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Payments of commission by general insurance companies to policy agents will soon come under tight scrutiny in a bid to check ever-increasing operational expenses of the insurers.
A special team of the Chief Controller of Insurance (CCI) is expected to start inspecting the commission payments of the general insurers from next week, officials said.
"The CCI has formed an inspection team led by a deputy controller to check whether the insurance operators are paying the commission beyond the permissible limit or not," a senior CCI official told the FE.
If any arbitrary payment is detected, the committee will place its findings to the regulator for next course of action, he said.
Although the regulator decided earlier to include representatives from the insurance sector in such inspection team, the insurers had declined to join the process due to some technical problems.
The apex body of insurers -- Bangladesh Insurance Association (BIA) -- informed the CCI that the inclusion of its representatives in the inspection process might create 'misunderstanding' among the operators, said an official.
"The inspection aims to curb the companies' ever-growing overhead expenditure, caused by higher rate of commission payments," he said.
Such an unprecedented move has been initiated against the backdrop of the reintroduction of commission payment system for general insurance business, according to officials.
The authorities recently withdrew the official restriction on payment of such agents' commission for general insurers after it found that such bar merely failed to serve the desired purpose, official sources said.
They, however, admitted that even after the discontinuation of the commission payment system in March 2002, most companies had continued to pay higher rate of commission in 'disguised' forms.
Such unethical practices did not only push the companies' overall operational expenses higher but also caused an unhealthy competition in the country's insurance business, they added.
"The regulator found itself in a difficult situation to detect such hidden payments in the form of commission even after the imposition of such restriction," said an official.
Although there is an official provision for imposition of financial penalty against the additional overhead expenses of insurers, the amount is found to be too inadequate.
As a result, almost all the country's 43 general insurance companies easily pay penalties ranging between Tk 50,000 and 100,000.
Under the existing provision, permissible expenditure ranges between 13 per cent and 18 per cent of their insurance business.
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