December 4, 2020, 8:37 am

Nirmal Barman

2018-02-20 15:38:51 BdST

New rules cause chaos in Ins industry


The non-life management expenditure regulations, issued by the insurance regulator last week, have caused frustration in the industry as it included agent commission in the entire management cost.

The latest regulation was prepared under the Insurance Act of 2010, scrapping the age-old rules issued in 1958.

The rules of 1958 had separate provisions about the commission to be paid to the agents for procurement of business.

Currently, there are guidelines issued by the insurance regulator giving 15 per cent commission to the agents.

But the latest regulation incorporated the commission in the management expenses which have increased by 6-8 per centage point.

The initial ceiling of premium earnings also surged between Tk 10 million and Tk 50 million in the latest regulation. It was Tk 10 million at the initial stages in the rules of 1958.

The industry insiders say those who do big business will face troubles due to the latest regulation.

The regulation says non-life firms will be able to spend as management expenses 16 per cent for marines insurance of its gross premium earnings.

If they deduct 15 per cent agent commission, then they will have only 1.0 per cent which will be used for the entire management expenditure.

This is applicable for the gross premium earnings of Tk 400 million and above.

However, people at the Insurance Development and Regulatory Authority (IDRA) said, this regulation had been prepared in consultation with the representatives of the Bangladesh Insurance Association.

“They had adequate discussions on it. They had representations in the meeting that had finalised the regulation,” said a person familiar with it.

They said reduction of existing 15 per cent commission might be a solution, they pointed out.

PK Roy, Managing Director of Rupali Insurance, had representation in the meetings on behalf of the Bangladesh Insurance Association, a group of privately-owned life and non-life firms.

Mr PK Roy could not be contacted over phone to comment on the matter.

However, in case of first Tk 10 million-Tk 50 million business in Bangladesh, according to the regulation, the management expense for a non-life firm will be 35 per centage of premium in respect of fire and miscellaneous incidents.

The expenses will be 26 per cent for marine business.

For business between over Tk 50 million but not exceeding 100 million, the non-life firms will have management expenses to the tune of 33 per cent of gross premiums applied for fire and miscellaneous insurances.

Twenty-five per cent will be for marine insurance coverage.

Businesses between over Tk 100 million but not exceeding 150 million, will be allowed 32 per cent for fire and miscellaneous insurances. Marine insurance will have 24 per cent of premium earnings.

For business between over Tk 150 million but below Tk 200 million, the management expenses will be 30 per cent for fire and miscellaneous and 22 per cent for marine insurance business.

The management expenses in the range of Tk 200 million and less than Tk 250 million, 28 per cent will be allowed for fire and miscellaneous insurances and 20 per cent for marine business.

For business between Tk 250 million but not exceeding Tk 300 million, the non-life-firms will have the provision to spend 26 per cent for fire and miscellaneous insurances and 18 per cent for  marine.

For business over Tk 300 but not exceeding Tk 350 million, the limit is 24 per cent for fire and miscellaneous insurances and 17 per cent for  marine insurance.

The non-life firms will have 22 per cent management expenses for fire and miscellaneous insurances having business of over Tk 400 million and 16 per cent for marine insurance.

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