Non-life insurance companies have finally agreed not to give more than 15 percent commission to agents as per the rules of the regulator, in what can be viewed as a shot in the arm for the flagging sector.
The development comes after the Bangladesh Insurance Association (BIA), a forum of sponsors, yesterday warned its members not to violate the decision.
“We will not allow any company to go beyond 15 percent,” Sheikh Kabir Hossain, president of the BIA, told reporters at a briefing at Dhaka Club.
All insurers, the Insurance Development and Regulatory Authority (IDRA) and the Bangladesh Bank have agreed to work together to implement the commission rate set by the regulator in 2012.
Mahbubur Rahman, chairman of Eastland Insurance and president of the International Chamber of Commerce-Bangladesh, said they have to follow the decision for the sake of the industry.
Insurance penetration rate is less than one percent in Bangladesh and yet 46 non-life companies are competing with each other to hook business.
Many of the companies offer as high as 60 percent of the premium as commission to get business, which, according to good companies, is hurting the industry.
Amid this situation, the IDRA issued a notice seven years ago asking insurers to follow its order on agent’s commission.
When compliant insurers had tried to abide by the IDRA rule, errant companies grabbed the business by giving exorbitant commission. The financial health of many insurance companies is wobbly due to the payment of high commission, said Nasir Uddin Ahmed, executive member of the BIA.
Asked how the violators would be detected, the BIA president said all the insurers will be extra cautious and if anyone is found to be giving more commission they will be easily identified.
“We will convey the information to the regulator for proper action. The IDRA can impose a fine on a company and the officials concerned and it can also repeal the licence of the violator,” said Hossain, also the chairman of the Sonar Bangla Insurance Company.
The BIA has already sat with the central bank so that it can take initiatives through banks to monitor the issue.
The central bank agreed to provide all support, he added.
The IDRA has also issued a notice to non-life insurers to close several bank accounts and maintain three certain accounts. It will make monitoring of their activities easier, he added.
“Insurance has become an unholy sector because of this commission business,” said Md Khaled Mamun, chief executive officer of Reliance Insurance.
Restricting the commission at 15 percent is a positive move, he told The Daily Star.
“We are expecting something good from it,” he added.
Aftab ul Islam, chairman of Asia Pacific General Insurance, and Farzanah Chowdhury, managing director and chief executive officer of Green Delta Insurance Company, were also present at the event.
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