IDRA to investigate 17 general insurers in disciplinary crackdown

Dr M Aslam Alam, chairman of the IDRA

Seventeen non-life insurance companies will also undergo special audits as the regulator has identified them as high-risk after a similar measure taken for poorly-regulated life insurance companies.

The Insurance Development and Regulatory Authority (IDRA) has already appointed auditors to 15 life insurance companies that have been facing complaints of non-settlement of claims.

"We have found the insurers to be at high risk in our recent assessment in terms of governance, claim settlement, and asset classes," said Dr M Aslam Alam, chairman of the IDRA at his first press briefing on Wednesday since joining the office.

The IDRA has been working with the weakest performers and new rules and regulations are designed to confront the crisis engulfing the insurers, said Mr Alam who joined the organisation seven months after the political changeover in August last year.

The special audits are aimed at uncovering why the insurers have failed to settle policyholders' claims timely and collect premiums, what the policy lapses were and the current status of the assets of the firms.

The regulator also wants to identify individuals responsible for mismanagement and take appropriate punitive actions based on the audit findings, said Mr Alam.

The insurance regulator will send letters to the chief executive officers of the 17 non-life insurance companies early next week. Separate audit firms will be assigned to carry out the financial scrutiny and submit reports within 30 working days, said an official of the IDRA.

As per the terms of reference (ToR), auditors will verify whether these general insurers have been complying with the Insurance Act 2010.

They will also look into the companies' financial statements for 2023 and see if they properly followed the regulatory directives relating to premium collection, deposit, refund or policy cancellation, re-insurance, accuracy in database and management expenses.

The general insurers deemed as high-risk include Islami Insurance Bangladesh, Islami Commercial Insurance, Express Insurance, Continental Insurance, Dhaka Insurance, Takaful Islami Insurance, Desh General Insurance, Purabi General Insurance.

Also on the list are Provati Insurance, Phoenix Insurance, Mercantile Islami Insurance, Republic Insurance, Sikder Insurance, Sonar Bangla Insurance, Standard Insurance, Bangladesh Co-operative Insurance and Nitol Insurance.

All but Bangladesh Co-operative Insurance are publicly listed. The country has 82 insurance companies - 36 life insurers and 46 non-life insurers. Of them, 58 are publicly listed companies.

The country's insurance sector has been marred by mismanagement, fund embezzlement, and weak oversight, said Mr Alam. "The insurance sector is facing extreme distrust after many insurers' failure to settle policyholders' claims in time."

According to the 2010 act, claims must be settled within 90 days after the submission of documents following the expiry of a policy.

At present, unpaid claims in the life insurance sector constitute 45 per cent of claims while about 47 per cent of claims remain unpaid in the general insurance sector.

More than 5.4 million policies have lapsed over the past 14 years, according to IDRA data. Moreover, nearly 1.1 million policyholders are currently unable to recover their dues.

This is the backdrop to the IDRA proposing amendments to laws and regulations to address the challenges that the sector is facing and to regain public trust.

The government has finalised a draft of the Insurance Resolution Ordinance 2025, similar to bank resolutions, published last week for public and stakeholders' opinions.

The primary objective of the Insurance Resolution Ordinance-2025 would be to safeguard policyholders' interests, particularly by ensuring timely claim settlement.

"The new ordinance will create legal scope for the restructuring of troubled insurers, ownership change, mergers, or liquidation," said Mr Alam.

The new ordinance also grants the regulator sweeping powers to declare financially troubled insurers bankrupt. If necessary, it could even liquidate the personal assets of directors to clear dues owed to policyholders.

The insurance regulator is set to bring major changes to the regulations regarding the appointment and removal of the chief executive officers (CEOs) of insurance companies.

"This initiative has been taken mainly to address the crisis of qualified top managers in the insurance sector," the IDRA chief said.

Currently, 19 insurers have been operating without CEOs for one to three years, out of 82 insurers. The companies claim they are unable to find qualified candidates for the top position, he said.

Mr Alam also said the existing rules are not enough to appoint administrators and run these companies smoothly.

Without ensuring transparency, accountability and good governance in the sector, people's confidence will not grow, he said, adding that new laws and regulations would help gain back people's trust.