Photo : Collected
The insurance sector is experiencing a growing number of lapsed policies, attributed to a crisis of trust. The Insurance Development and Regulatory Authority (IDRA) reports that 35 life insurance companies had 389,000 lapsed policies in the previous year. In the first quarter of the current year, these companies already have 364,000 lapsed policies. Insurance company CEOs express concern about this trend, saying it is not a positive indicator for the industry.
Those involved in the sector consider the alarming rate of increase in lapsed policies as an ominous sign for the insurance industry. They say that to restore trust in the insurance sector, corruption and irregularities must be stopped along with preventing policy lapses. If this problem is solved, insurance companies, agents, and customers will all benefit. The general public's trust in the insurance sector will increase. For this, IDRA needs to be stricter.
B M Yusuf Ali, President of Bangladesh Insurance Forum, an organisation of insurance company CEOs, and CEO of Popular Life Insurance Company, told The Daily Messenger, “The increase in lapsed policies is not at all a good sign; it's concerning. For the sake of the insurance sector, lapsed policies must be controlled, this problem must be solved.”
S M Nuruzzaman, CEO of Zenith Islami Life, told The Daily Messenger, “A life insurance policy lapses when the premium is not paid. According to conventional life insurance law, if no premium is paid within five years after the first premium deposit, the initially deposited money becomes lapsed.”
Sonali Life Insurance Companies Ltd, a new generation company, tops the list of lapsed policies. From January to March 31 of 2024, 67,555 policies of the company lapsed. In the previous year, the company had 396,522 lapsed policies.
Delta Life Insurance Companies Ltd is in the second position in terms of lapses. The institution had 28,823 lapsed policies in 2023. National Life Insurance Companies Ltd is in the third position with an increase of 31,667 policies.
Popular Life Insurance Companies Ltd and Prime Islami Life Insurance Companies Ltd are in the fourth and fifth positions, respectively. Among these, Popular Life has 30,959 lapsed policies, and Prime Islami Life Insurance Ltd has 29,393 lapsed policies.
Hasina Sheikh, Chairman of the Department of Banking and Insurance at the University of Dhaka, said that to increase the contribution of insurance to the country's development, an educated population in insurance sector is needed. The current government has considered the insurance sector an important sector. But sadly, Bangladesh is literally lagging in insurance education. To advance this sector, lapsed policies must be stopped.
Insurance policies are lapsing for six reasons. The first reason is that customers initially take insurance emotionally. After taking insurance, they learn that companies are not paying insurance money. It takes years of suffering to get the insurance money. This reduces customer trust. The second reason is that customers lose their jobs or businesses. As a result, they can't continue the insurance. Third, agents entice customers to take policies beyond their means. That is, an individual can afford insurance of up to Tk 10 out of Tk 100 of income. But agents make them take up to Tk 30. Later, customers can't pay that money. The fourth reason is customers taking policies without understanding. When they come to reality, they can't continue after paying 2 to 3 installments. The fifth reason is the lack of nearby offices of companies. The sixth is the absence of agents. Due to not having permanent jobs, agents quickly change companies. As a result, customers can't find agents after taking policies. For these reasons, lapsed policies are increasing.
According to the Bangladesh Insurance Association (BIA), 60 to 70 percent of policies don't survive beyond one year. Policies lapse for several reasons. The primary reason is taking out insurance policies for amounts beyond the customer's ability to pay. As a result, after paying the first two or three installments, they can't continue paying the policy premiums. The second reason is the lack of a service-oriented mentality among agents. Third, customers give premium money to agents in good faith. But agents misappropriate the premium money without depositing it. These are the reasons policies lapse.
According to IDRA data, there are currently 35 life insurance companies in the country. These companies sell 18 types of insurance policies. The policy names are: Savings Insurance, Installment Insurance, Child Security Insurance, Assurance cum Pension Insurance, Group Hospital Medical Insurance, International Medical Service Health Insurance, Social Security Insurance, Family Security Insurance, Multidimensional Protection Insurance, Bangabandhu Education Insurance, Health Service Insurance, Cancer Care, Group Pension Plan, Cardiac Plan, Life Protection, Life Victory, Protection, and Employee Protection Insurance.
The number of lapsed policies from selling these policies was 1,496,765 in 2017, 1,449,053 in 2019, 1,420,902 in 2020, 948,40 in 2021, 1,153,636 in 2022, and 1,542,815 in 2023. That is, compared to 2022, lapsed policies increased by 389,000 in 2023.
However, in the first quarter of 2024, 364,623 new policies lapsed. Among these, Akij Takaful Life Insurance PLC's policies increased by 1121, Alpha Islami Life Insurance Ltd-8593, Astha Life Insurance-881, Baira Life Insurance-369, Best Life-1985, Bengal Islami-2891, Chartered Life-5127, Diamond Life-841, Delta Life-57981, Fareast Islami Life-4549, Golden Life-5282, Guardian Life-3992, Homeland Life-9363, Jamuna Life-237, Jiban Bima Corporation (JBC)-8624, LIC of Bangladesh Limited-531, Meghna life-4790, Mercantile Islami Life-156, Metlife-18030, National Life-31667, NRB Islamic Life-1693, Padma Islami Life-1555, Popular Life-30959, Pragati Life-18437, Prime Islami-29393, Progressive Life-2862, Protective Islami Life-1297, Rupali Life-8749, Sandhani Life-8275, Sonali Life-67555, Sunlife-1073, Sunflower Life-5442, Swadesh Life-9850, TRUST Islami Life-5938, and Zenith Islami Life Insurance Ltd had 4535 lapsed policies.
IDRA Chairman, Mohammad Jainul Bari, told The Daily Messenger, “We are trying to improve the situation in the insurance sector. We are striving to achieve 100 percent insurance claim settlement and bring the number of lapsed policies to zero. If insurance claims are settled, half of the problems in this sector will be solved. Lapses will also decrease.”
Messenger/Disha
