The Insurance Development and Regulatory Authority has suspended the Baira Life Insurance company's business licence for mismanagement, corruption, non-settlement of insurance claims and a large number of customer complaints.
The regulator, in its last meeting held on September 25, has decided not to allow the problem-riddled life insurer to sell any new policy, although the company can continue with its ongoing policies until maturity.
A letter issued on Monday prohibited the company from selling new life insurance policies. The insurance authority has also written to the Financial Institutions Division under the Ministry of Finance to appoint an observer at the board of directors of the company.
An observer, appointed by a regulator, takes the charge of a company with a superseding power in the board of a financial service entity that suffered embezzlement or severe professional failure.
Mohammad Abul Basher, the chairman of Baira Life Insurance, could not be contacted on phone for his comments despite repeated attempts.
Insurance authority officials told The Business Standard that the company has breached many sections and subsections of the Insurance Act.
The insurance authority had also received over 1,000 complaints from customers against the Baira.
There is a possibility that ultimately the company will face liquidation, said several regulatory officials seeking anonymity.
All the unpaid insurance claims will be settled under regulatory monitoring before any such steps are taken against the company.
That will not be a tough job, because the company has fixed financial assets that may cover the claims' liability, said the officials.
Fixed assets and investments in government securities, if liquidated, should amount to at least Tk35 crore in net cash and claims liabilities of the company should not exceed the amount by far, according to a rough estimate of the regulatory officials.
The company is not submitting any actual valuation report that evaluates the life insurer's liability position.
A case of merger with any other life insurer too may take place, if there is a policy level decision in the coming years, said the regulators.
Baira Life at a glance
Starting its journey in 2000, the Baira Life was focused on serving non-resident Bangladeshis.
But the company's board members had been embroiled in embezzlement and an extreme lack of governance did not allow the company to achieve its goals. In the last 17 years, the company saw 17 chief executive officers joining and leaving because of board members' unprofessional interruptions.
For remaining non-listed with the stock market over years, the company was fined but they did not pay.
Surprisingly, its annual licence renewal also has not been done in the last four years.
Baira Life's business in 2018
Nearly 50 thousand life insurance policies were alive in December 2018. Around 15,000 policies lapsed over the past year and nearly half of them were new and revived policies.
In 2018, the gross premium income of the company decreased 22 percent to Tk10.78 crore - a market share of 0.12 percent. The management expense was double of the gross premium where the industry average was below 40 percent.
First year gross premium income that comes from new life insurance policies in 2018 was Tk5.24 crore, which was down 14 percent from the previous year. Policy procurement cost in 2018 was 4 times higher than the total first year premium income, the highest in the life insurance industry.
In 2018, the company's life insurance assets fell 17 percent to go below Tk97crore.
Some 74 percent of claims were unsettled, while the industry average was below 12 percent.
Total paid-up capital was Tk18.26 crore. Despite a nearly two decades of operation, the company is yet to secure the mandatory paid-up capital of Tk30 crore.
More interestingly, the shareholder directors hold the insufficient number of shares to be in the board.