Recent developments in Bangladesh’s insurance sector have brought to light persistent vulnerabilities, particularly in the life insurance segment, despite existing legal frameworks and regulatory oversight. Growing reports of irregularities and fraudulent practices have renewed focus on the sector’s structural challenges.
At present, insurance fraud is mainly governed by the Insurance Act 2010 and the Penal Code 1860, with the Insurance Development and Regulatory Authority (IDRA) serving as the primary regulatory body.
Under Section 130 of the Insurance Act 2010, individuals or organisations providing false information or submitting forged documents in insurance operations face up to five lakh taka in fines, three years’ imprisonment, or both. In addition, IDRA can impose administrative penalties ranging from one lakh to ten lakh taka for violations such as issuing policies without approval, delaying claim settlements, or failing to follow prescribed regulatory procedures.
Criminal liabilities under the Penal Code 1860 are more severe. Fraud under Sections 415–420 carries a maximum of seven years’ imprisonment and fines. Forgery or submission of false documents under Sections 463–465 carries up to two years’ imprisonment, while accounting fraud under Section 477A may result in up to seven years’ imprisonment and fines. Furthermore, involvement in illegal financial transactions may invoke provisions of the Anti-Money Laundering Act 2012.
Recent reports indicate that several private life insurance companies have faced allegations of unauthorised use or misappropriation of policyholders’ funds. In response, IDRA has strengthened monitoring and imposed fines in some cases. However, experts note that the current penalty structure may not be sufficient to deter large-scale fraud in the sector.
To address these concerns, IDRA is considering a series of reforms, including:
- Confiscation of personal assets of directors found guilty of fraud
- Strengthening consumer protection measures
- Expanding regulatory powers and oversight capabilities
- Increasing penalties for non-compliance
These proposals are under stakeholder review as of mid-March 2026.
Overview of Legal Framework and Penalties
| Legislation | Offence | Maximum Penalty |
|---|---|---|
| Insurance Act 2010, Sec. 130 | False information / forged documents | 5 lakh taka fine, 3 years imprisonment, or both |
| IDRA Administrative Measures | Unauthorized policy issuance, claim delays, regulatory breaches | 1–10 lakh taka fine |
| Penal Code 1860, Sec. 415–420 | Fraud | 7 years imprisonment + fine |
| Penal Code 1860, Sec. 463–465 | Forgery of documents | 2 years imprisonment |
| Penal Code 1860, Sec. 477A | Accounting fraud | 7 years imprisonment + fine |
| Anti-Money Laundering Act 2012 | Illegal financial transactions | Penalties as per Act |
Sector analysts emphasise that simply enforcing laws is insufficient to restore trust. They advocate for comprehensive reforms, continuous monitoring, and technology-based surveillance systems. Such measures are essential to overcome long-standing structural weaknesses and establish transparency, accountability, and public confidence in the insurance sector.
