Insurance companies in Bangladesh will no longer be able to charge policyholders for commissions or service fees while settling claims, according to the "Insurance Claims Management Guideline 2024".

Insurers must ensure help desks and complaint boxes in their offices, form grievance redressal committees and strengthen internal audit activities, it said.

They must also keep designated insurance claim management officials and introduce an online tracking system so that policyholders can view the progress in the settlement process against their claims, it said.

Insurers cannot ask for any document from policyholders other than those mentioned in the insurance contract and must become technologically adept and upload all their policies on the regulator's app, it added.

The Insurance Development and Regulatory Authority (IDRA) issued the guidelines on April 28 to protect the interests of policyholders and ensure transparency and accountability in insurers' activities.

Around 65.19 percent of all claims were settled in 2023, according to the IDRA, which is a far cry from the global average of 97-98 percent, according to media reports.

In Bangladesh, 72 percent of life insurance claims and 41 percent of non-life insurance claims were settled in 2023.

The insurance penetration rate, which is measured as a ratio of total premiums collected to a country's gross domestic product, in Bangladesh stands at 0.46 percent whereas it stands at 4.2 percent and 0.91 percent in neighbouring India and Pakistan respectively.

At present, there are 36 life insurance and 46 non-life insurance companies in Bangladesh, with around 17.11 million people currently under insurance coverage.

However, the guideline is vague in some aspects. For instance, it says that the board of directors must ensure the payment of insurance claims using "as few steps as possible".

This guideline was formed to protect policyholders' interest, such as ensuring disbursement of claims as fast as possible and reducing paperwork and associated requirements for beneficiaries, Zahangir Alam, spokesperson of the IDRA, told The Daily Star.

AKM Monirul Hoque, vice-president of the Bangladesh Insurance Association, said the regulator held consultations with them before formulating the guidelines.

However, it would have been better if this guideline had been formulated earlier, he said.

To Tohidul Alam, a professor and chairman of the Department of Banking and Insurance of the Faculty of Business Studies at the University of Rajshahi, these guidelines are very timely.

Customers will find it easier for their claims to be settled, he said.

However, there are some clauses in these guidelines which could have been more specific. By doing so, both policyholders and insurers would have benefitted, he opined.

For example, the guideline states that claims should be settled "without delay" in cases where an investigation is not required. But it does not specify which cases do not need investigations nor any timeframe for "without delay", he said.

Another clause states that insurers must maintain "liquid assets" to timely settle claims but does not specify the amount or even a percentage relative to the total amount of assets, added Alam.

In the case of banks, Bangladesh Bank has specifically mentioned the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) that lenders have to maintain, he said.

The CRR is the portion of customer deposits that commercial banks must keep as a reserve with the central bank to ensure that they do not run out of cash to meet the payment demands of their depositors.

The SLR is the almost same, differing only by the fact that the reserve can be kept in the form of cash, gold or other securities.

"The claim settlement ratio is low in Bangladesh as some insurers don't clear a large part of the claims on time," said Mohammad Jainul Bari, chairman of the IDRA, recently.

"This is creating a bad image for the overall industry," he said.

To improve the claim settlement rate, the IDRA initiated some regulatory reforms and rolled out corporate governance and policyholder protection guidelines, he said.

A company's licence was suspended and two companies are under special audit. Some other companies have been fined a large amount. "All of this has been done so that all other companies speed up settlements," Bari said.

The IDRA has even instructed some companies to sell properties and settle claims, he said.

"However, the regulator alone can't do everything for the development of the sector. The companies must have the desire to improve the situation," he said.

He added that if the mindset to serve people and do business honestly did not exist, problems would remain in the sector no matter how many laws the regulator enacts.