The government is set to hand out licences for new insurance companies although many newer insurers are yet to find a toehold in the industry despite five years of operation.
The Insurance Development and Regulatory Authority (IDRA) gave the no-objection certificate to NRB Islamic Life Insurance to register with the Registrar of Joint Stock Companies.
The NOC, which was given on January 3, is the green light to the sponsor to go ahead and apply for a full licence.
As the prime regulator, the IDRA is supposed to take the decision as per laws, but the consent for a new company was given following the instruction of the finance ministry.
“Obtaining no-objection from the IDRA is the primary step for getting a licence,” said GM Kibria, chairman of the proposed company.
Kibria, organising secretary of Awami League's European unit, said they had applied for the licence in 2013, when licences for insurance companies were last awarded.
At the time, the government gave licences to 16 insurers, but NRB Islamic Life Insurance failed to make the cut. Another company, Beach Land Life Insurance, is also in the process of getting licence.
Contacted, Gokul Chand Das, a member of the IDRA, said the company was given the no-objection for registration purpose only and it does not guarantee any licence.
The development comes at a time when the financial health of most of the new insurance companies is worsening because of a failure to hook business in the heavily competitive market. Currently, 78 insurance companies are operating in the market.
“The new generation companies are yet to get a toehold in the industry,” said BM Yousuf Ali, president of Bangladesh Insurance Forum, a platform of the insurance companies' managing directors.
In this perspective, the government should take measures so that these companies can survive before awarding new licences, said Ali, also the managing director of Popular Life Insurance. Higher management cost is also responsible for the deteriorating health of the new insurance companies.
For instance, in the first quarter of 2018, 12 insurers were found to have spent more than the authorised limit for business management. Of them, nine were new generation companies, according to an IDRA report.
The new companies are also supposed to be listed on the stock market within three years of operations but none have done so on account of their poor financial health.
The insurance regulator too is struggling: it has less than 100 employees to regulate the huge number of companies.
Set up in 2011, the regulator has not been able to recruit adequate workforce because of red-tape.
Similarly, the whole insurance industry is facing a lack of efficient workforce. Many insurance companies have empty posts at the top level, said insurance insiders.