Local non-life insurers expect to bag an additional income of Tk 10 billion, helped by the implementation of a 15 per cent agent commission. The commission against business procurement has been made effective since August.
"To my mind, the new commission system will add at least Tk 10 billion boost to our segment of the insurance sector a year," Sheikh Kabir Hossain, president of the Bangladesh Insurance Association (BIA) told the Financial Express in an interview in Dhaka recently.
Currently, the annual turnover of the privately-owned general insurance firms is around Tk 18 billion. There are 45 non-life insurers in the private sector. Another non-life and re-insurer is state-owned Sadharan Bima Corporation, which earns around Tk 12 billion a year.
Mr Hossain, who represents the grouping of 76 life and non-life insurers, said the government will also pull in additional revenues through value added tax and other taxes.
"Not only we will gain from this new commission system, the government exchequer will earn significantly from taxes," Mr Hossain said.
Sheikh Kabir Hossain
The BIA chief said both the insurance regulator and the association have been working hard on how to implement the system effectively.
"We're supporting the regulator continuously…" he said.
Chairmen and CEOs of the non-life companies and officials at the Insurance Development and Regulatory Authority (IDRA) had several meetings in the past to this end. They are also holding monthly meetings on how to identify and resolve potential problems.
In the meantime, the Authority formed a surveillance committee to inspect the offices of the non-life firms as to whether they were complying with the orders.
The head of the IDRA-backed surveillance team together with the representatives of the BIA and Bangladesh Insurance Forum has a mandate to visit the field-level offices and check the bank statements of the companies.
But Mr Hossain made it clear that the association would not be part of the field visit since it will "create a conflict of interest."
He said that the BIA will look into the technical aspects to identify the nature of the violation of the orders.
In July last, the IDRA issued two orders regarding the 15 per cent agent commission while procuring the nonlife business.
The watchdog did it as many firms provide as high as 70 per cent commission for procuring business, which ultimately impacts the financial health of the insurance companies.
Even this practice weakened the companies' ability to make claims.
There have been instances of diverting business from one insurer to another, the BIA chief said, adding many insurers did it luring agents into higher commissions.
"We have reached a gentlemen agreement that we'll no longer snatch business away from another by offering higher commissions," Mr Hossain said.
Still, he said there are challenges and those must be overcome through proper motivations and mentoring.
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