IDRA to hire auditors for extravagant life insurers

Jasim Uddin Haroon | Published: November 30, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

The regulator has decided to appoint auditors for many life-insurance companies which have been found extravagant in their management expenses.
Official sources said the Insurance Development and Regulatory Authority (IDRA), the regulator of 77 life and non-life insurance firms, in its board meeting recently took a decision to this effect.
Management spending involving business procurement cost by many of the life-insurance firms has exceeded nearly 77 per cent in violation of relevant rules, according to the IDRA.
As part of the move, the IDRA has already issued letters to three life companies and it will also write to the remaining ones within next month.
However, the new life firms and those maintaining expenses in line with the rules concerned will remain outside the purview of the strict regulatory measure.
Sources at the IDRA said it might start appointing auditors in some companies sometime January next.
The regulator had conducted a survey on 13 life insurers for a period of five years until 2013.
It found out that most of the life insurers had exceeded limits of their allowable management expenses, especially in their first-year of operation.
This leads to depriving policyholders in terms of financial benefits.
The companies surveyed by IDRA had spent an extra amount of more than Tk 2.62 billion beyond their limits only in 2013.
Sources at the IDRA said they had at least thrice warned the firms about the rise of the management expenses.
"Some life insurers had pledged earlier to curb it, but didn't," said one official.
The IDRA sources said they were warned about the issue in 2012 but most of them failed to keep their promises.
A top official at the IDRA said the regulator is highly concerned about the abnormal rise in management expenses as this type of extra expenditure by the companies affects the aim of attaining a vibrant insurance industry.
"Ultimately the policyholders are the losers for the high cost incurred by the life firms as the money spent belongs to them," he said.
He hinted that a part of the expenditure was being spent for maintaining motorised vehicles that, in many cases, are used by the high officials.
Apart from this, the life firms spend a significant volume of premium earnings for the payment at the supervisory level of the respective insurers that often exceeds their actual requirements.
He cited an example: a life firm has more than 1000 supervisors, which does not match with the average earnings of the insurer.
"They promised us to minimise extra management cost at zero level but failed to do it," he said.
He said new firms that got licences in 2013 are also violating the rules in relation to the management spending.
However, many insiders at the life firms said the management expenses had been rising in recent years on the back of poor business growth.
He said the growth in the life-insurance business remained downward over the last three years but the expenditure was on the upturn.
jasimharoon@yahoo.com