347,000 insurance policyholders cancel policies in 9 months

In the first nine months of this year, 347,000 policyholders have canceled their policies with 36 life insurance companies operating in Bangladesh, according to the latest report by the Insurance Development and Regulatory Authority (IDRA). Industry insiders say that while the insurance sector contributes to the economy alongside banks, non-bank financial institutions (NBFIs), and the capital market, it remains plagued by distrust and instability. Despite various governmental and private initiatives, full confidence in this sector has not been restored, and the challenges are deepened by recurring policy cancellations.

According to IDRA data, there were around 11.2 million insurance policies in 2009, which declined to 8.58 million by 2023. In the first nine months of 2024 alone, companies lost 347,878 policyholders. Over the last 15 years, approximately 3 million policyholders have exited the sector. The most recent data reveals that from January to September 2024, Delta Life Insurance Company Limited saw the highest number of policy cancellations, with 56,338 policies closed.

National Life Insurance Company PLC ranked second with 56,099 canceled policies, followed by Popular Life Insurance Company Limited with 33,378 cancellations. Pragati Life Insurance PLC came in fourth with 23,023 policy closures, while Alpha Islami Life Insurance ranked fifth with 21,917 cancellations.

The term “tamadhi” (a widely used term in the insurance sector originating from Arabic) refers to the lapse or cessation of a policy. A policy becomes “tamadhi” when the premium is not paid within a specified timeframe, resulting in the policyholder losing insurance coverage and, in many cases, forfeiting the money already paid. Experts attribute policy lapses to several factors, including a lack of follow-up from agents who initially sell the policies but fail to maintain consistent engagement with policyholders. A lack of awareness among customers and allegations of broken promises from companies also contribute to the issue.

Instances of agents embezzling premiums paid by customers further exacerbate the problem. According to S.M. Ibrahim Hossain, director of the state-run Bangladesh Insurance Academy, policy lapses are harmful for both companies and customers. When a policy lapses, customers lose the coverage they would have received in case of unexpected events. For companies, it results in revenue loss and undermines financial stability and customer trust.

S.M. Ziaul Haque, CEO of Chartered Life Insurance Company, stated that many customers impulsively buy policies but later fail to continue them. Additionally, agents lose interest in subsequent years as commissions decrease compared to the first year. Rising inflation, political and economic crises, and financial hardships also force many policyholders to divert savings to meet household expenses, resulting in unpaid premiums and policy lapses.

S.M. Nuruzzaman, CEO of Zenith Life Insurance Company and acting general secretary of the Bangladesh Insurance Forum, emphasized that the government and insurance companies both have responsibilities to revive the sector. To reduce policy lapses, companies must prioritize timely claims settlement, train agents to collect renewal premiums, and ensure good governance.

Uttam Kumar Sadhu, CEO of Delta Life Insurance Company, acknowledged that financial constraints often prevent policyholders from paying premiums on time, leading to cancellations. Similarly, M.J. Azim, CEO of Pragati Life Insurance, highlighted that the July-August protests and floods in several regions, including Comilla, Feni, Lakshmipur, Noakhali, Chittagong, and Sylhet, disrupted income and hindered premium collection, resulting in policy lapses.

However, IDRA is taking steps to reduce the number of policy lapses, said Jahangir Alam, director and spokesperson of the authority. “We have had discussions with companies in the past and continue to do so. We hope the rate of policy lapses will decrease soon,” he stated.