Home ›› 20 Jan 2022 ›› Front
Amid the economic hazards triggered by the Covid-19 pandemic, life funds of insurance companies gradually saw a hike in the past few years in the country.
An analysis of the last five years showed that the amount of life fund has been increasing gradually. The amount shot up further amid the Covid-19 situation. In 2020, life funds of all life insurance companies reached Tk 36,108 crore, which can potentially contribute to completing any of the mega projects in the country, insurers said.
On the other hand, among the 33 life insurance companies, 10 life insurance companies had a life fund of Tk 34,308 crore in 2020, which was 94 per cent of the total life fund, according to the unaudited annual reports of 2020 submitted to the Insurance Development and Regulatory Authority (IDRA).
Scenario of life insurance sector in five years
According to the annual reports of the companies, the sustainability of life fund earnings has increased gradually. The life funds of all life insurance companies in 2016, 2017 and 2018 were Tk 29,554 crore, Tk 30,887 crore and Tk 32,493 crore, respectively.
In 2019, the amount of life funds was Tk 34,400 crore, which reached Tk 36,108 crore at the end of 2020, marking a Tk 1,708 crore hike.
Top 10 companies
The country’s top 10 life insurance companies are MetLife Bangladesh, Delta Life Insurance, National Life Insurance, Fareast Islami Life Insurance, Jiban Bima Corporation, Meghna Life
Insurance, Popular Life Insurance, Prime Islami Life Insurance, Sandhani Life Insurance and Pragati Life Insurance.
IDRA data shows that multinational company MetLife grabbed the top position in December of 2020, which had Tk 14,758 crore in its life fund, marking 40.87 per cent of the total life fund. Delta Life Insurance was in second place with Tk 4,174.5 crore (11.56 per cent) in life fund.
Besides, National Life Insurance was in third place with Tk 4,001.47 crore, marking 11.08 per cent of life fund, and Fareast Islami Life Insurance had Tk 3,387.4 crore (10.23 per cent) in life fund, grabbing the fourth place.
Jiban Bima, Meghna Life, Popular Life, Prime Islami Life, Sandhani Life and Pragati Life had Tk 2,193.11 crore, Tk 1,886.34 crore, Tk 1,656 crore, Tk 860 crore, Tk 794 crore and Tk 596 crore, respectively.
What life fund is and how it is calculated
In the insurance sector, life funds are collected with the premium instalments of life insurance users after excluding all expenses and insurance claims.
Life fund is the amount that any company gets from premium earnings after paying all expenses and insurance claims. As per the government rule, insurance companies have to invest 30 per cent of their life funds in the government treasury bond every year for risk management.
Insurers want use of life funds in mega projects
People who are involved with the insurance sector opined that although there is a policy to use life funds for investments, some companies have spent the money in different sectors. These companies delay the payments of insurance claims, subsequently causing harassments to the clients.
Wishing to remain unnamed, an official of IDRA told The Business Post that life funds can be used for investment in different mega projects, but insurance companies are using this money in other sectors, disrupting the payments of insurance claims.
Bangladesh Insurance Association (BIA) President and Sonar Bangla Insurance Chairman Sheikh Kabir Hossain said, “Life funds of insurance companies are not being used in suitable sectors while many mega projects can be implemented with this money. The government kept mum when we proposed investing in the Padma Bridge project earlier.”
Meghna Life Insurance Chairman Nizam Uddin Ahmed said the huge amount of life fund comes from the insurance policies taken by the customers. Payments of customers’ insurance claims will be easier if this money brings profit, he said, adding, “But currently, the interest rate of banks is low. So, fixed deposit receipts (FDRs) do not bring much profit.”
Earlier, a proposal was placed to the government for investment in mega projects, but no response came, he added.
“It is possible to implement the government’s many mega projects using the money from the life fund, although there is an obligation to invest a specific portion of the fund in the governments’ treasury bond,” Jalalul Azim, CEO of Pragati Life Insurance, told The Business Post.
“The government can implement many large projects after fetching money from this sector as the interest rate of bank deposits has fallen. The government can utilise the life funds with good returns, avoiding different bond markets after formulating a law,” he added.
Experts’ opinion
Instead of mega-projects, experts suggested investment of life fund’s money in the bond market.
Caretaker government’s former adviser Dr AB Mirza Azizul Islam told the Business Post that “In our country, deadlines of completing mega-projects normally become uncertain while project cost also expands three to four times further. So, it’s unsure whether insurance companies would be able to make profit by investing in mega-projects.”
Insurance companies can be directed to invest their life funds massively in treasury bills and bonds, he said.
Policy Research Institute Executive Director Dr Ahsan H Mansur also voiced same and said measures should be taken for increasing investments in the bond market.
Besides, insurance companies should not be encouraged to invest in land procurement or building sector as well, he insisted.
