Clarify additional management costs

The Insurance Development and Regulatory Authority (IDRA) has issued a show-cause notice to Bengal Islami Life Insurance Company Limited seeking clarification on the alleged spending of additional management costs and providing high commissions to the agents.

Sources at the IDRA said that Bengal Islami Life Insurance had paid a maximum 95 per cent commission on the first-year premium to its agents in 2021.

Due to paying high-rate commissions to the agents, the company’s management expenses have increased, resulting in excessive management costs against the approved limit of the private insurance company.

After its inception in 2021, the company has only Tk3,50,00,000 in its life fund now, according to the sources at the IRDA. A small portion of the premium income is added to the life fund, so there is no scope to increase the life fund significantly, they said.

The company will have to pay a total of Tk4,19,00,000 to the policyholders from 2023 to 2026. As a result, the company may face a financial crisis, according to IRDA analysis.

The company must have to bring the management costs within the permissible limit, they said, adding that the amount of additional management cost, which they have already spent, will have to be adjusted by reducing the cost or increasing the capital, the company may face severe problems in the coming future.

In the letter, IDRA also asked the insurance company to clarify the reasons why it failed to be listed on the stock market within three years. Its authorities asked the insurance company to identify its overall financial condition by conducting a special audit.

An IDRA official, who did not wish to be named, said that IDRA had prepared a report last year after an investigation. An explanation has been sought from the company to know about the irregularities.