers.
Unsettled claims amount to Tk3,050 crore in the four years to the second quarter of 2023.
Companies approved to issue health insurance policies
IDRA has recently allowed life insurance companies to offer full-fledged health insurance policies, ending the monopoly by non-life insurers in the local market.
The non-life insurance companies have been offering the health insurance policies, with usually a short-term or not more than one-year tenor, to the clients solely since 2014 under a regulation issued at that time.
However, the regulation became invalid with the issuance of the latest circular that also allowed the life insurers to design, price and sell medical products in the market.
Health insurance products have been getting popular since the Covid-19 outbreak.
The corporate houses are the major clients in Bangladesh.
However, life insurers earlier could have offered health coverage to their clients but only as a supplement to their main life policies, which is termed "rider" in the industry.
The life insurers inherently get more customers than the non-life ones that offer health products in the retail space.
The new order will help them get more people covered under medical insurance at a more affordable premium as now the market is open for all, said an official at the Idra.
24,605 complaints against 14 insurers in 2023
About 14 life insurance companies settled only 14.09% of the 24,605 complaints they received in the first 10 months last year, according to official figures.
Of them, 95% were related to non-settlement of claims despite policies reaching maturity.
The remaining complaints were linked to management issues, violation of rules in appointing top officials and bad investments, among others.
Policyholders filed the complaints against 14 life insurance companies, which settled 3,467 claims between January and October.
The piling up of complaints come as several life insurance companies are struggling to settle claims due to a lack of liquidity resulting from bad investments and fund embezzlement.
Of the insurers, the highest number of complaints, at 9,336, was filed against Sunlife. In contrast, the lowest number of claims, just one, was lodged against Trust Islami Life, according to the data of the Idra.
Life insurers told to raise their earnings
Life insurers have been instructed to take necessary measures so that the policyholders continue to pay their premiums until the maturity of policies.
As more or less 45% of the policyholders discontinue paying the premiums right from the second year or in the following years.
Industry insiders informed that almost 100% of the policyholders pay the premiums in the first year but discontinue it from the second year for various reasons.
The insurance regulator has instructed the country’s 34 privately-owned life insurance companies to take measures so that they could maintain a premium collection level at least at 70% after the first year of selling a policy from existing 55%.
Jiban Bima Corporation (JBC) is the lone life insurance company in the public sector.
The regulator considered that a 15% increase in the policy renewal earnings would help the companies strengthen their financial health as well as improve the industry image.
According to the provisions of the Insurance Act 2010, a life insurer can spend more than 90% of her/his first year’s premium earnings provided that the policy tenure is 10 years or more.
Barring two or three companies, all the life insurers’ earnings in the second year and thereafter fell significantly in the recent time, leading to a decline in the life fund.
However, the size of the life fund is now falling due to increased claim settlements and poor investment earnings, said an industry insider.
At present, the life fund would be of around Tk34,000 crore, including US-based MetLife’s stake of 45%.
The earnings of the life firms were around Tk16,000 crore in 2022.
The companies maintained around 7.8 million life policies in 2022, when 1.77 million new policies were issued and 1.1 million lapsed.
Insurers barred from taking loans against paid-up capital
The Insurance Development and Regulatory Authority (IDRA) has told insurers to keep an equivalent amount of paid-up capital as deposits at banks under the company's name without liability.
Banks will issue a certificate citing the deposit of the funds and the insurance company will submit the document to Idra.
Paid-up capital is the amount of money a company has been paid from shareholders in exchange for shares of its stock.
As per Insurance Act, 2010, there is a provision to deposit the paid-up capital in scheduled banks without liability at the time of registration of insurance companies.
The notice comes after some insurance companies were found to be securing loans by creating liabilities against the fixed deposits created using paid-up capital, a clear violation of the law.
Recently, Swadesh Islami Life Insurance Company took a loan of Tk14.30 crore from NRBC Bank against a fixed deposit of Tk13.05 crore, which was the company's paid-up capital, according to a letter of the insurance regulator.
The loan was not even shown in the balance sheet.
As a result, IDRA relieved 12 of the 18 directors of Swadesh Islami Life, including its chairman, of their duties over allegations of an embezzlement of fixed deposits and breaching of the Insurance Act.
