New life insurers spend more to earn less

Insurance regulator in a recent review has found the performance of 13 new life insurance companies highly unsatisfactory.
The insurance regulator has prepared a report in this connection after holding separate meetings with the officials of 13 new companies.

During the meetings, Insurance Development and Regulatory Authority (IDRA) has warned that it would not renew licences unless they showed improvement in their respective performance.
The regulator issued 13 new licences between middle of 2013 and early 2014, totalling 31.
Of the 13, a life company spent Tk 525 against a premium earning of Tk 100 during the period under review.
The renewal premium earning which is considered as the backbone of the life insurance firms was found to be 5.0-10 per cent.
It usually ranges between 40 and 50 per cent in the case of well-performing local life firms. But it is more than 90 per cent for the US-based MetLife.
The aggregate earnings of the 13 companies stood nearly Tk 860 million in 2014.
This is a meagre earning in comparison with the country's total one-year life insurance business of Tk 60 billion.
However, officials at the IDRA said it will not renew the licences of insurers concerned in 2016 if they failed to improve their performance.
The life firms need renewal of their licences from the regulatory body every year.
IDRA chairman M Shefaque Ahmed said: "We're totally disappointed with the business performance of the new life companies."
He said they, in many cases, are breaching the laws concerned.
Mr Ahmed said: "I'm confused whether they will be able to protect the interest of the policyholders."
He said if the trend continues, the companies will become bankrupt.
The IDRA chief said they will not disburse any fresh fund from their paid-up capital if their performance continues to be unsatisfactory.
The regulator has provided Tk 40 million to all 13 new life firms to meet their emergency expenses. The funds were given form their paid-up capital of Tk 180 million on the condition that they will reimburse it within a few years.
Tapan Chowdhury, chairman of the new Guardian Life, at a meeting with the IDRA, said the life insurance business is different from other businesses.
"It takes time to understand the business," according to minutes of the meeting between the IDRA and the Guardian Life.
Guardian Life earned Tk 33.5 million in 2014. It spent Tk 37 million for business procurement in the year under review.
AKM Shariful Islam, managing director and CEO at the Diamond Life said the business performance is poor as there are 31 life companies in a limited market.
He said: "We 13 new companies entered the market at a time in 2013, so this has impacted our business as we're chasing one target group of people for business."
He said there was a shortage of field level officers to procure new business. Mr Islam, however, expressed hope that their business will grow shortly.
    jasimharoon@yahoo.com