Among the three actors in the financial market of Bangladesh - banks, stock markets and insurance - the latter appears to be lagging far behind in terms of institutional cum market growth. Its regulator - the 'Insurance Development and Regulatory Authority' (IDRA) was established by abolishing the erstwhile insurance department back in 2011. But sadly, it has not yet been made fully functional by the government even after a lapse of ten years. Predictably, the outcome has been very disappointing as evident from the stagnation and corruption prevailing in the country's insurance sector, which was highlighted by some media outlets recently.
Consequent to the passage of the Insurance Development and Regulatory Authority Act, 2010 by parliament, the IDRA started its journey with one chairman and four members in January 2011. The Financial Institutions Division under the Ministry of Finance is vested with the responsibility of appointing the IDRA officials. The four members are supposed to look after four areas, viz. general insurance, life insurance, law, and administration. But it is reliably learnt that the post of member (general insurance) has remained vacant for four years, while that for life insurance six months. Besides, the members who are currently serving on deputation have no background whatsoever of insurance business.
It has been learnt that recruitments in IDRA have remained stalled for a long time in the absence of recruitment rules for the sanctioned manpower. The manpower structure was in fact approved in July 2016 with 155 sanctioned posts in addition to the chairman and four members, which materialised after a five year-long tussle with concerned ministries. Under the circumstances, the authority is being run with the help of mostly non-professionals posted on deputation. Earlier, about 40 graduates from public and private universities got temporary appointment in the organization during 2011-12. Inquiry and investigation teams were formed with the help of these officials for overseeing the functioning of insurance companies and meting out punishments in case of deviations from laws or rules. But these experienced staffs could not get permanent appointment yet as the recruitment rules have not been finalised by the concerned Division.
Apart from the state-owned JibanBima Corporation, there are 32 life insurance companies in Bangladesh's private sector including MetLife (previously ALICO) of the USA and the Life Insurance Company (LIC) of India. But only about 20 million people out of a total 170 million are estimated to be covered by insurance schemes in the country. However, the national insurance policy formulated by the Financial Institutions Division claimed that only 6 million people had insurance-coverage. If the financial reports of insurance companies over the previous five years are analysed, it is found that on an average, half of the policies became inoperative following payment of first year's instalments.
People in the insurance sector have identified several reasons for the lapsing of policies. These include negligence of the insurance agents, who demonstrate laxity in following up with clients subsequent to the opening of a policy. There is also lack of awareness among the clients. Besides, the concerned companies are often accused of straying from their commitments, and there are even instances of embezzlement of clients' money by the insurance agents. It has also been observed that the agents involved at the field-level often lack adequate education and tend to entice people instead of enlightening them. Many people fall prey to deceptions as a result. The IDRA should therefore have a mechanism for taking action against these manipulators.
According to the figures provided by Bangladesh Insurance Association (BIA), about 70 per cent life insurance policies become redundant after the first year. Previously, the insurance agents used to get commissions out of premiums at the rate of 35% to 70%, which was in vogue up to 13 March 2012. After that, rates for the first three years were introduced; but the commission system has been fully revoked with effect from the current month.
Although there are many types of policies having duration of 3 to 18 years, a majority of subscribers prefer 10 to 12 years-long policies. The state-owned JibanBima Corporation (JBC) currently has about 400 thousand individual policy-holders and 300 group policies having 150 thousand members. On the other hand, the leading life insurance company MetLife has a subscriber-base of about 1.2 million, although JBC was leading the pack up to 1996. The third, fourth and fifth positions are occupied by Delta, National and Pragati Life Insurance Companies.
The SadharanBima Corporation (SBC) is the lone state-owned agency in the area of general insurance and reinsurance that is bedevilled by insider corruption and mismanagement. On the other hand, there are 46 general insurance companies in the private sector. The reason for this high number is that these entities have been accorded permission mostly on political considerations. More astonishingly, half the profits earned by SBC by insuring government assets are distributed among the private insurance companies without any rationale, and this practice has continued for over 30 years. In fact, this ridiculous system was introduced in 1990 on an experimental basis by amending the Insurance Corporation Act 1973. The pay-outs are doled out on a quarterly basis based on agreements signed by SBC with the private sector insurance companies. Some of these companies even pay the salaries of their staffs from this free gift provided by the SBC.
It is reliably learnt that five attempts were made in the past to amend the relevant law for doing away with this absurd profit-sharing system. But the government back-tracked each time due to interventions by BIA, which is politically powerful. BIA, on the other hand, argues that the insurance of government assets should be opened up for all parties if the current system is to be shelved. The IDRA is also silent on the issue, as it is directly controlled by the government in violation of its supposedly autonomous character. Experts opine that abolishing this free profit-sharing system would undoubtedly enhance transparency and efficiency of the country's general insurance sub-sector.
Dr Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.