Insurance sector riddled with corruption: Khosru

Irregularities, disorder, and corruption have taken deep root in the nation’s insurance sector, requiring tough measures to restore control, Finance Minister Amir Khosru Mahmud Chowdhury warned Monday.
Speaking to reporters after inspecting the Insurance Development and Regulatory Authority (IDRA) headquarters, he criticised insurers for failing to honor customer commitments. 
He noted that approximately 57% of insurance claims currently remain unpaid.
“Customers invest their hard-earned money to secure their future, yet many companies fail to settle these claims. Out of every 100 claims, 57 are left pending. This is completely unacceptable,” Amir Khosru said.
The minister announced that the government will set strict deadlines for claim settlements. 
Companies struggling with cash flow will be required to liquidate land and other fixed assets to satisfy legitimate policyholder dues.
Comparing the crisis to recent turbulence in the banking industry, the finance minister revealed that the government uncovered widespread mismanagement, corruption, and lax regulation upon taking office.
To address the system’s structural flaws, the government plans to overhaul existing insurance laws and establish a stricter regulatory framework, which will be submitted to parliament for approval.
Risk-based supervision and automation
The finance minister announced that a risk-based supervision system will soon be introduced in the insurance sector, pointing to past regulatory gaps at the Insurance Development and Regulatory Authority (IDRA) as a major cause of current industry issues.
Under the new plan, all insurance companies will transition to full automation, requiring transactions to be processed online.
“The more physical interaction there is, the greater the scope for corruption,” Amir Khosru Chowdhury said, emphasising that the system is being redesigned for complete interoperability.
The overhaul will integrate insurance firms, IDRA, Bangladesh Bank, the Bangladesh Securities and Exchange Commission (BSEC), and other key stakeholders into a single, unified platform.Addressing allegations that some insurers maintain dual servers, one for legitimate records and another for off-the-books transactions, the minister warned that the practice will end immediately. No company will be permitted to operate secondary servers going forward.

Condition of 7-8 companies ‘worrying’
The finance minister said seven to eight insurance companies were in such poor condition that their continued operation was a concern. Action is being taken against them, he said.
He said these companies would have to resolve their problems within a short period in line with instructions from the regulator. Those that fail to do so will face further action.
However, the finance minister said he did not want to make any immediate comment on whether any insurance companies would be merged.
He said whatever is necessary for the insurance companies would be done, adding that it would not be appropriate to comment on the matter prematurely before the relevant issues are finalised.
The finance minister also said legal cases and court injunctions in the insurance sector were creating obstacles to the implementation of decisions taken by the regulator.
He said some people were going to court to avoid regulatory decisions and were trying to take advantage of the situation. 
Changes will be made to the insurance law to address the problem, while changes will also be made to the management of IDRA, he said.
The finance minister said the government aims to bring Bangladesh’s insurance sector up to international standards.
The role of insurance in economies around the world is significant, he said, adding that professionals working in the insurance sector also enjoy a respected position in many countries. Bangladesh must also take its insurance sector to that level, he said.
He said insurance companies could make a major contribution to a country’s economic development. 
The scope of insurance extends beyond life insurance to people’s assets, businesses, homes, furniture, electronic products and various other areas.
However, Bangladesh has yet to fully realise the potential of the insurance sector, he said.

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