Irregularities, Corruption Deeply Rooted in Insurance Sector: Khosru

Finance Minister Amir Khosru Mahmud Chowdhury has said irregularities, disorder and corruption have taken deep roots in Bangladesh’s insurance sector, warning that tough measures will be needed to bring the sector under control.

He said insurance companies must settle claims within a stipulated timeframe to restore customers’ confidence. If necessary, companies will have to sell their assets to pay customers’ legitimate claims.
The minister made the remarks while visiting the office of the Insurance Development and Regulatory Authority (IDRA) in Dhaka on Monday.

Amir Khosru said around 57 percent of insurance claims remain unsettled, meaning 57 out of every 100 claims are yet to be paid. “This is in no way acceptable,” he said.

He said companies would be given a deadline to settle outstanding claims and action would be taken against those that fail to comply.

“Many companies have purchased land and other assets without paying customers’ dues. If they have a cash shortage, they will have to sell their assets to settle the claims,” the finance minister said.

He said some claims have already been settled and the IDRA chairman had taken an initiative to settle one claim as an example. However, he clarified that settling insurance claims is not the responsibility of the regulator’s chairman but of the respective insurance companies.

Comparing the situation in the insurance sector with the banking sector, Amir Khosru said widespread mismanagement, corruption and lack of control had been found after the government took charge.

He said necessary amendments would be made to the insurance law and a proper resolution framework, similar to that in the banking sector, would be introduced. The proposed reforms are expected to be placed before Parliament.

The finance minister said risk-based supervision would be introduced in the insurance sector and all insurance companies would gradually be brought under an automated system.

“All transactions will have to be conducted online,” he said, adding that greater physical interaction creates more opportunities for corruption.

He said an interoperable system would be introduced involving IDRA, insurance companies, Bangladesh Bank, the Bangladesh Securities and Exchange Commission and other relevant agencies.

Amir Khosru also warned insurance companies against maintaining two servers for separate sets of transactions. He said companies would not be allowed to operate two servers and action would be taken if any such practice was detected.

The finance minister said the condition of seven to eight insurance companies was extremely concerning, to the extent that questions had arisen about how they were still operating.

He said these companies had been instructed to resolve their problems within a short period in line with IDRA directives. Failure to comply would result in further action.

He said it was too early to comment on possible mergers, adding that the government would take whatever measures were necessary for the insurance sector.

Amir Khosru said IDRA suffers from both a shortage of personnel and a lack of skilled and professional manpower.

He said the number of government officials working on deputation at IDRA would gradually be reduced over the next three to five years, while the authority would develop its own skilled and professional workforce.