The Insurance Development and Regulatory Authority (IDRA) has recently issued a notification to non-life insurance companies asking them to make all kinds of payment or expenditure through banking channel.
According to the IDRA notification, non-life insurance companies cannot have more than three bank accounts in order to deposit premium money.Therefore, insurance companies can have one account at any of the three different scheduled banks. If a company has already stored money in more than three bank accounts, additional accounts will have to be closed by July 31.
The notification came on the last Thursday meeting with the state-owned General Insurance Corporation, Bangladesh Insurance Association (BIA), an association of insurance owners, and Bangladesh Insurance Forum (BIF), an association of the CEOs of the insurance.
The new move is likely to protect the interest of insurance customers, bring good governance in the insurance business and ensure strong internal control, IDRA sources said.
The regulatory authority said insurance companies can have bank accounts to consolidate capital and accumulate other income as needed. On the other hand, a bank account should be kept for payment of claim and management costs.
It warned that the commission money and monthly salaries cannot be paid in cash under any circumstances.
The company’s all the transactions have to be cross-checked, but for official requirement, the insurance companies can only withdraw cash to give honorarium of the company’s board members and meet other expenses.Insurance companies should not seek IDRA approval to open a permanent deposit (FDR) at a bank, but they should seek approval to open a bank account for any other matter.
Under this directive of bank account protection, insurance companies have to submit a report to IDRA by August 12.
According to the CEOs of insurance companies, IDRA has given new guidelines for the abolition of higher commission system, which is tarnishing the goodwill of insurance sector.
Under the IRDA law, general insurance companies can offer the highest 15 percent commission to the clients.
But actually the companies are paying 60 to 70 percent commission.
The sector insiders said, after joining IRDA as chairman Shafiqur Rahman Patwary vowed to bring discipline to insurance sector including the higher commission system, but to no avail.
He said: “We are strict now. If nobody obeys the instructions, we will take steps to cancel their licences.”
Shafiqur also mentioned that BIA and BIF vowed to implement the new IDRA directive.
According to BIA president Sheikh Kabir Hossain, IDRA took a good initiative. Now the insurance company should not give higher commission to anyone.