New Ins law to allow setting up of brokerage houses
Tuesday, 21 October 2008
S M Jahangir
The new insurance law will allow setting up of brokerage houses for promotion of the country's general insurance business, official sources said.
The brokerage houses will work like the insurance policy agents.
"A new provision has been incorporated into the Insurance Ordinance 2008 to pave the way for creation of brokerage houses for the country's general insurance business," said an official source.
President Iajuddin Ahmed recently signed the new insurance ordinance, the gazette notification of which will published within a couple of days, the official added.
According to official sources, the new insurance law will also allow the authorities concerned to frame necessary rules and regulations for the creation of the brokerage hoses.
"After the new ordinance comes into effect, the necessary rules regarding the operational status, required paid-up capital and licensing arrangements of the brokerage houses will be framed," a senior official told the FE.
The official said the Independent Insurance Regulatory Authority, which will come into force through promulgation of another new ordinance simultaneously with the Insurance Ordinance 2008, will be the licensing authority of the brokerage houses.
The main functions of such brokerage houses will be to procure insurance polices and sell those to the general insurers, officials said.
With the creation of the proposed brokerage houses, the local general insurers will either collect new insurance policies through their respective policy agents or procure those from the brokerage houses, they mentioned.
They further said this system has been introduced in order to help prevent the alleged payments of higher than permissible rates of commissions to the policy agents against the backdrop of the prevailing 'unhealthy' competition among the general insurers.
In March last, the government put a restriction on the payment of commission for the policy-agents of general insurance companies to check their ever-increasing overhead expenditures.
The government withdrew the commission system mainly because of the fact that payments of higher rates of commission had caused an unhealthy competition in insurance business.
The authorities in late 2006 withdrew the restriction on payment of such agents' commission after it found that such move failed to serve the desired purpose, official sources said.
Later, the National Board of Revenue (NBR) imposed taxes on insurance companies' overhead expenditures, exceeding certain slabs fixed earlier by the government following a request from the commerce ministry, sources said.
They also said even after taking such steps, some insurance companies are continuing payments of high rate of commissions allegedly in a 'disguised form'.
Although there is an official provision for imposition of financial penalty against the additional overhead expenses of insurers, the amount is small, official sources said, adding almost all the 43 general insurance companies often paid penalties ranging between Tk 50,000 and Tk 100,000.
Officials believe that introduction of brokerage houses will not only help bring discipline in the country's general insurance business, but it will also streamline payments of agents' commission to a greater extent.
The new insurance law will allow setting up of brokerage houses for promotion of the country's general insurance business, official sources said.
The brokerage houses will work like the insurance policy agents.
"A new provision has been incorporated into the Insurance Ordinance 2008 to pave the way for creation of brokerage houses for the country's general insurance business," said an official source.
President Iajuddin Ahmed recently signed the new insurance ordinance, the gazette notification of which will published within a couple of days, the official added.
According to official sources, the new insurance law will also allow the authorities concerned to frame necessary rules and regulations for the creation of the brokerage hoses.
"After the new ordinance comes into effect, the necessary rules regarding the operational status, required paid-up capital and licensing arrangements of the brokerage houses will be framed," a senior official told the FE.
The official said the Independent Insurance Regulatory Authority, which will come into force through promulgation of another new ordinance simultaneously with the Insurance Ordinance 2008, will be the licensing authority of the brokerage houses.
The main functions of such brokerage houses will be to procure insurance polices and sell those to the general insurers, officials said.
With the creation of the proposed brokerage houses, the local general insurers will either collect new insurance policies through their respective policy agents or procure those from the brokerage houses, they mentioned.
They further said this system has been introduced in order to help prevent the alleged payments of higher than permissible rates of commissions to the policy agents against the backdrop of the prevailing 'unhealthy' competition among the general insurers.
In March last, the government put a restriction on the payment of commission for the policy-agents of general insurance companies to check their ever-increasing overhead expenditures.
The government withdrew the commission system mainly because of the fact that payments of higher rates of commission had caused an unhealthy competition in insurance business.
The authorities in late 2006 withdrew the restriction on payment of such agents' commission after it found that such move failed to serve the desired purpose, official sources said.
Later, the National Board of Revenue (NBR) imposed taxes on insurance companies' overhead expenditures, exceeding certain slabs fixed earlier by the government following a request from the commerce ministry, sources said.
They also said even after taking such steps, some insurance companies are continuing payments of high rate of commissions allegedly in a 'disguised form'.
Although there is an official provision for imposition of financial penalty against the additional overhead expenses of insurers, the amount is small, official sources said, adding almost all the 43 general insurance companies often paid penalties ranging between Tk 50,000 and Tk 100,000.
Officials believe that introduction of brokerage houses will not only help bring discipline in the country's general insurance business, but it will also streamline payments of agents' commission to a greater extent.