Fareast Islami Life Insurance Company Ltd will have to pay Tk 5,467 crore over the course of next three years in insurance claims to its policyholders.
However, the company's funds and assets amount to only Tk 1,923 crore. This significant disparity between the required payments and available funds has sparked uncertainty regarding the company's ability to fulfill Tk 3,680 crore worth of insurance claims.
A senior official of the company informed The Daily Messenger about the current predicament, stating that the company will be unable to fulfill even half of its outstanding insurance claims. This is primarily due to the inability to liquidate all of the company's assets. Additionally, the company is facing a decline in premium income as it is not actively insuring new customers. Consequently, there is considerable uncertainty surrounding the payment of insurance claims for both new and existing customers.
Customers resorting to door-to-door visits to collect their overdue payments are exacerbating the challenge and hindering all efforts aimed at restoring trust in the insurance sector. Jahangir Alam, the Director and Spokesperson of IDRA, informed The Daily Messenger that the company has been directed to expedite the payment of insurance claims to customers, even if it requires selling off all assets. Furthermore, directors have been urged to explore options for securing fresh funding to address the situation.
He also said that the current chairman of the company, Sheikh Kabir Hossain, has asked the government for incentives to overcome the financial crisis of Fareast Life Insurance. He made this demand in the IDRA meeting with the board of directors of Fareast Islami Life on September 11, last year.
A review of Fareast Islami Life's financial report for 2023 indicates a decline in total premium income, including renewal premium income. Concurrently, higher expenses have led to a reduction in the company's surplus funds. Despite changes in ownership and the reorganisation of the board of directors over the past two years, no efforts to recover embezzled company funds have been successful. Consequently, the insurance company is approaching an acute financial crisis.
On the other hand, the amount of insurance claims of consumers is increasing every year. Along with this, the liability of the premium deposited by the new customers is also increasing. As the company is unable to do business in this situation, on the one hand, the company is facing financial crisis, on the other hand, there is extreme uncertainty about the payment of the customer's dues. Even in this situation, Fareast Islami Life spent Tk 20.49 crore in excess last year, which is illegal according to law.
Senior officers of the company are receiving substantial salaries and financial perks, with a total expenditure of Tk 46.86 crore allocated for their salaries and allowances last year. Specifically, the chief executive received a monthly salary of Tk 6 lakh, along with additional financial benefits such as car fuel expenses. Furthermore, development officers also received significant compensation, amounting to Tk 14.46 crore in the last fiscal year.
According to company data, outstanding claims as on December 31, 2022 stood at Tk 2,180.31 crore. The amount of expired claims in 2023 stood at Tk 614.27 crore. That is, in 2023, the amount of outstanding claims and new expired claims stood at Tk 2,794.58 crore.
Out of the total expenses, Tk 464.42 crore worth of claims were settled in 2023. Consequently, the outstanding claims amount to Tk 2,330.16 crore. Additionally, new claims expected to arise from 2024 to 2026 are estimated to reach Tk 3,136.81 crore. Therefore, the total insurance claims to be paid in the next three years sum up to Tk 5,466.97 crore.
According to the financial report, Fareast Life's premium income declined in 2023. The total premium income for the company in 2023 amounted to Tk 602.60 crore. In contrast, it was Tk 638.78 crore in the previous year, 2022. This represents a decrease of Tk 36.18 crore or 6 percent compared to the previous year.
Sheikh Kabir Hossain, Chairman of the company, expressed to The Daily Messenger that the company's current condition is concerning. He emphasised that since assuming leadership, their top priority has been promptly addressing customer insurance claims. However, the influx of new policies has fallen short, resulting in a decline in premium income. Additionally, the anticipated proceeds from asset sales have fallen below expectations. Consequently, despite intentions to expedite insurance claim payments, the current circumstances pose significant challenges.
Efforts to contact Fareast Islami Life’s Chief Executive Officer (CEO), Apple Mahmud, on his mobile phone were made several times but were unsuccessful.