When insurers don’t insure you

In June 1979, Muhammad Mohsin Khan, a businessman from Halishahar in Chattogram, bought a two-year term risk insurance policy worth Tk2 lakh from the state-owned Sadharan Bima Corporation on the export of high-quality bamboo to Sweden.

In the mid-1980, he kept a bamboo lot worth the insured sum in a warehouse named Chayabithi on the Dhaka Trunk Road. A Janata Bank branch on the Sheikh Mujib Road in the port city was supervising the warehouse.

But on 5 and 6 June that year, the entire warehouse was flooded after a severe cyclone, damaging the bamboos along with other goods.

When Mohsin made a claim of Tk2 lakh in compensation from the insurer for the covered loss, it refused to pay even though the amount was determined after a thorough inspection. So, Mohsin filed a case with the Chattogram court.

Over 40 years down the line, the businessman's insurance claim has not been settled yet with legal tangles throwing a spanner in his years-long struggle for the money. 

It appears that not only do defaulters evade paying back their obligations, insurance companies are also following the same script, and they have deprived customers of their due insurance claims over the years.

There is a massive backlog of 19,000 cases, including 10,000 with the money loan court alone, against a number of insurance companies that have not paid up claims worth Tk3,000 crore so far to their clients. Some of these claims have not been cleared even after court verdicts, said sources in the Supreme Court and other tribunals.

The Business Standard has examined some of these cases.

In 1981, the Chattogram court ordered the settlement of Mohsin Khan's insurance claim for the damaged bamboos through arbitration in response to an application from the insurance company.

An Arbitration Board decided that Mohsin should be paid the insurance claim as well as all interests.

When the state-owned insurance company filed a revision case against that decision with the High Court in 1982, the court upheld the Arbitration Board's decision and ordered that Mohsin be paid Tk2 lakh along with interests accrued up to the time of the order.

Sadharan Bima Corporation appealed against the order again, but the Appellate Division also upheld the High Court order in 1988.

At the same time, the Sheikh Mujib Road Janata Bank branch in Chattogram was given the responsibility of determining the payable amount by adding the interests to the insurance claim for the 1980-88 period.

The Appellate Division also ordered the bank to fix the insurance claim to be paid to Mohsin and present it before the Chattogram court.

Mohsin Khan told The Business Standard that in 1992, Janata Bank determined the payable amount plus interests and submitted a report to the Chattogarm court but the court did not accept it and ordered a re-arbitration instead.

Then, the businessman again filed a revision case with the High Court against the court order. In 2003, the High Court ruled in his favour again.

The insurance firm appealed against the verdict again to the Appellate Division. After a long 13-years, the Appellate Division upheld the High Court order and gave its verdict in 2016. In the verdict, Janata Bank was ordered to determine the insurance claim with interests again.

Mohsin Khan said, "I am now about 80 years old. I have lost my patience dealing with the case for about 40 years."

The amount of interest will now be more than Tk30 lakh, he added. 

Although the Judge Court, the Arbitration Board, the High Court and the Appellate Division have all issued a rule to add the accrued interest to the sum insured at the interest rate that banks lend for CC loans, the insurance firm is not paying me the money for reasons unknown although he paid the insurance premium regularly, said Mohsin.

He said, "Even though I applied to the prime minister in 2018, it did not work."

"The Chattogram Chamber of Commerce as well as some ministers recommended the payment of insurance claim for me, but the insurer is ignoring all that."

"Now, I am not in a position to file a contempt of court case because I don't have the money and because of my age." I have limited mobility, Mohsin said.

It is not only the Mohsin Khan case, but there are also 19,000 cases against various insurance companies, including those well-known across the country.

There are about 10,000 cases with the Money Loan Court, 8,000 cases of fraud with Magistrate Courts and 1,000 writs with the High Court, said a source in the Supreme Court.

Of the 19,000 cases, 8,400 remain pending for court settlement for more than five years, it added.

Deputy Attorney General Imran Ahmed Bhuiyan, an expert on the banking and insurance law, told TBS that an Insurance Company plays a vital role in facilitating country's economic activities as well as cross border transactions. Insurance is considered as the best medium of protection for both property and human life against all uncertainties. However, It is unfortunate that the insurance companies in Bangladesh are reluctant to compensate the policies when it become due against valid claims.

As a result, a good borrower of a Bank may become loan defaulter due to malpractice in the insurance industry. In this regard, Insurance companies should be aware that as per law if any intentional delay is found in payment of a policy, interest shall be calculated on a monthly basis at the rate of 5% higher than the prevailing bank rate after 90 days from the dates on which the payment becomes due, he added.

