A report, released by the country's insurance regulator, has uncovered extensive irregularities in the maintenance of the books of account by the life insurance companies.
The report of the Insurance Development & Regulatory Authority (IDRA) said life insurance companies have been maintaining 'some questionable' heads in their books of account such as 'collection in hand,' 'outstanding premiums' and 'cash in hand' for long with 'ill-motives'.
The regulator said the life insurers show inflated amounts in these heads than the actual figures.
It found such types of inconsistencies and irregularities in accounting practices after it had conducted a survey on the life insurance firms.
A senior IDRA official said funds shown in 'collection in hand' head, that are not shown in bank accounts, are usually deposited by branch offices of the respective life firms after the end of each calendar year.
Explaining the official said if the actual amount deposited in bank accounts was Tk 1.0 billion, the insurer showed it at Tk 1.2 billion at the end of December.
For instance, he said, a life insurance company showed Tk 2.9 billion in 'collection in hand' head in the books of account. But the IDRA study found that the amount thus shown had been completely inconsistent with the insurer's premium earnings.
The regulator thinks that the firms have been maintaining such 'fictitious' and 'inconsistent' heads in their books of account to show their life funds bigger than the actual ones.
A surplus in the life fund leads to higher earnings for the life firms and it helps get attractive dividends, mainly by the sponsors.
The IDRA suspects the firms eat up a big amount of money, mostly belonging to the policy holders, through such irregular ways.
The regulator took the issue of irregular maintenance of books of account very seriously as it deprived the policy-holders and weakened the foundation of the life companies.
However, the IDRA issued notices to all life firms Thursday last for providing final audit reports within October 07 next.
M Shefaque Ahmed, chairman of the IDRA, told the FE that these were the matters of serious concern considering the interest of the policy-holders.
He said the regulator will evaluate further if it detected inconsistencies in final reports of the life companies.
However, the IDRA report also found that life insurers were not complying with the government rules with regard to investment of their earnings. It said life firms are required to invest at least 30 per cent of their earnings in government treasury bills and bonds.
The IDRA said many life firms have been taking bank loans despite having adequate liquidity.
IDRA sources said such type of bank loan taken by the life firms is not justified by any means.
He said there are examples, even in neighbouring India, where life firms rather give loans to the government or other agencies for development of infrastructures.
Another senior official at the IDRA said a life insurance company took Tk 1.51 billion loan from a commercial bank in 2012.
But the company had at least Tk 3.0 billion in life fund maintained in different forms.
The IDRA surveyed 13 out of 17 old life insurance companies excluding state-owned Jiban Bima Corporation.
In 2013, the government issued licenses to 14 life insurance companies in the country but they are yet to be considered for approval of actuarial basis.
Jasimharoon@yahoo.com
