10 life insurers at existential risk: Idra chairman
Around 10 life insurance companies are at risk and may face an existential crisis within the next two to four years due to bad investments made using funds collected from policyholders, said Mohammad Zainul Bari, chairman of the Insurance Development and Regulatory Authority (Idra).
"They have squandered their clients' money and spent excessively on management by up to 200-300 times," he said on the occasion of the second founding anniversary of NRB Islamic Life Insurance Ltd at a city hotel on Saturday.
"Either these companies have deliberately made poor investments or embezzled the money under the guise of investments," he added.
Zainul Bari, however, did not provide the names of the companies in trouble. Some 35 life insurers operate in the country.
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The companies are now unable to settle claims. They are paying policyholders from the new premiums they are collecting and adding more liability for the future, he said.
"We receive hundreds of applications every day from policyholders who have been denied insurance claims," the Idra chairman said, adding that these individuals have been subjected to months of harassment by the insurers. What is even more alarming is that some of the policyholders are resorting to filing cases.
He said that Idra is deeply concerned about this matter and has already summoned the high-risk insurance companies. "We have instructed them to prepare action plans, sell fixed assets if necessary to settle claims, and reduce expenses," he added.
But even after that, it is not possible to tell how many companies will come out of the precarious situation. The authorities are now exploring legal options, including revoking licences, he added.
Zainul Bari believes most life insurance companies are currently unable to settle their clients' claims. "They are not doing this wilfully. Rather, they lost their ability to settle the claims," he added.
He said the contribution of the insurance sector to GDP in 2021 was 0.5%, which has now decreased further.
He said that last year, life insurance claims were settled to the tune of Tk9,559 crore which was proportionally 66%. Every year, companies fall behind in paying insurance claims. About 40% of people are not getting fair claims. This is an ominous sign for the future of the insurance sector.
About one crore people are connected with insurance in the country, and employment has been given to several lakh people. And new people-friendly and welfare-oriented insurance policies have played a significant role in this success.
According to official statistics, the gross premium amount of the life insurance sector stood at Tk11,399.51 crore at the end of 2022.
