The Insurance Development and Regulatory Authority (IDRA), the regulatory body for Bangladesh, has identified nine issues in the country’s non-life insurance sector.
The problems are paying high commission to agents, accepting premium on credit, low claim settlement rate, understate premium income, high operating costs, and sluggish reinsurance, reported the newspaper The Daily Star.
In addition, non-life insurance companies charge improper premium rates, keep their premium income at various banks, and do not follow recruitment rules.
The insurance sector has long been suffering from paying excessive commissions to agents. Many companies offer as much as 60% of the premium as commission to secure business, which hurt their profits, industry insiders say.
With this backdrop, the IDRA issued a circular in 2012 barring insurance companies from paying more than 15% of the premium as commission to their agents. However, most insurers disregarded the directive, prompting the regulator to issue another notice in late 2019 instructing them to comply for the sake of the sector’s welfare.
Subsequently, in a meeting with the Bangladesh Insurance Association that same year, insurance companies collectively agreed to follow the order in a bid to keep the sector alive. However, most of them are still paying high commission rates in several ways, the IDRA said.
Some insurers do not reinsure their policies, which places a bigger burden on the company as the risks are unshared. The IDRA previously ordered insurers in the country to reinsure their policies with Sadharan Bima Corporation and a foreign company, which would each take 50% of the burden. A