12:00 AM, December 04, 2012 / LAST MODIFIED: 12:00 AM, December 04, 2012

Insurers worried over rising RMG accidents

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Sajjadur Rahman

Insurance companies are concerned over the growing number of accidents in apparel factories as the insurers' compensation for their clients in the garment sector has been on the rise over the years.
In a move, the companies have decided to devise new policies to handle the menace, especially the fire accidents that kill people and occur mainly due to poor factory management.
“We are the worst sufferers of accidents in factories as we are the leading insurer in the country,” said Nasir A Chowdhury, managing director of Green Delta Insurance Company.
Green Delta paid Tk 5.6 crore as compensation for fire accidents in garment factories in 2010. The amount rose to Tk 12.20 crore in 2011. Till September this year, the insurer has paid Tk 4.5 crore as compensation.
According to the Clean Clothes Campaign, an alliance of organisations in 15 European countries, more than 500 Bangladeshi workers have died in factory fires since 2006.
In February 2006, at least 57 workers were killed and more than 100 seriously injured when fire engulfed KTS, a textile factory in Chittagong. Fire at Spectrum, a garment factory near Dhaka killed 29 people in the same year.
The latest fire incident in Tazreen Fashions claimed more than 100 lives.
Fire insurance is a must for factories. The companies that are engaged in export-import business have to cover some additional risks. Before issuing insurance coverage, insurers need to inspect the factories to know about their safety measures and compliance.
“We think twice before insuring a hazardous factory, such as garments,” said Sabir Ahmed, chief financial officer of Reliance Insurance, one of the top two companies in the country.
“We inspect factories on our own,” said Ahmed. “We did not need to pay a big amount of compensation last year.”
Chowdhury said they also carry out survey of the factories before issuing any coverage. Insurers usually ignore minor loopholes, he said.
“But we find a lot of shortcomings when a factory goes for claims settlement,” he said. “And, we minus the cost for negligence.”
The issue has become a worry for the insurers' association as well.
“We have convened a special board meeting after the fire accident in Tazreen Fashions. We've formed a committee to devise new policies to handle the growing number of accidents,” said Sheikh Kabir Hossain, president of Bangladesh Insurance Association.
Hossain said insurers face problems during claims settlement as the policyholders do not cover all the machinery and risks.
“When we carry out survey for claims settlement we find major loopholes,” he said.
Hossain, who is also the chairman of Sonar Bangla Insurance, said his company is witnessing a rise in claims for accidents in garment factories.
He said factory owners do not insure their workers, their policies only cover the factories.
The garment industry having more than 5,000 factories produces clothes for the western countries. Garments account for 80 percent of Bangladesh's exports, with earnings of nearly $19 billion in the last financial year. Nearly 3.5 million people, mostly women, are employed in the industry.

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