The insurance regulator has asked the non-life insurance companies to strictly enforce maximum 15 per cent agent commission on their business procurement from next month (August).
The Insurance Development and Regulatory Authority (IDRA) has issued a circular regarding the matter in the first week of this month to stop uneven competition in one of the key financial sectors.
It is alleged that many insurance firms offer even 80 per cent agent commission for increasing their business volume. A portion of the commission goes to the parties concerned, and the remaining goes to the bank employees or agents.
In 2012, the IDRA also issued a circular, setting 15 per cent as maximum commission ceiling, but the decree has been largely violated by many firms.
However, this time the insurance regulator has asked the non-life insurance firms to stipulate three bank accounts they maintain to procure business and disburse commission as part of monitoring implementation of the order.
The IDRA officials said many companies have already given information of their bank accounts.
Besides, the non-life firms will have to submit monthly statements of their transactions to the IDRA.
The insurance industry insiders think that this time the regulator's move may come into effect, as all the relevant parties are working to this end.
Sheikh Kabir Hossain, President of the Bangladesh Insurance Association (BIA) - a group of 76 life and non-life firms in Bangladesh, told the FE: "We are ready to implement the IDRA's directive, and all are working in this regard."
"We've met all our members to discuss compliance of the commission's directive."
He also said the BIA will also meet the central bank to discuss the issue, as it can play an important role to make the move effective.
There are allegations that many bank officials are involved in it, he added.
Imam Shaheen, Secretary General of the Bangladesh Insurance Forum - a forum of insurance firm CEOs, told the FE that there are many challenges in implementing the directive, as agent commission is a good source of income for many people.
The "free-style" commission offering is in practice in the insurance sector since the independence, and so there are many challenges in stopping it.
But, at present, the perspective is different, as all concerned want to enforce the IDRA directive, noted Mr Shaheen, managing director of the Asia Insurance Limited.
"A vested group will try to resist the IDRA's initiative. But this time we all have realised that its effective implementation is necessary for our own sake," he added.
On the other hand, Gokul Chand Das, a member of the IDRA, told the FE that they will scrutinise statements of the bank accounts, whose information will be submitted by the insurers to them.
"We'll focus on (maintaining clarity of) the bank statements. If an insurer does business amounting to Tk 100, it must have Tk 85 in balance after deducting 15 per cent agent commission," he concluded.
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