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Insurance companies could not be held accountable for financial frauds as the regulatory body lacks power to enforce disciplinary actions, said the chief of the Insurance Development and Regulatory Authority (IDRA).
"A few days ago, the governor of the Bangladesh Bank told the media that the banking sector is on the brink of a disaster. However, I believe the insurance sector is facing an even deeper crisis.
"The misdeeds in the insurance sector over the past 15 years have led to this crisis. The previous regime granted licences to insurance companies, allowing them to exploit the public. They systematically looted people's money on the pretext of doing business," said IDRA Chairman Dr M Aslam Alam at a seminar at the IDRA office in the capital on Wednesday.
IDRA has been unable to prevent the irregularities because it has little or no authority, he said.
The programme was jointly organised by the IDRA and the Insurance Reporters Forum (IRF) to discuss reforms that the sector needs to recover from the crisis. Two research papers were presented at the seminar titled "Insurance sector reforms and our responsibilities".
The paper on the life insurance sector was presented by Md. Jalalul Azim, managing director & CEO of Pragati Life Insurance, while Brigadier General Shafique Shamim, managing director & CEO of Sena Kalyan Insurance, presented another paper on the non-life insurance sector.
The event was attended by IDRA members, CEOs of life and non-life insurance companies, and journalists who cover the insurance sector.
Mr Alam criticized the Insurance Act as highly flawed, and argued that it had been designed in favour of insurers by weakening IDRA. "When IDRA suspends an entity, it in most cases obtains a stay order from the court and continues operations.
"For example, my first case after joining IDRA involved Sonali Life Insurance. We appointed an administrator, but the company's owner challenged our decision in court. As a result, a stay order was issued, preventing the administrator from carrying out duties."
Under the existing laws, IDRA does not have the power to restructure the board of an insurance company. "We can only suspend it. However, once the suspension order is lifted, the same board members return and overturn all reforms made by the administrator."
Moreover, IDRA lacks the authority to remove a company's chairman or directors or even approve board appointments.
In the banking sector, the central bank must approve the appointment of a chairman, but IDRA has no such authority over insurance companies.
"We also lack the power to approve independent directors," said Mr Alam.
"Almost every decision made by IDRA is challenged in court. The opposition parties frequently obtain stay orders against our rulings. When we appoint administrators, the affected parties secure stay orders. If we suspend a board, the very next day they get a court order reversing our decision.
"If we truly want to change the situation, IDRA must be empowered and a proper regulatory environment must be established." said the IDRA chief.
He accused insurance companies of non-cooperation when IDRA demands information from them. Mr Alam also raised questions about the authenticity of the data provided by insurers.
Digitalisation could eliminate 85 per cent of irregularities and corruption. "We take initiatives, but cooperation is often not there," he said.
Referring to the Insurance Management System (IMS), Dr. Alam said it currently provides 10 essential services necessary in monitoring insurance companies. If complete and accurate data is fed into the IMS, IDRA will be able to function effectively.
However, the newly-formed committee of the Bangladesh Insurance Association (BIA) stated that they will not cooperate in implementing this system.
Dr Alam further stated that apart from digitalization, an adequate workforce is also essential.
IDRA is currently operating with a limited number of staff and inadequate technology. Despite these challenges, efforts are underway to develop the insurance sector.
Regarding pending claims, Mr Alam said IDRA does not have the authority to liquidate companies' assets to settle claims as such a move entails legal proceedings.
"If the claims are not settled, people will not have faith in the insurance sector," he said, adding that establishing good governance is essential to restoring confidence in the industry.
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