When insurers’ jobs are not insured

While insurance companies are supposed to protect people, properties and financial assets, they now can not extend job protection to their own employees.

The Covid-19 pandemic is forcing the insurance sector to cut jobs to reduce operating costs.

The industry comprising 79 companies – life insurance 33 and general 46 – employs around 35,000 people. Of them, nearly 2,000 lost their jobs only in the April-June quarter of this year. Many more are fearing job losses at a time when alternative job prospects are bleak or non-existent.

Conditions of nearly four lakh agents in the life insurance industry across the country are worse as their income depends mostly on new insurance policies, which came down to almost zero during the 66 days of nationwide shutdown.

Prime Islami Life Insurance Limited has terminated around 200 of its nearly 600 employees in recent months in a bid to cut operating costs.

"We have excess manpower who were recruited by the previous management unnecessarily. Now we want to cut those jobs to protect policyholders' interests and money," said Md Apel Mahmud, managing director and CEO of Prime Islami Life Insurance.

However, he claimed the number of fired employees will not be as high as 200. "Employees who have been terminated will be given due benefits as per service rules," he added.

Fareast, Protective and Padma life insurers have also terminated their employees. Many employees of marketing teams of many general insurance companies have also lost their jobs.

"What else can a company do when its business reduces to half year-on-year," said a chief executive officer of a general insurance company. Members of the sales team are the ones to be hit first as there is hardly any new business now.

The Business Standard asked Khaled Mamun, chief executive officer of Reliance Insurance, a leading general insurer about the industry's business trends amid the pandemic.

"Premium from marine insurance that accounts for nearly one-third of our total business has gone down by 65% in April and May," said Mamun.

Also, existing policies are being renewed at a reduced rate, he added.

Non-life or general insurers' business depends on imports, exports, setting up of new factories, fire and motor insurance. This segment of business has grown at double digit rate riding on steady economic growth for over a decade until the devastation of the coronavirus pandemic.

"The overall business of general insurers went down by 45% as premium income from fire and marine insurance has declined significantly in the past two months," said Sheikh Kabir Hossain, president of Bangladesh Insurance Association or BIA.

"There is no motor vehicle import, no travel," Hossain said.

Meanwhile, life insurers' business depends on getting new policies. Nearly 4 lakh agents are engaged in hooking new business for their companies at a commission that goes as high as 50% in the first year and the benefits get reduced gradually.

Though the shutdown was withdrawn nearly a month ago, the condition has not improved that much for the agents. Moreover, existing life insurance policyholders are taking out cash by selling their policies to meet their basic costs at this time of the pandemic.

"Agents are passing through hard times as they have hardly any income now. They now need government support like garment workers," said Hossain of the BIA.

The BIA has formally written to the Insurance Development and Regulatory Authority (IDRA) requesting it to extend help for the agents.

Commenting on job cuts, the BIA president said they have discussed the issue at a recent meeting and requested member companies not to do so at the moment.

"But we can't bear on a company not to cut jobs. It depends on their financial capacity," he said.

Md Shafiqur Rahman Patwari, chairman of the IDRA that regulates the insurance industry, also said if a board of a company decides to terminate employees the IDRA can hardly do anything.

On the BIA's application for help, he said he has forwarded the letter to the finance ministry, which has formed a committee to find out ways to address the problems.

Bangladesh's insurance industry is one of the underdeveloped ones in the world with less than one percent penetration rate, which is measured as the ratio of premium underwritten in a particular year to the country's gross domestic product. India's insurance penetration was nearly 4% last year.

Also, the lapse rate, at which policyholders fail to pay their premiums on time and ends up with cancellations of insurance coverage, is also very high here, according to IDRA.

In Bangladesh, the first year policy lapse rate for private insurance companies is in the range of 50-60%, much higher than that of other countries.The rate is 10-15% in India, 40% in Sri Lanka and 45% in Pakistan.

A policyholder doesn't get any return if he lapses in one year. On completion of two years, the company pays policyholders after deduction of its management cost.

Gross premium income of 79 insurers was Tk13,291 crore, less than $1.5 billion, in 2019 from an economy that was worth $300 billion that year.