Management costs are decreasing in the country’s life insurance sector. This expenditure has been decreasing continuously since 2018. In the last 4 years, life insurance companies have spent Tk 822 crore less than the approved expenditure limit in the management sector. Such a picture has emerged in a recent report of IDRA, the regulatory body of the insurance sector. On March 30, the report titled ‘Life Insurer Information (2018-2022)’ was published on the authority’s website. 2021 and 2022 data are unaudited in this 5-year report. Those concerned with the sector say that the management costs of some companies were already low due to doing business in accordance with the law. In addition, several companies have brought down their management expenses below the permissible limits after pledging to recover excess expenses in 2018.
Last on May 27, 2021, the Insurance Development and Regulatory Authority (IDRA) decided to reorganize the field level organizational structure of the companies to control management costs in the country’s life insurance sector. In this, companies are instructed to keep 3 grades instead of 5 grades at the supervisory level. At the same time, a maximum 18 percent expenditure obligation including salary, commission, bonus and travel is imposed for these three grades. According to the data, in the last accounting year 2022, the total management expenditure of Tk 3,689 crore was spent to collect a total premium of Tk 11,402 crore in the life insurance sector of the country.
The sanctioned expenditure was Tk 3 thousand 914 crores. 225 crores or 5.75 percent less than the sanctioned limit. Before this, in 2021, the life insurance sector of the country spent a total of Tk 3,275 crore to collect premiums of Tk 10,260 crore. That year the management expenditure approval was 3 thousand 501 crores. Accordingly, in 2021, the expenditure is 6.46 percent or 226 crores less than the approved limit. In 2020, the total premium collection in the country’s life insurance sector was Tk 9,476 crore. The sanctioned management expenditure for collection of this premium was Tk 3 thousand 180 crores. Actually the management cost is 2 thousand 978 crores. 203 crores or 6.37 per cent was spent below the sanctioned limit during the year under review. Prior to this, management spent 3 thousand 241 crores to collect a total premium of 9,600 crores in 2019. However, the management expenditure approval was Tk 3 thousand 409 crores. In 2019, under-spending was Tk 168 crore or 4.93 percent below the sanctioned limit. The country’s life insurance companies overspend last year in 2018. The amount of this expenditure was 95 crores, 2.99 percent. In the year under discussion, the management expenditure of Tk 3 thousand 164 crore has been approved but the actual expenditure is Tk 3 thousand 258 crore. The total premium collection in 2018 was Tk 8 thousand 989 crore. Acting Secretary General of Bangladesh Insurance Forum and Chief Executive of Zenith Islami Life SM Nuruzzaman said that the biggest problem of this sector was excess management cost.
Due to strict guidelines from regulatory agencies and sincere efforts by companies, the problem has been reduced to a great extent. He said that although management costs in the life insurance sector have decreased overall, the costs of some companies are still above the limit, which is good for the respective companies. We need to further reduce management costs in the interest of insurance customers and owners while respecting the law. As a result of this, on the one hand, the ability of insurance companies to pay claims will increase, on the other hand, the negative image of this sector will be eliminated; Customers’ confidence in insurance will also return, said SM Nuruzzaman.
