Bangladesh’s insurance sector is facing renewed scrutiny over alleged mismanagement, corruption and weaknesses in regulatory enforcement, with Finance Minister Amir Khosru Mahmud Chowdhury raising concerns about the industry’s ability to meet its obligations to policyholders.
The concerns are particularly significant for customers who have paid their premiums but remain unable to receive money due to them under the terms of their policies. According to figures cited in the discussion, as much as 57 per cent of insurance claims remain unsettled. The scale of outstanding claims has raised questions about the financial management of insurers and the effectiveness of regulatory oversight.
The finance minister has described the difficulties in the insurance industry as comparable to those affecting the banking sector. While the problems vary between institutions, the common concerns include weak governance, questionable business practices and delays in meeting contractual obligations to customers.
Insurance is based fundamentally on a contractual relationship. Policyholders pay premiums in return for financial protection against specified risks or for benefits payable when a policy reaches maturity. When a legitimate claim is not settled within a reasonable period, the impact can extend beyond the individual customer. Persistent delays can weaken public confidence in the entire insurance system and discourage people from using insurance products.
Insurance companies in Bangladesh operate under the Insurance Act 2010, while the Insurance Development and Regulatory Authority (IDRA) is responsible for regulatory oversight under the relevant legal framework. Where companies fail to comply with legal requirements, the regulator has powers to intervene and take appropriate measures. The concern raised by the finance minister is whether those powers are being used effectively enough to prevent irregularities and protect policyholders.
The government is also considering the need for an Insurance Resolution Act modelled in part on resolution mechanisms in the banking sector. Such legislation could provide additional tools for dealing with distressed insurers and unresolved obligations. However, a new law would not automatically resolve the sector’s problems. Effective enforcement of existing legislation and stronger institutional capacity at IDRA would remain essential.
Financial management within insurance companies is another area requiring close attention. Concerns can arise when an insurer with substantial outstanding claims directs funds towards property purchases, including land, or other investments while customers continue to wait for settlements. The financial priorities of companies need to be assessed alongside their obligations to policyholders and the regulatory requirements governing their operations.
The alleged use of separate servers or records has also emerged as a serious concern. If one system contains genuine business information while another holds different records, regulators may face difficulties in establishing the actual financial and operational position of a company. Such practices can also create opportunities for the manipulation or concealment of information.
A deadline has reportedly been set for ending such practices, after which inspections are expected to take place. The effectiveness of that exercise will depend on IDRA’s capacity to conduct thorough inspections. Adequate manpower is necessary, but staffing alone will not guarantee results. Inspectors must have the technical skills to examine financial and digital records and must perform their duties independently and diligently.
Regular supervision by senior authorities could strengthen the inspection process. It could also help ensure that findings are properly followed up rather than remaining only in inspection reports. A regulatory campaign can lose its effectiveness if companies face little consequence after irregularities are identified.
Risk-based supervision has therefore been proposed as a way of making regulatory monitoring more targeted. Under such an approach, companies presenting greater financial or operational risks could receive closer scrutiny. Insurers with large volumes of unsettled claims or weaknesses in their records could require more frequent examination, allowing regulatory resources to be directed towards areas where the potential risks are greatest.
Digitalisation could also help improve transparency. Maintaining electronic records of premiums, policy payments, maturity settlements and claims would reduce reliance on paper documents and make transactions easier to monitor. Regular online updates could give regulators a more current view of an insurer’s activities and make unexplained changes to records easier to detect.
The settlement of outstanding claims remains the central concern for policyholders. The finance minister has suggested that insurance companies could sell assets or property where necessary to raise funds for meeting their obligations. Any such process would need to comply with applicable laws and be conducted transparently, with proper safeguards for policyholders and other stakeholders.
The broader challenge for Bangladesh’s insurance sector is therefore not simply whether another law should be introduced. Strong enforcement of existing rules, effective regulatory supervision, reliable financial records and timely settlement of legitimate claims are equally important.
For policyholders, the credibility of the insurance system ultimately rests on whether companies honour the commitments made in their policies. Improving transparency, strengthening IDRA and ensuring that valid claims are dealt with properly could help rebuild confidence in the sector and provide a more stable foundation for the future of insurance business in Bangladesh.
