Sikder Insurance claim settlements dip in 5 years

Sikder Insurance Company’s claim settlement rate plunged in five years, reaching 1.52 per cent in 2021 from 51.04 per cent in 2017.

The Insurance Development Regulatory Authority (IDRA) data shows the company’s claim settlement rate was 16.04 per cent in 2018, 9.88 per cent in 2019, and 4.39 per cent in 2020.

Besides, its total claims at the end of 2021 were Tk 19.46 crore, out of which it settled only Tk 15 lakh.

The insurer’s premium growth also declined during this period. The growth rate was 16 per cent in 2017, 21 per cent in 2018, negative 10 per cent in 2019, negative 6 per cent in 2020, and 7 per cent in 2021.

The company’s Managing Director and Chief Executive Officer Sk Abdur Rafique told The Business Post they have no bad reputation in the market regarding claim settlement.

“However, due to the Covid-19 pandemic, like everyone, our business did not go well in 2021. We settled over Tk 3 crore claims in 2022. We currently have no pending claims,” he said.

The company has also violated the Insurance Act 2010. The law says general insurers must maintain a minimum paid-up capital of Tk 40 crore. 60 per cent of the capital will be provided by sponsors and directors while the remaining 40 per cent will come from general investors. But Sikder’s paid-up capital is only Tk 24 crore at present. “We have applied for an initial public offering.

Paid-up capital will be adjusted when we will get listed,” Rafique said.

A firm’s paid-up capital represents the extent to which it depends on equity financing to fund operations. This figure can be compared with a firm’s level of debt to assess if it has a healthy balance of financing, given its operations, business model, and prevailing industry standards.

Industry insiders say it is crucial for insurance firms to increase paid-up capital considering the present economic indicators. They also warned that low paid-up capital can be a grave threat to the security of clients’ money.

Sadharan Bima Corporation Director AKM Ehsanul Haque said, “Paid-up capital of Tk 30 core for life insurers and Tk 40 crore for non-life insurers is insufficient as per the insurance act. In case of a financial crisis, most of these firms will become insolvent.’’

Sikder Insurance was established in 2013 as a non-life insurer. Currently, its asset and investment are Tk 155.14 crore and Tk 141.24 crore respectively.