Ins industry sceptical about positive impact of new law
Sunday, 12 October 2008
FE Report
The insurance industry is sceptical about any positive impact of the new insurance law while keeping the Insurance Corporations Act 1973 in place.
"We do not still exactly know how the law looks like, but we have heard that the President has signed the ordinance. The law will help us a little if the Insurance Corporations Act remains as usual," said a top ranking insurance expert.
Private insurers said if this Act is not replaced the activities of the state-run Sadharan Bima Corporation (SBC) will continue to affect the growth of this sector. SBC is a competitor in the market, but the provision of compulsory reinsurance cession by the private sector insurers gives it enormous authority to control the private companies, they said.
Bangladesh Insurance Association (BIA) recently submitted a memorandum to the commerce secretary saying that the position of the SBC, if remained the same, it would be detrimental to the interest of the general insurance companies and needs to be addressed with utmost priority.
Private insurers said the state-owned SBC can underwrite insurance business from public sector as well as private sector and the bulk of its reinsurance premium is derived by way of compulsory cession from private insurance companies.
BIA said a reinsurance company cannot and should not compete with its own reinsurance clients in respect of direct insurance business. Due to this reason in all insurance markets overseas, the operation of insurance and reinsurance are separated. BIA said SBC should restrict its activities to either as a direct insurer or reinsurer.
SBC, BIA said, has failed to play the role of a national reinsurer and its services have continuously deteriorated over the years. BIA said it is a matter of record and of deep concern to the insurance industry that SBC does not promptly process or pay claims nor do they give any reason for non-settlement of claims to its clients, A large number of claims are pending with SBC for many years and SBC does not bother to process or settle these claims despite directives from the government.
It said SBC is unable to provide reinsurance services due to lack of technically qualified and experienced manpower. SBC also lacks knowledge of international reinsurance markets.
Private insurers believe that this process will not reduce the premium income of SBC, rather this will act as a stimulant to SBC to run its affairs on a commercial basis.
SBC Managing Director Md. Shafiqul Azam said he does not know anything about the law. SBC will give its view if the government seeks its opinion on the insurance law or the insurance corporations act.
He said there is no problem in doing reinsurance and insurance business by a same company.
Mr Azam, however, refused to make any comment on the observations of the private insurers about his organisation.
The insurance industry is sceptical about any positive impact of the new insurance law while keeping the Insurance Corporations Act 1973 in place.
"We do not still exactly know how the law looks like, but we have heard that the President has signed the ordinance. The law will help us a little if the Insurance Corporations Act remains as usual," said a top ranking insurance expert.
Private insurers said if this Act is not replaced the activities of the state-run Sadharan Bima Corporation (SBC) will continue to affect the growth of this sector. SBC is a competitor in the market, but the provision of compulsory reinsurance cession by the private sector insurers gives it enormous authority to control the private companies, they said.
Bangladesh Insurance Association (BIA) recently submitted a memorandum to the commerce secretary saying that the position of the SBC, if remained the same, it would be detrimental to the interest of the general insurance companies and needs to be addressed with utmost priority.
Private insurers said the state-owned SBC can underwrite insurance business from public sector as well as private sector and the bulk of its reinsurance premium is derived by way of compulsory cession from private insurance companies.
BIA said a reinsurance company cannot and should not compete with its own reinsurance clients in respect of direct insurance business. Due to this reason in all insurance markets overseas, the operation of insurance and reinsurance are separated. BIA said SBC should restrict its activities to either as a direct insurer or reinsurer.
SBC, BIA said, has failed to play the role of a national reinsurer and its services have continuously deteriorated over the years. BIA said it is a matter of record and of deep concern to the insurance industry that SBC does not promptly process or pay claims nor do they give any reason for non-settlement of claims to its clients, A large number of claims are pending with SBC for many years and SBC does not bother to process or settle these claims despite directives from the government.
It said SBC is unable to provide reinsurance services due to lack of technically qualified and experienced manpower. SBC also lacks knowledge of international reinsurance markets.
Private insurers believe that this process will not reduce the premium income of SBC, rather this will act as a stimulant to SBC to run its affairs on a commercial basis.
SBC Managing Director Md. Shafiqul Azam said he does not know anything about the law. SBC will give its view if the government seeks its opinion on the insurance law or the insurance corporations act.
He said there is no problem in doing reinsurance and insurance business by a same company.
Mr Azam, however, refused to make any comment on the observations of the private insurers about his organisation.