The Insurance Development and Regulatory Authority (IDRA) has announced a sweeping reform in Bangladesh’s non-life insurance sector, imposing a complete ban on agent commissions and introducing stricter regulations on employee remuneration and benefits. The new directives are set to take effect from January next year.
According to an official notification issued by IDRA, non-life insurance companies will no longer be permitted to conduct business through agents. Consequently, all agent commissions will cease entirely.
IDRA clarified that, under the Insurance Act, 2010, no insurance agent is allowed to pay or receive commissions—directly or indirectly—on behalf of any individual or institution. Any violation of this provision will invite strict regulatory action.
The notification further emphasises that salaries, allowances, and other benefits for non-life insurance officials and employees cannot be calculated solely on the basis of premium collections. Investment-related benefits, except for risk-based returns, must be aligned with the insurer’s approved service and investment policies.
All payments to employees must now be routed through designated bank accounts. Cash payments or other unauthorised methods will not be permitted. Additionally, insurance companies are required to submit quarterly statements in a prescribed format, detailing employee remuneration and associated payments.
IDRA stated that these reforms are designed to safeguard policyholders’ interests, strengthen financial discipline, and ensure improved governance within the non-life insurance industry.
Key Regulatory Changes at a Glance
| Area | Previous Practice | New Regulation |
|---|---|---|
| Agent Commissions | Allowed | Fully banned |
| Employee Salaries & Benefits | Based on premiums collected | Must follow approved policies, not premium-driven |
| Investment-Linked Benefits | Sometimes discretionary | Must align with service & investment policies |
| Payment Method | Cash or bank | Bank accounts only |
| Reporting Requirements | Limited or irregular | Mandatory quarterly statements |
Rationale Behind Abolishing Agent Commissions
IDRA’s decision marks one of the most significant regulatory interventions in recent years. The commission-driven model in the non-life sector has long been criticised for encouraging excessive premium volume at the expense of underwriting quality. Industry experts note that high commissions have often led to distorted pricing, weak risk assessment, and delays in claim settlements.
By removing agent commissions, IDRA aims to correct structural weaknesses in the sector, ensuring that insurers prioritise underwriting discipline, financial prudence, and policyholder protection. While the transition may pose challenges—particularly for commission-dependent companies—regulators and industry analysts believe that this reform will ultimately promote a more sustainable and policyholder-centric insurance market in Bangladesh.