Syed Shahriar Ahsan, managing director of the state-owned General Insurance Corporation, told TBS that insurance claims are paid after the policies expire or as per the contract. 

However, he said he does not know anything about businessman Mohsin Khan's case.

Like Mohsin, Alamgir Kabir, owner of Mercedes Asha Accessories, a car parts wholesale and retail outlet in Vijayanagar area of the capital, took out a risk insurance policy of Tk1.59 crore from Meghna Life Insurance in 2014 against the goods stored in his business establishment. 

He said he had been paying regular monthly insurance premiums accordingly. In the meantime,  Alamgir took a loan of Tk70 lakh from IFIC Bank.

On the night of 27 April 2015, an electric short circuit fire destroyed all the goods. 

Alamgir lodged a general diary with the police and immediately informed Meghna Life Insurance of the disaster.

The insurance company surveyed the fire location but even after almost a year, the insurance company did not dispose of his insurance claim.

Meanwhile, Alamgir Kabir, who lost everything, could not repay the loan he took from IFIC Bank that declared him a loan defaulter.

The businessman was forced to file a case against Meghna Life with a Dhaka court in May 2016 to realise his claim. 

Alamgir alleged that the insurance company was delaying the hearing of the case with various excuses.

"I could not pay the bank money as I did not get back my insurance claim. The bank has declared me a defaulter. So it is impossible for me now to restart any business with a bank loan," said the businessman.

However, when IFIC Bank was informed about the matter, it blacklisted Meghna Life Insurance, according to Alamgir. 

Meghna Life Insurance senior General Manager (claim recovery) told TBS that they decided to give Alamgir Tk30 lakh after discussions with him but Alamgir went to the court.

Barrister Tanjib-ul Alam, a legal expert on company law, told TBS that it is the duty of the Insurance Development and Regulatory Authority (Idra) to oversee the insurance industry business, protect the interests of insurance policyholders and beneficiaries. 

But the regulatory authority is not a well-functioning institution, barely working to protect the customers' interest, and on the other hand, since the owners of insurance companies are influential, the authorities appear to be unable to carry out their duties properly, he added.

Although there are many complaints about the non-commercial and unethical practices of the insurance companies in paying their customers' demands, Idra is completely indifferent, said the lawyer. 

He maintained that consumers would not have gone to court had they got a solution from the regulator. 

Barrister Tanjib-ul Alam said unlike Bangladesh, the people in the United States, the United Kingdom and almost all other countries do not have to go through the hassles of getting fair treatment from insurance companies. 

A very small number of insurance companies in Bangladesh may have paid insurance claims of the policy holders, their clients have to suffer immense suffering, according to the legal expert.

Insurance companies make the legal wrangling a drawn out process. A spinning mill at Comilla Export Processing Zone, RN Spinning, demanded Tk232 crore from the Union Insurance Company as per the insurance policy after the factory was damaged in a fire in April 2019. 

The miller filed a writ with the High Court early last year as his insurance claim was not paid up. So far the writ has not been settled.

Rakibul Islam, company secretary of the spinning mill, told TBS that the insurance company is procrastinating with regard to the payment without any reason even after their inspection of the factory damage.

"A writ petition has been filed against the insurer as Idra did not help us primarily," he said.

Idra official (Legal Division) Md Dalil Uddin claimed that all kinds of steps are being taken to protect the interests of the customers. 

Arrangements have also been made to settle the claims of many customers, and the insurance companies are being monitored so that they act with sincerity to protect the interests of the customers, Dalil claimed.

Sheikh Kabir Hossain, president of the Bangladesh Insurance Association, told TBS that the insurance firms are paying customers their due insurance claims in accordance with the law. 

He admitted that there may be a few exceptions, and in those cases, local insurance agents cheat their customers for which the claimants fail to realise their claims on time.

When asked about the allegation that in the field of industry and commerce too, many companies do not get their policy claims, Sheikh Kabir put the blame on the business firms that do not comply with the insurance conditions properly.

When any policyholders' business is affected by fire, flood or storm, they are found to have multiple insurances in the name of one enterprise. When difficulties arise with regard to taking out multiple insurances for one business firm, customers do not get their money in time, said Kabir. 

Morshed Sarwar, vice-president (finance) of Bangladesh Knitwear Manufacturers and Exporters Association, told TBS, "There are more than fifty files on the insurance claims lying unsettled after fire or damage or theft in various factories."

"We have talked to the insurance companies concerned from time to time about this, and we have also asked Idra for a solution, but without result."

The insurers are making delay over payments on various excuses, Sarwar said, adding that after a few days, the claimants will be advised to take recourse to law, and the association will provide them with necessary help.