A leading non-life insurer said the regulator should immediately prepare new guidelines on the management expenses as the age-old rules on the matter do not match the present reality including inflations over the years.

"Insurance Act, 1958 is not suitable for the present reality at all, All costs applied for the non-life insurance business have changed over the past 58 years," Farzana Chowdhury, managing director & CEO at the country\'s biggest private non-life insurance company-Green Delta Insurance Company Ltd told the FE.

She opined the ceiling of management expenses for insurance companies should be based on solvency margins belonging to the insurers arguing that it is unfair for leading companies to have the same ceiling compared with the smaller ones.  

"We, on behalf of the entire industry, request the insurance regulator to look into it and bring the necessary changes," the CEO said in an exclusive interview.

The following are excerpts of the interview:

FE: Insurance companies are spending much than allowable limit as management expenses. What is your view on it?

Farzana: Yes; it is true that the companies [non-life insurers] have been spending more than the allocated amount mentioned in the Insurance Act, 1958. Even our expenses have been on the higher side. But what we have to consider is that the amount mentioned in the Act 58 years ago do not give a proper guideline as the circumstances changed over the past six decades and based on these, the Insurance Act, 1958 should be amended.

FE: What reasons do you think for such high management expenses?

Farzana: The present reality is totally different than that of the 1950s. Some major reasons are: inflation has increased manifolds since 1958. As a result of this all the utility expenses, various costs like advertisement, transportation, and salary have also grown exponentially.

To my mind some expenses have soared up to 3000 times compared to 1958. Even the insurance registration fee in 2005 has been increased by 133 per cent by the regulatory body.

The Value Added Tax (VAT) was not included in that act as the indirect tax was not introduced during that time.

On the other hand, Central Rating Committee (CRC) which revises tariffs for the non-life firms have reduced premium rates applied for various industries.

FE: Could you give some arguments justifying this increase in expenditure?

Farzana:Look, it has been said that the higher expenses adversely affect a company\'s ability

Continued to page 20


Continued from page 9

to pay the shareholders\' dividend and claims to the clients.

Green Delta, since its inception has been able to disburse significant amount of dividends to its shareholders. On an average we have paid 37 per cent dividend in the last 20 years. This was possible due to the proper management expense controlled by the management. We expect the trend to continue in the coming days.

Green Delta has always been known for its prompt claim settlement. Our clients are satisfied for our claims settlement procedures and we have been appreciated from different quarters for our prompt service. We have settled few of the largest claims in the insurance sector of Bangladesh.

Despite paying significant dividends to the shareholders, settling claims of our valued customers and paying the government all the relevant taxes, our total assets have been increasing.

Our available solvency margin is much higher than the required solvency margin. This confirms our ability to pay for the insurance claims for our valued customers.   

Even though our expenses were higher than the 1958 guideline, but we have been able to fulfill all the commitments of our valued stakeholders.

FE: What role do you think the regulator (IDRA) can play to address this issue?

Farzana: Insurance Development and Regulatory Authority (IDRA) has done a tremendous job in bringing transparency to the insurance industry in Bangladesh. In spite of having so much limitations, they are relentlessly trying to ensure good practices by the companies.

FE: What is the current scenario of Bangladesh insurance industry?

Farzana: The insurance sector in Bangladesh is still relatively untapped with less than 3.0 per cent penetration. The sector contributes less than 1.0 per cent of the GDP. This means there is immense growth potential for the sector. Currently we are seeing a consistent 13-15 per cent growth every year in the insurance industry.

However if the growth in the sector reaches 20 per cent every year, that will be remarkable. With our flagship project \'Insurance for Everyone\' and government\'s recent praiseworthy initiatives related to safety net insurance to give coverage to the bottom of the pyramid group, we are hopeful regarding the possibilities of a 5.0 per cent of the GDP contribution within 5-10 years\' timeframe.

The Industry has been growing consistently over the past decade. Recent trends show that now people are more aware on insurance and informed on the importance of having various insurance coverage.

Ms Farzana is the country\'s first female CEO in the industry and soon after becoming the top brass of the non-life firm had introduced an innovative product for the women.

Nibedita, which is a comprehensive Insurance scheme for women, launched by Green Delta 1in 2013 on pilot basis, it is the first female insurance product in South East Asia.

More than 52 per cent of our total population consists of women so a product like this was only a demand of time. The word \'Nibedita\' means a dedicated women and the product lives up to its name by offering unique features to the females.

FE: What makes Nibedita unique:

Farzana: The main idea behind Nibedita is that women empowerment is the pre-requisite for socio-economic development of a country.

Nibedita does cover few extended areas e.g. trauma allowance in case of rape, road bully, robbery, acid victims. The extended coverage also includes loss or damage to household goods / personal effects due to fire / lightening, riots, storm, typhoon, flood, cyclone and earthquake. It does not, however, cover pre-existing disability; death, injury or disablement arising from actions while intoxicated or under the influence of drugs and so on.

Nibedita is now officially in the market and attracting a wide array of women from different walks of life.

Nibedita provides a maximum coverage of Tk 1.0 million with the minimum net premium of Tk 580 per person per lac.

So far more than 3000 women have availed the Nibedita scheme to safeguard their future.