Dhaka: Finance Minister Amir Khosru Mahmud Chowdhury on Monday expressed deep frustration over the inability of 57 percent of the country's insurance companies to settle policyholders' claims, labeling the situation as deeply frustrating for the insurance sector. "If 57 out of 100 companies cannot settle customers' claims, that is in no way acceptable," he stated after visiting the office of the Insurance Development and Regulatory Authority (IDRA).
According to United News of Bangladesh, the minister attributed the current crisis to irregularities, disorder, and corruption within the sector, emphasizing the need for stringent measures to restore control. He highlighted the necessity for insurance companies to settle claims within a fixed timeframe to rebuild customer confidence and suggested that firms should liquidate assets if required to meet their obligations.
Chowdhury underscored the gravity of the situation by pointing out that customers, who invest their hard-earned money in premiums to secure their future, are being let down by companies failing to honor their claims. He stressed that deadlines are being established for insurers to resolve outstanding claims and warned of actions against non-compliant entities.
The minister further criticized some companies for investing in land and other assets instead of fulfilling their financial commitments to customers. He described the condition of certain insurers as alarming, noting that seven to eight companies have deteriorated to a point where their continued operation is puzzling, prompting ongoing actions against them.
Chowdhury did not rule out the possibility of merging troubled companies but stated that any decisions would be premature until a thorough groundwork is complete. He assured that necessary measures would be undertaken to stabilize the sector.
While some claims have been resolved, with the IDRA chairman personally intervening in at least one case, the minister clarified that the primary responsibility for settling claims rests with the insurance companies themselves, not the regulator's chairman.
He announced plans to amend the Insurance Act to enhance oversight, with a resolution framework akin to the banking sector to be introduced shortly. These reforms are expected to be presented to Parliament soon.
A new risk-based supervision system is being introduced to address the lack of adequate oversight by the IDRA in the past. Chowdhury revealed that all insurance companies would be brought under automation, mandating online transactions.
To strengthen the sector, plans to create an interoperable insurance system involving the IDRA, Bangladesh Bank, and the Bangladesh Securities and Exchange Commission, among other stakeholders, are in motion. Addressing allegations of companies maintaining dual servers for fraudulent transactions, Chowdhury declared that any company found operating with two servers would face strict action.
The minister emphasized the need for transparency in all financial transactions and operations of insurance companies, insisting on full compliance with regulatory requirements. He also acknowledged manpower shortages at the IDRA and outlined a plan to reduce government deputation officials over the next three to five years as the IDRA builds its own skilled workforce.
Chowdhury highlighted the challenges posed by pending lawsuits and court stay orders that obstruct the implementation of regulatory decisions, accusing some parties of exploiting legal avenues to evade regulatory actions. Changes to the Insurance Act and reforms to the IDRA's management are planned to address these issues.
In his concluding remarks, the minister outlined a vision to elevate the insurance sector to international standards, recognizing its critical role in global economies. He noted the vast untapped potential of insurance beyond life coverage, extending to properties, businesses, and personal assets in Bangladesh.
Chowdhury acknowledged the entrenched irregularities and corruption in the sector but remained resolute in his commitment to reform, asserting that the regulator's effective functioning would prevent a return to past practices. Insurance companies must now operate within legal frameworks, under proper regulation, and within the new digital framework.