A senior insurance executive has proposed that the industry regulator require insurers to liquidate their assets if they fail to settle customer claims.
He made this call as settlement rates continued to slide across the industry and jeopardised public confidence in insurers.
Data from the Insurance Development and Regulatory Authority (IDRA) show that the claim settlement rate among life insurers fell from 85% in 2020 to 72% in 2023. According to the latest data, life insurance companies in the country settled 72.43% of all claims in 2023, down from 74.28% in 2022, reported The Financial Express. The claim settlement rate of non-life insurance companies dropped year-on-year by around 8.0 percentage points to 35.58% in 2023.
Managing director & CEO of Pragati Life Insurance, Md Jalalul Azim, told the newspaper that he had submitted a report to the IDRA suggesting cash-poor insurers sold their assets to raise funds to settle claims. In cases where insurers do not have sufficient assets, legal action should be taken against the owners of the insurers concerned to ensure that policyholders receive their rightful claims.
There is a precedent for such action. The IDRA recently sold the building of an insurance company to settle claims of its policyholders. But the IDRA lacks the power to confiscate the assets of an insurance company owner and has to resort to legal action.
Mr Azim also recommended that insolvent insurers be barred from accepting new business so as not to increase their financial burden and the risk of embezzlement of funds.
Bangladesh has over 80 insurance companies, including 36 life insurers.