Md A H Siddiqee:
Insurance, by definition, is a contract whereby for specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards. Insurance does not protect any asset from perils .Insurance minimizes the loss of the sum insured; and thus can keep the owner in a sense of security in that if his property is at risk unforeseen, the insurer will compensate him. In another words, it is a system of distributing risk among the existing members of the insurer by underwriting. A policy proposal is not accepted directly. The insurer takes the decision to include the prospective proposer into his existing members of the policy holders as it serves as a trustee. To determine the level of Risk of each and every such fresh policy holder is called Underwriting. So, it is very technical matter and quite different from existing financial organization like Bank, non Banking institutions or merchant Banks. The fund as accumulated as premium income is the money of the policy holder of the policy he or she has purchased. It may be a Life policy or Non-Life policy. Whatever the policy may be, the insurer must protect the interest of the policy holders. Pitifully enough, many Insurers do not comply with the rules and regulations issued by the IDRA.
By now, we have 62 (excluding the newly permitted companies) Insures operating in the country. IDRA is the regulatory body of the sector .Previously, an additional secretary or a joint secretary from the commerce ministry was used to take over the office of the Controller of Insurance. With no knowledge of such a technical matter like Insurance, Controller of Insurance had very little to do for the industry. Happily enough, the present Government has appointed an Actuary, the highest professional degree of the Insurance industry to head the IDRA. It is a positive move. As the prospects of the industry where sky is the limit, we should come forward to hail this move who academically knowledgeable to address the prevailing problems of the sector. The major problems of this sector are: over commissioning, to do business on credit, unhealthy competitions among the companies, non diversified market, low rate of claim settlement, fakes appointment etc. But the most dire-some problem of the sector is over commissioning. IDRA has fixed the maximum ceiling of commission at 15%. Regrettably, many companies are doing business by giving more than the stipulated rate as fixed by IDRA. Insurance market in Bangladesh remains extremely competitive due to existence and operation of a large number of companies, un-commensurate with the size of the market.
Here, the role of IDRA is very important in that the fund of any Insurer is tri partial i.e. the money of the policy holder, the money of the share holder (if enlisted), and the money of the Insurer. If business is done at 40%, the interest of policy holders and share holders will be over looked. This is how, many Insures have become rickety while the concerned BoD members are living with luxury.
As mentioned earlier, IDRA vide their circular dated 1st April, 2012 fixed the rate of agency commission @ 15% for all non-life insurance business; and has tried all Insurers to follow the circular stringy. By suspending operation of two non life insurance companies namely Northern General Insurance Company Ltd and Islami Insurance Bangladesh Ltd, IDRA has showned its stand. Its positive result has also been seen in the dividend declaration of 2012 as most of the companies declared significant percentage of profit to the share holders.
But the way, IDRA has suspended the operation of two Non life companies has risen a Legal question as to the capacity of the IDRA. Being aggrieved thereby; Northern General Insurance Company Ltd moved a Writ application before the Hon’ble High Court Division. On 18-09-2012 upon hearing of the application a Division Bench of the High Court Division comprising their Lordships Ms Justice Salma Masud Chowdhury and Mr Justice Quaza-Ul Hoque was pleased to issue a Rule Nisi upon the Respondents to show cause as to why the impugned Memo No : bi: u: ni: ka/gad/1230/2011-1397 dated 17-09-2012. Their Lordships were pleased to stay the further operation of the impugned Memo for a period of three months from date.
The matter being Re- Sub juice, it should be left with the Hon’ble court concerned to dispose; while we may discuss the provisions of The Insurance Act-2010 on the matter.
The section 130 & 134 of the Insurance Act-2010 deals with the offence and penalty while Subsection of D of section 10 of the Insurance Act-2010 which deals about the Stay or cancellation of registration reads as follows:
10: Stay or cancellation of registration. – (1) The authority may, stay or cancel the registration of the insurer completely for one or more than one reasons hereinafter provided or may stay or void the insurance business of any particular class or sub-class, for instance:
If the insurer –
(a) is failed to comply with the rule of security of section-23 or 119;
(b) do not commence business within 1(one) year of the registration;
© might propose to compromise or settlement with its creditor or might compromise or settle, or merge or the insurance business is dissolved or terminated or terminated by any other means or the insurer is declared as insolvent;
(d) Deal in such insurance business which is subversive to the interest of the policy-holder or the development of the business or harmful to the national interest;
(e) Incapable to carry out the responsibility;
(f) becomes failure to preserve the solvency margin prescribed by the provisions;
(g) Infringes this act or any rules and regulations thereof or are failed to comply with terms and conditions made by the authority;
(h) involves in any illicit or immoral or illegal activities;
(i) fails to carry out the reinsurance management properly;
(j) If any demand of any insurance policy initiated in Bangladesh is pending for 3 (three) months from the date of final verdict.
130: Imposing fine for any infringement or failure to non-comply with this Act. – If any person under this act or rule made there under or regulation –
(a) Fails to submit to any statement, accounts, returns or reports to the authority;
(b) fails to comply with the direction;
(c) fails to preserve the solvency margin;
(d) fails to comply with the insurance contract;
(e) Failing to comply with an order of reinsurance contract within the time prescribed shall be punishable with fine of maximum 5 (five) lac Taka or 5 (five) thousand taka for each day for the period of which the default or contravention is acted upon.
134: Personal fine for failure to comply with the rule of the law or any infringement.-Unless there is otherwise provided in this act, any director of an insurer, share-holder, chief executive officer, manager or other officers or brokers or partners, insurance surveyors or its other officers or agents or employers of insurance agents who fail to comply with the rule of this act, or makes default and knowingly be part of such default shall be punishable with fine for maximum 1 (one) lac taka and lowest 50 (fifty) thousand Taka and not minimum 5(five) thousand Taka for continuance of such breach .
We personally feel that section 134 is very is very harsh for the chief executive officers, managers. Since, they are to do some irregularities to bring business. There is nothing personal. If a manager cannot offer the over commission, his client will definitely flee away to another company. Good or bad, when a manager does something, he does it with prior consent of the management. It is true that if a manger is punished by the IDRA, it gives a signal to all officers concerned. But our point is that if the officer is to be punished for any offence, the company concerned should also be punished concurrently. From our bitter experience, we can say that many officers are committing offence at the behest of the management. IDRA has not come up with any Rules (for the managerial officers) to save their career.
Conducting insurance business in the true spirit of professionalism, bringing in modern management and sales techniques and new product developments are keys to the future growth and progress of the industry.
Frankly speaking, we know that our Insurance Industry is infested with irregularities. These irregularities must be eradicated to change the scenario of the sector. If necessary, the said provisions of the said act must be amended.
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