Bangladesh’s life insurance industry is facing a serious credibility problem as unpaid claims continue to accumulate, leaving policyholders and their families struggling to access money they were promised under their insurance contracts.
According to the latest official figures from the Insurance Development and Regulatory Authority (IDRA), unsettled claims across the life insurance sector have reached Tk 44.12 billion. The figure represents a substantial financial burden for an industry whose primary purpose is to provide protection and financial security to individuals and families during periods of death, maturity or other covered events.
For policyholders, the issue is straightforward. They pay premiums over a period of years with the expectation that an insurer will honour its contractual obligations when a valid claim arises. When payments are delayed for years, however, that basic expectation is undermined. The consequences can be particularly severe for families that depend on insurance proceeds following the death of a breadwinner or for people who have planned their finances around a policy reaching maturity.
The concentration of unpaid claims among a handful of companies makes the situation even more concerning. Fareast Islami Life alone accounts for Tk 33.10 billion of the outstanding amount, representing more than three-quarters of the sector-wide backlog. Padma Islami Life, Sunflower Life, Progressive Life and Baira Life are among the other insurers contributing to the overall figure.
The burden does not fall equally on all sections of society. Policyholders in rural areas and those with limited financial resources may find it particularly difficult to pursue delayed claims through lengthy administrative or legal processes. For some families, even a relatively small insurance payment can be financially significant. Having to spend years pursuing money that is contractually due can place additional pressure on people who are least equipped to absorb it.
Limited relief against a much larger backlog
The regulator has recently taken steps to address the problem. At a cheque distribution ceremony, Tk 145.10 million was handed over to 2,549 policyholders of seven insurance companies.
The initiative provides immediate relief to those who received payments, but its scale remains small compared with the overall problem. The Tk 145.10 million distributed represents less than one per cent of the Tk 44.12 billion in outstanding claims.
That disparity highlights the need for a much broader strategy. One-off distribution ceremonies may help individual claimants, but they cannot resolve a backlog of this magnitude or prevent fresh claims from becoming overdue. The central question is whether insurers can develop the financial and operational capacity to settle legitimate claims within a reasonable period on a sustained basis.
High acquisition costs add to insurers’ financial pressure
The industry’s underlying business practices are also drawing scrutiny. In some cases, reported acquisition costs exceed one and a half times the first year’s premium. Such a cost structure can put considerable pressure on an insurer from the moment a new policy is acquired.
The problem becomes more acute when policies lapse after only one or two years. If a policyholder stops paying premiums early, the insurer has limited opportunity to recover the substantial initial expenditure through future premium income.
Large management structures and extensive networks of commission-based agents can add to these costs. Weak enforcement of existing commission directives has also allowed questionable practices to persist, raising concerns about whether regulatory rules are being applied effectively across the sector.
The financial position of insurers cannot, however, be assessed simply by looking at the value of their total assets. An insurer may appear to have substantial assets on paper while still facing difficulty meeting claims when payments become due. This can happen when the timing of liabilities is not properly matched with the timing and liquidity of income-generating assets.
Effective asset-liability management is therefore essential for a long-term insurance business. Premiums and investments may generate income over extended periods, while claims can become payable at specific times. If insurers fail to maintain adequate liquid resources for those obligations, policyholders can face delays even when a company technically possesses significant assets.
Stronger oversight needed to restore confidence
The continuing claims backlog suggests that the industry’s problems require more than temporary interventions. The regulator needs to ensure that acquisition costs remain within sustainable limits and that insurers maintain sound asset-liability management practices.
Companies with persistent payment failures should also face meaningful scrutiny and accountability. Regulatory directives have little value if insurers can disregard them without significant consequences.
For the industry itself, restoring public confidence will depend largely on its ability to demonstrate that legitimate claims can be processed and paid on time. Insurance is built on a promise of financial protection. If that promise becomes uncertain, persuading people to maintain policies or encouraging new customers to enter the market becomes increasingly difficult.
The Tk 44.12 billion claims backlog is therefore not merely an accounting problem. It reflects weaknesses in financial discipline, business practices, claims management and regulatory enforcement. Clearing the existing obligations is necessary, but preventing the same problem from recurring will be equally important.
Unless insurers strengthen their financial management and the regulator enforces its rules more firmly, the outstanding claims could continue to grow. In that event, the cost will ultimately be borne by policyholders—many of whom entered the insurance market precisely because they were seeking greater financial security.
