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The board of directors of Jamuna Life Insurance has withdrawn capital without the approval of the regulator Insurance Development and Regulatory Authority (IDRA), which insurance sector insiders said is a gross fraud against customers.
In the last seven years, authorities of Jamuna Life Insurance Company Limited have spent Tk 100 crore of customers’ premiums in the name of extra commissions and illegal management expenses.
Thus, the company has deposited only Tk 83 lakh in company funds out of Tk 115.70 crore from 2017 to 2023, leaving approximately Tk 115 crore unaccounted for. The new-generation life insurance company, which commenced operations in 2014, has been engaging in this egregious corruption.
It is alleged that since 2014, the company, engaged in reckless business practices, has spent irregularly on management and has also cheated customers. Additionally, the company has reported expenses of Tk 105 crore through various irregularities, including non-payment of insurance claims. These data were obtained from the latest financial report of Jamuna Life Insurance Company.
When asked about the matter, Jamuna Life Chairman Badrul Alam Khan told The Daily Messenger, “We are endeavoring to address the company's situation. However, reducing management costs has become difficult for us due to the high commission rates prescribed by the regulatory body in the first year.”
He also mentioned that the company's CEO, Kamrul Hasan Khandkar, is best suited to address these issues. “However, as Kamarul Hasan is unwell and on leave, I am unable to provide detailed information at this time. Nevertheless, we have no pending insurance claims,” said Badrul Alam Khan.
Industry experts said that the financial condition of Jamuna Life not only threatens the interests of the company’s customers but also has broader implications for the entire insurance sector. Therefore, the regulatory body needs to take strict measures to safeguard the interests of policyholders in the insurance sector.
Regarding this, Director and Spokesperson of the Insurance Development and Regulatory Authority (IDRA), Mohammad Jahangir Alam, told The Daily Messenger, “We are monitoring every aspect of the company and have issued several instructions. Failure to comply with these instructions will result in legal action.”
According to the Insurance Act, entrepreneur-directors forming a company must have a minimum paid-up capital of Tk 18 crore, with Tk 1.50 crore to be deposited. No director or CEO of the company can sell these shares without the approval of the Insurance Development and Regulatory Authority (IDR).
However, the company’s financial report for January to December 2023 shows that the company currently has an investment of Tk 15.50 crore, with Tk 11.50 crore invested in the public sector and Tk 4 crore in other sectors. This indicates that Tk 4 crore out of Tk 19.50 crore have been misappropriated.
The Insurance Act also prescribes management expenses for running the company. However, by violating the IDRA's regulations, the board of directors of Jamuna Life spent Tk 27.55 crore, citing additional management expenses over the past seven years.
Meanwhile, as per the law, insurance companies are only permitted to collect insurance premiums from customers. However, officials at the Chattogram branch of Jamuna Life took money from individuals under the guise of fixed deposits, then provided interest in the first month against the deposit.
Subsequently, by misleading clients at the main branch, labeling the deposit as a policy, Tk 3 crore was withdrawn from hundreds of customers. Upon discovering this, customers lodged complaints with both the company and IDRA. IDRA has conducted an investigation into the matter but has yet to take any action.
Nonetheless, IDRA issued seven directives to Jamuna Life Insurance in 2022 to enhance the company's financial capacity to address these irregularities and protect customer interests. These directives included reducing management costs, decreasing policy lapses, and increasing the renewal premium rate to 60 percent. However, in the subsequent year of 2023, the company failed to implement any of these seven guidelines.
Conversely, due to the rise in costs and the inability to reduce the policy surrender rate and increase the 2nd-year renewal rate, the interests of insurance consumers are jeopardized. A review of the company’s interim accounts for the year ending December 31, 2023, has revealed this predicament.
According to IDRA's instructions, the renewal premium rate should be elevated to 60 percent. However, the company's renewal premium income rate in 2023 stood at only 17.56 percent. Based on the final accounts, in 2022, excluding group and health insurance, the premium income in the 1st year was Tk 17.49 crore. Out of this, in 2023, the renewal premium income in the 2nd year amounted to Tk 4.22 crore.
Furthermore, in 2022, the total premium income, including 1st-year premiums and 2nd-year renewals in 2023, amounted to Tk 21.71 crore. However, the company spent Tk 22.85 crore for this premium. In essence, even if all premiums collected from customers have been spent, an additional Tk 1.14 crore has been drawn from the company’s funds. Consequently, Jamuna Life Insurance has expended Tk 105.25 for premium income of Tk 100.
Messenger/Fardin
