Uniform structure for ins companies in the offing
Thursday, 5 May 2011
Asaduzzaman Pallab
Insurance companies will have to maintain a uniform organisational structure to create better image of the poorly regulated sector. At present, there is no common organisational structure in the sector which ultimately confuses the clients and creates negative idea about insurance companies. Insurance sector watchdog Insurance Development and Regulatory Authority (IDRA) formed two separate committees recently with a view to finalising uniformity in the organisational structure of the sector. One committee is headed by IDRA member Ziaul Huq Mamun who deals with life insurance companies and the other is headed by IDRA member Nobo Gopal Banik who deals with general insurance. Another seven persons from the private sector will represent the two committees. At present, there are two systems for organisational structure in different organisations in the country, one is American system and the other is British system. Currently operating 62 insurance companies in the country follow mixture of British and American systems in their organisations. In some cases, insurance companies' higher officials create designations which are not existent even in British or American systems. Explaining the fact, one of the members of newly formed committees Kazi Md Mortuza Ali told the FE that in some cases, insurance companies create unusual post only to accommodate any essential employee in a company. "This addition in hierarchy creates confusion among the clients of insurance companies" said Mr Mortuza, who is also the managing director of Prime Life insurance. "It's essential to develop a common organisational structure to improve the image within the insurance sector", he observed. Meanwhile, insurance regulator also takes initiative to fix up the number of layers in the post of life insurance companies to minimise the amount of commission. At present, along with the post of agent there is unlimited number of 'employer of agent' in life insurance companies. "We will fix a certain number of 'employer of agent' in order to reduce the commission amount in a certain insurance deal. At present, the maximum commission ceiling is 20 per cent. But it becomes a frequent practice to give commission as high as 80 per cent to get business. Event some insurers give waiver in fixing premium rate. Insurance laws strongly prohibit giving premium rate waiver. In case of giving waiver for premium rate the insurance company needs to take prior approval of Credit Rating Committee (CRC). The newly formed two committees will also look into irregularities in fixing up the premium rate. IDRA Chairman Shefaque Ahmed told the FE that both the committees have been given 45-day time limit to submit their reports. "If we can bring discipline in commission and premium rate along with organisational structure it helps reduce the management expenses of insurance companies," he said.
Insurance companies will have to maintain a uniform organisational structure to create better image of the poorly regulated sector. At present, there is no common organisational structure in the sector which ultimately confuses the clients and creates negative idea about insurance companies. Insurance sector watchdog Insurance Development and Regulatory Authority (IDRA) formed two separate committees recently with a view to finalising uniformity in the organisational structure of the sector. One committee is headed by IDRA member Ziaul Huq Mamun who deals with life insurance companies and the other is headed by IDRA member Nobo Gopal Banik who deals with general insurance. Another seven persons from the private sector will represent the two committees. At present, there are two systems for organisational structure in different organisations in the country, one is American system and the other is British system. Currently operating 62 insurance companies in the country follow mixture of British and American systems in their organisations. In some cases, insurance companies' higher officials create designations which are not existent even in British or American systems. Explaining the fact, one of the members of newly formed committees Kazi Md Mortuza Ali told the FE that in some cases, insurance companies create unusual post only to accommodate any essential employee in a company. "This addition in hierarchy creates confusion among the clients of insurance companies" said Mr Mortuza, who is also the managing director of Prime Life insurance. "It's essential to develop a common organisational structure to improve the image within the insurance sector", he observed. Meanwhile, insurance regulator also takes initiative to fix up the number of layers in the post of life insurance companies to minimise the amount of commission. At present, along with the post of agent there is unlimited number of 'employer of agent' in life insurance companies. "We will fix a certain number of 'employer of agent' in order to reduce the commission amount in a certain insurance deal. At present, the maximum commission ceiling is 20 per cent. But it becomes a frequent practice to give commission as high as 80 per cent to get business. Event some insurers give waiver in fixing premium rate. Insurance laws strongly prohibit giving premium rate waiver. In case of giving waiver for premium rate the insurance company needs to take prior approval of Credit Rating Committee (CRC). The newly formed two committees will also look into irregularities in fixing up the premium rate. IDRA Chairman Shefaque Ahmed told the FE that both the committees have been given 45-day time limit to submit their reports. "If we can bring discipline in commission and premium rate along with organisational structure it helps reduce the management expenses of insurance companies," he said.