Insurers accuse banks of discouraging Tk 100 accounts

Ismail Hossain State-owned banks are reluctant to open savings bank accounts of small policy holders with initial amount of Tk 100, alleged life insurers. They said that they have been receiving hundreds of such allegations from the field level that small policy holders are facing difficulties during opening bank accounts. Bankers say that they did not receive any directive from the Bangladesh Bank to open bank accounts for the small life policy holders with Tk 100. Muhammed Shah Alam, FCA, managing director of Meghna Life Insurance Ltd. told the FE that they had formally informed the Insurance Development and Regulatory Authority (IDRA) about the reluctance of banks." Earlier in November, the insurance regulator had reproduced the BB letter to the life insurers for opening bank accounts with Tk 100 for small policy holders. IDRA member Naba Gopal Banik earlier told the FE that they directed life insurance companies to bring small policy holders into the banking network as per directive of the Bangladesh Bank. Bangladesh Bank issued a circular on November 1 this year to all state-owned commercial and specialised banks with the direction to allow small policy holders to open bank accounts. "But the state-owned banks are saying they did not receive such direction," Md. Kazi Mortuza Ali, managing director of Prime Islami Life Insurance Ltd, told the FE , saying, "Our policy holders are also facing problems". He said, "We have not received written complaints yet but there are numbers of verbal allegations from the field level." Naba Gopal Banik said the central bank took the decision for life insurance policy holders to use bank accounts for operating their policies in a bid to make sure that they get money back after maturity. There are allegations that small life policy holders do not get money back at the time of maturity as a section of company officials cheat their clients. Mr Banik said if the money is transacted through a specific bank account, the policy holders will be able to recover the money at maturity of the policy, and the dishonest officials will not have a chance to cheat them. He said the insurance regulator is simply following the central bank order issued last month. He said small policy holders do not need to open accounts, but if they want to get the policy money back from the insurance company, they must open bank accounts. According to the BB's directive, small life policy holders can open account against policy document. It is not mandatory for policy holders to keep minimum balance in those accounts. Welcoming the move, Sheikh Kabir Hossain, chairman of Bangladesh Insurance Association, said the association has been pursuing the central bank for a long to make it mandatory for micro- policy holders to maintain an individual bank account. He said giving a policy holder's money back at maturity is "very tough" without bank account. Now it will be easy to pay back small policy holders' money. Besides, some unscrupulous people in the industry want to deceive small policy holders by not honouring the clients' claims. Mr. Hossain said the association wanted bank account at Tk 10 for small policy holders to encourage them as most of them are out of the banking system. A total of 14 life insurance companies are operating in the country in addition to the state-owned Jibon Bima Corporation. The government has, however, decided to accord new licence for life insurance firms. IDRA also favours the government move, saying the insurance market can absorb more life insurers.