Draft laws worry insurers Regulator's overriding power to hurt industry, sector leaders say

The insurance industry is concerned with the claim settlement
provision recommended in the report of the standing committee on
finance ministry that has proposed to empower the regulator greatly.
Section 71 of the Insurance Bill 2009 says the decision of the
regulatory authorities on claim settlement would be final and there
would be no scope to challenge the verdict in court. "This goes
against the constitution. Everyone has the right to go to court and it
should not be stopped by enacting laws," AKM Rafiqul Islam,
president of Bangladesh Insurance Association, told The Daily Star.
The association also conveyed its concern in a letter to AHM Mustafa
Kamal, chairman of the standing committee, last week. The letter
requested Kamal to change the provision and allow all parties to go
to the arbitration council and higher courts if they want. Otherwise
it will be a violation of internationally accepted insurance
practices, the letter said. There are 62 insurance companies in the
country, of which only two are government-owned and the rest are
private. Of those 44 are general and 18 life insurance companies and
their total annual premium in 2008 was around Tk 4 ,500 crore,
according to industry data. Industry people said the issue has hurt
them badly as they have done a lot to formulate new laws to replace
the age-old 1938 Act that still exists. The caretaker government in
2008 initiated a move to pass two ordinances regarding the
insurance sector, but it did not happen finally. Later, the Awami
League-led government moved to formulate and approve the new
regulations. The standing committee has examined the regulations
drafted by the caretaker government and recommended changes where it
felt necessary. But the insurers said they are surprised to see the
Section (71) on claim settlement in the proposed bill. "The
regulator is not supposed to settle the claims. It happens nowhere in
the world," said Nasir A Chowdhury, managing director of Green Delta
Insurance. Chowdhury said the industry receives hundreds of claims
every year and what will happen when all will rush to the regulatory
authorities saying that they are unhappy with the insurance
companies' offer. He also cited an example of a claim. Last year a
businessman claimed Tk 1 crore, as a portion of his factory was
burned. But the insurance company's survey team found a loss worth
only Tk 95 ,000. "What would happen if the man could settle his claim
by offering bribes to corrupt officials at the regulatory office?"
questioned Chowdhury who has over 50 years of experience in
insurance sector. Finally, the man settled the claim at only Tk 1
lakh, he said. Under the proposed laws, companies will be bound to
pay the amount settled by the regulator, as there will be no chance
of challenging the verdict in the court, Chowdhury said. Mustafa
Kamal said quasi-judicial power proposed for the regulatory
authorities would help settle the claims quickly. When asked on the
right to go to the court against the verdict of the regulator in the
proposed bill placed by the standing committee led by him, he said he
has to go through it. The lawmaker said everyone has the
constitutional right to go to the court.