57% insurance firms failing to pay claims unacceptable: Khosru

Finance Minister Amir Khosru Mahmud Chowdhury

Finance Minister Amir Khosru Mahmud Chowdhury on Monday said 57 percent of the country's insurance companies are not paying policyholders' claims, calling the situation "deeply frustrating" for the country's insurance sector.

"If 57 out of 100 companies cannot settle customers' claims, that is in no way acceptable," he told reporters after visiting the office of the Insurance Development and Regulatory Authority (IDRA).

The minister said irregularities, disorder and corruption in the sector have created the current crisis, adding that tough measures must be taken to bring the industry under control.

He said insurance companies must be made to settle claims within a fixed timeframe to restore customer confidence, and that firms should sell off assets if necessary to clear their dues.

Khosru noted that customers pay premiums from their hard-earned money to secure their future, yet many companies are failing to honour their claims, a situation he said is completely unacceptable.

He said deadlines are being set for insurers to settle outstanding claims, and action will be taken against those that fail to comply.

Many companies, the minister alleged, have purchased land and other assets instead of paying customers what they are owed. "If they are facing a cash crunch, they must sell assets to pay claims."

Describing the condition of some insurers as "alarming," he said seven to eight companies have deteriorated to a point where it is unclear how they are still operating, and that action is being taken against them.

Khosru added that these companies must resolve their issues within a short period in line with regulatory directives, or face further action.

On the possibility of merging troubled companies, he said it will be premature to comment before groundwork is complete, adding that whatever is necessary for the sector will be done in due course.

The minister said some claims have already been settled, with the IDRA chairman personally taking the initiative to clear at least one.

However, he clarified that settling claims is the responsibility of the insurance companies themselves, not the regulator's chairman.

Khosru said necessary amendments will be brought to the Insurance Act to strengthen oversight, with a "resolution" framework similar to the banking sector planned to be introduced. "These reforms are expected to be placed before Parliament in the coming days."

He said a risk-based supervision system is being introduced in the sector, noting that the absence of adequate oversight by the IDRA in the past had contributed to the present crisis.

All insurance companies, the minister said, will now be brought under automation with transactions required to be conducted online.

Highlighting plans to make the entire insurance system interoperable, he said insurers, the IDRA, Bangladesh Bank and the Bangladesh Securities and Exchange Commission, along with other stakeholders, will be brought under an integrated framework.

Responding to allegations that some insurance companies maintain two servers, Khosru said instances have been found where one server holds genuine data while another is used for separate transactions.

He said no company will be allowed to operate with two servers going forward, and any found doing so will face action.

The minister said insurance companies must bring transparency to all their financial transactions and operations, and must fully comply with all regulatory requirements rather than partial compliance.

He also pointed to manpower shortages at the IDRA, saying both the number and quality of skilled, professional staff at the regulator remain inadequate.

Over the next three to five years, Khosru said, the number of officials on deputation from the government will be gradually reduced as the IDRA builds its own trained, professional workforce capable of long-term sector oversight.

He said insurance is a specialised profession and experienced, qualified professionals need to be brought into the regulator.

The minister further said pending lawsuits and court stay orders have hampered the implementation of regulatory decisions, alleging that some parties go to court specifically to avoid regulatory action and exploit the resulting delays.

He said changes to the Insurance Act, along with reforms to the IDRA's management, are planned to address this.

Outlining a goal of elevating the sector to international standards, Khosru said insurance plays a major role in economies worldwide and that professionals in the field hold respected positions in many countries, a status Bangladesh's insurance sector has yet to achieve.

He noted that insurance's scope extends well beyond life coverage to property, businesses, homes, furniture and electronics, potential that remains largely untapped in Bangladesh.

The minister said the roots of irregularities and corruption in the sector run deep.

"This is a difficult task, but it is one we must undertake in the interest of the people of Bangladesh," he said, adding that once the regulator begins functioning effectively, various reactions can be expected in the market as those involved in irregularities try to weaken oversight and return to the old system. "That opportunity will not be given again. We have shut that door."

Khosru said insurance companies must now operate within the law, under proper regulation, with professionalism, and within the new digital framework. -UNB