Home ›› 10 Nov 2021 ›› Front
The insurance sector on the whole is far from shining – a regressive state that does not coincide with the wellbeing of the country’s economy and overall development.
The ultimate reason for not expanding business in the life insurance industry is its policies turning out to be lapsed every year.
Sources said a certain number of policies go into oblivion annually. At the end of December 2020, a total of 33 life insurance companies witnessed the disuse of their 13.91 lakh policies.
Although almost all insurance companies are more or less responsible for the policies turning invalid, the number of such policies belonging to five insurance companies is alone 9.44 lakh accounting for 67.86 per cent of the total outdated policies.
Among the top five companies in terms of policy expiration are Fareast Islamic Life Insurance, Popular Islamic Life, MetLife, National Life Insurance and Delta Life Insurance Company.
The information came from an analysis of the companies’ unaudited financial statements for 2020 submitted to the Insurance Development and Regulatory Authority (IDRA).
According to the regulator, the most talked-about company at the end last year is Fareast Islamic Life Insurance.
The number of Fareast’s lapsed policies stands at 4.18 lakh, which is 30.05 per cent of the total.
However, Popular Life Insurance Company comes next in line to Fareast in terms of the policy failure.
The number of obsolete policies of Popular Life Insurance is 2.25 lakh, which is 16.17 per cent of the total discontinued policies in the sector.
The third largest multinational company, MetLife, has 1.11 lakh outdated policies, which occupy 7.97 per cent of the total such policies in the sector.
Similarly, the number of discarded policies belonging to National Life and Delta Life is 1.09 lakh and 81,000 comprising 7.83 per cent and 5.82 per cent respectively.
According to the report, the number of running policies in the life insurance sector in 2019 is 97.41 lakh. In 2020, it went down to 86.66 lakh.
On the other hand, the number of defunct policies is higher than that of the revived ones. The number of extinct policies in 2020 was 13.91 lakh and that in 2019 was 14.49 lakh. On the contrary, the number of policies rescued last year was over 5 lakh while in 2019 it was over 7 lakh.
Reasons behind insurers’ policy failure
In the case of life insurance policies, a failure of timely payment of premiums by the customers sends the policy into a defunct category. The sector people have identified a number of reasons for the policy discontinuity.
Among the notable reasons is the inaction or less spryness of the representatives of life insurance firms that do not pay much heed as they do while opening a new policy.
Besides, policyholders are also found to be lacking in awareness; there are also allegations of breach of promise against the companies.
Rupali Life Insurance CEO Golam kibria said: “We the insurers want that the policies remain in place, because if the policy is in operation, the customers as well as the people associated with the insurance benefit. It is a win-win for both parties.”
“However, there are a number of reasons behind the fiasco. Sometimes, our insurance workers entice the customers by holding out a series of opportunities entailed in their said policies bought by the policyholders without understanding much about them. In addition, we have not any direct contact with the customers – all contributing to end up in the gutter.”
Steps needed for policy control
IDRA Executive Director and Spokesperson SM Shakil Akhter said the Insurance Development and Regulatory Authority has taken several steps to identify the reasons for the policies being dysfunctional.
The notable measures include the inactivity of agents in earning renewal premiums alongside the agents’ tendency to change companies frequently, he cited.
Policy enforcement and agents’ active role in boosting the company’s renewable premium income, increasing penetration in the insurance industry, and above all, reining in the management of the company are some of the directives issued, SM Shakil pointed out.
Among the IDRA guidelines, 10 per cent of the commission payable on the first year and deferred premium of the life insurer has to be paid with the commission to the agent and development officer at all levels after collecting the renewal premium in the second year.
“As a result of these measures, the insurance companies are becoming more and more aware of their policy management,” claimed the IDRA official.
Bangladesh Insurance Association president Sheikh Kabir Hossain said, “We have already submitted a proposal to IDRA to control the lapsed policy. In accordance with the guidelines issued by the regulator, the rate of policy expiration started to decline in the last few years.”
The growth of invalid policies may be due to the pandemic; however, all these policies will be valid in the future, he hoped.
Jiban Bima Corporation Managing Director Jahurul Haque observed that the high rate of outdated policy has created a negative impact on the insurance sector.
“If the entire premium is deposited along with an additional fee, there is often an opportunity to revive the expired policy,” he suggested.
The insurer, however, posited that the companies often waive late fees to keep their business afloat, saying that awareness should be raised among the people about this, especially before buying an insurance policy while the customer should be informed about the expiration date.
