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Low spending on agents boosts insurers' earnings

Sarwar A Chowdhury
Earnings of listed insurance companies went up in the first half this year as the insurers spent less on commission paid to their sales agents.
Earlier the companies used to pay 40 percent commission on average to rope in clients, but the regulator set the highest ceiling at 15 percent in March and ensured strict compliance.
Half-yearly profits of 28 general life insurance companies, out of 34 listed, saw a rise by 38 percent on average in comparison to the same period last year.
Industry people credit the good fortune to the presence of the regulator — Insurance Development and Regulatory Authority (IDRA) — which came into effect in January last year.
Prior to that, in a bid to boost their client portfolio, the insurance companies would resort to offering agency commission beyond the maximum ceiling of 17.5 percent.
The agency commission is a fee paid to an agent or an insurance salesperson as a percentage of the policy premium.
The average commission rate afforded to the agencies stood at 40 percent, but in some cases it went up as high as 60 percent, sectorpeoplesaid.
The higher commission rates ate into the insurance companies' profits, they added.
But in March the IDRA set the agency commission rate at 15 percent strict adherence to it.
Hossain, chairman of Bangladesh Insurance Association.
“This has increased the earnings and profits of the insurance companies,” he said, adding that this year's higher business activity, too, contributed to the rise in profits.
Hossain, also chairman of Sonar Bangla Insurance, said if all insurance companies strictly follow the rate, it would create a healthy competition amongthe firms.
Nasir A Choudhury, managing director and chief executive officer of Green Delta Insurance Company, said the IDRA's heightened supervision had an impact on the industry earnings.
“Due to the weak regulation earlier, the insurance companies could get away with giving high agency commission. But now, no insurance company goes above the 15 percent rate, which had a positive impact on the companies' corporate results," he said.
Earnings of insurance companies that had exposure to the stockmarket, however, were saddled by the market volatility during the period, he added.
Although they recorded profits in the January-June period, the profit ratio was lower in comparison to the same periodlastyear, Choudhury said.
There are 62 insurance companies in Bangladesh, of which 44 are general and 18 life insurers.
Of the 44 general insurance on the stock exchange; while nine out
“Now maximum of the companies do not give agency commission above the 15 percent rate,” said Sheikh Kabir
of the 18 life insurance firms are listed.
sarwar@thedailystar.net