Credit Management Policy of Life Insurance Companies: A Case Study on “Sandhani Life Insurance Company Ltd.”

Abstract

This case study explores the credit management policies of Sandhani Life Insurance Company Ltd. a leading financial institution operating within Bangladesh's life insurance sector. The aim of the study is to assess the company's approach to managing credit risks, evaluating how its policies align with industry standards and the regulatory framework while ensuring sustainable growth and financial stability. Sandhani Life is a prominent player in the life insurance market, offering a range of life and health insurance products. The company aims to provide financial security and peace of mind to its customers while maintaining a strong financial position. The credit management policy focuses on reducing default risk by setting clear guidelines on underwriting, assessing the creditworthiness of clients, and structuring insurance products. The policy includes risk evaluation techniques, such as assessing applicants' credit history, income stability, and health condition, to ensure sound decision-making before offering coverage. A robust collection mechanism is in place to minimize overdue premiums and manage any outstanding debts effectively. Sandhani Life Insurance emphasizes the importance of diversification in its insurance portfolio to spread risk. The company also incorporates reinsurance agreements to mitigate potential large claims that could affect financial stability. Regular monitoring of policyholders’ financial health ensures early detection of risks associated with premium payments or policy lapses. Sandhani Life’s credit management practices are aligned with the regulatory requirements set by the Insurance Development and Regulatory Authority (IDRA) of Bangladesh. The company adheres to national financial guidelines, including solvency requirements, minimum capital standards, and investment protocols to ensure long-term sustainability and protection of policyholders' interests. Sandhani Life Insurance Company Ltd. demonstrates a well-structured and proactive credit management policy, aimed at balancing risk and profitability. With continuous improvements and adaptation to the changing financial landscape, the company can maintain its competitive position while ensuring a secure financial future for its policyholders. This case study highlights the significance of an effective credit management policy in financial institutions and provides a detailed analysis of Sandhani Life Insurance’s approach, strengths, and areas for improvement.