IDRA Orders Troubled Insurers to Fix Claim Settlement Issues
The Insurance Development and Regulatory Authority (IDRA) has instructed six struggling life insurance companies to submit plans to address longstanding problems in settling claims. This move is in response to ongoing issues of corruption and irregularities that have significantly impacted policyholders.
The regulator’s decision aims to increase accountability and protect consumer rights within the insurance sector. The companies under scrutiny are Baira Life Insurance, Fareast Islami Life Insurance, Sunlife Insurance, Sunflower Life Insurance, Padma Islami Life Insurance, and Golden Life Insurance. These companies have been plagued by issues that have prevented them from fulfilling their obligations to policyholders.
According to data from IDRA, these six insurers collectively owe over 9 lakh policyholders claims totaling Tk 2,887 crore. The amount of unsettled claims accumulated over five years, up to the third quarter of 2024, constitutes a staggering 98.37 percent of the total claims during that period.
Md Solaiman, a spokesperson for IDRA, told The Daily Star that these companies have failed to adhere to regulations, particularly regarding claim settlements. He attributed their ongoing difficulties to corruption and irregularities, leading to severe financial strains. The insurance regulator recently met with the companies’ chairpersons and chief executive officers, requiring them to submit a three-month action plan by April 15. The plan must detail how they intend to resolve their outstanding issues.
Except for Sunlife Insurance, the remaining five companies have a claim settlement ratio below 5 percent, according to the latest IDRA data. Solaiman stated that the regulator would take further action if the proposed solutions are unsatisfactory.
Amzad Hossain Khan Chowdhury, CEO of Golden Life Insurance, stated that the company is working to resolve its crisis. Golden Life Insurance, established in 1999, is currently in turmoil, with its headquarters closed, many key officials absent, and approximately 18,000 policyholders awaiting payments. The closure occurred after policyholders confronted staff because of the company’s failure to settle claims of Tk 34.95 crore.
Padma Islami Life Insurance’s board of directors has decided to sell company property, particularly land, to settle policyholder claims. IDRA has already approved the sale, which was announced on the Dhaka Stock Exchange website. The land in Cumilla, consisting of 20 decimals, is expected to sell for Tk 1.9 crore. The company received claims worth Tk 226 crore in the last five years, with about Tk 221 crore remaining unsettled.
A top official from Sunlife Insurance stated that the company had already paid Tk 33 crore of the Tk 63 crore in claims. Currently, 19,000 policyholders are owed Tk 30 crore. The official added that they plan to sell new policies to resolve the situation and will officially inform the regulator of this.
The reporter also attempted to contact top officials from Padma Islami Life Insurance, Baira Life Insurance, Fareast Islami Life Insurance, and Sunflower Life Insurance, but did not receive a response before the report was filed.
IDRA’s spokesperson mentioned that the insurance companies must sell assets, reduce staff, and inject funds to address this situation. The regulator has given them a final chance before implementing drastic measures. They have been instructed to submit a logical and practical plan, given the persistent problems. Solaiman noted that it is not possible to resolve all the issues immediately.
Md Main Uddin, a professor of banking and insurance studies at the University of Dhaka, emphasized the crucial role of addressing claim settlement failures in restoring trust in the life insurance sector. He believes that the regulator’s intervention is vital, ensuring that these companies adopt a clear, actionable plan to resolve outstanding claims. Main Uddin underscored the need to tackle issues of corruption and irregularities and suggested that showing transparency in policyholder compensation will be essential for protecting policyholders and stabilizing the industry. He also stated it would have been better if the government had taken this regulatory step sooner. He added that exemplary punishment must be given to those responsible for the current situation of the companies, which may serve as a warning for many.
