The Bangladesh government is preparing a major overhaul of the country’s insurance regulatory framework as it seeks to address persistent problems involving unpaid claims, weak management, regulatory shortcomings and alleged financial irregularities.
As part of the initiative, the government is working on amendments to the Insurance Act 2010 as well as a new crisis-resolution framework for dealing with troubled insurance companies. The proposed measures are expected to be placed before Parliament soon, Finance and Planning Minister Amir Khosru Mahmud Chowdhury said on Monday.
The minister made the remarks after visiting the headquarters of the Insurance Development and Regulatory Authority (IDRA) in Motijheel, Dhaka.
The proposed changes come at a difficult time for the insurance industry, with concerns growing over the ability of some companies to meet their financial obligations to policyholders. The government is also considering provisions for restructuring insurers whose financial or management problems have become serious.
Khosru said legal disputes had become another obstacle to regulatory action. According to him, some entities had repeatedly approached the courts while seeking what he described as undue advantages, contributing to delays in dealing with problems.
Management weaknesses have also emerged as a concern. Several insurance companies are operating without permanent managing directors, making it more difficult to establish effective leadership and accountability.
The minister said work on legislative amendments and management restructuring was already under way. However, he stopped short of confirming whether weaker insurance companies would ultimately be merged with stronger ones.
He said it would be premature to discuss possible mergers before the crisis-resolution framework was finalised. The government, he added, would take whatever steps were necessary to address the problems of distressed insurers.
57 per cent of life insurance claims unpaid
One of the most serious concerns identified by the government is the large volume of unpaid life insurance claims.
Khosru said 57 per cent of life insurance claims remain unpaid, meaning a substantial proportion of policyholders are still waiting for money they are entitled to receive under their policies.
The minister said the government had uncovered widespread irregularities in the sector since taking office. Companies that continue to withhold policyholders’ dues could face direct consequences, he warned.
According to Khosru, some insurance companies invested customers’ funds in land, real estate and government securities rather than maintaining sufficient liquidity to meet claims. When claims became due, those investment decisions could leave companies without enough readily available funds to make payments.
The issue is significant because insurance is intended to provide financial protection when individuals or businesses face specific risks. Delays in settling legitimate claims can therefore undermine public confidence in the industry and discourage people from purchasing insurance products.
Khosru said the government had instructed IDRA to take a stricter approach towards insurers that had failed to settle claims. Companies have reportedly been given specific deadlines to clear their outstanding dues.
Insurers struggling with cash shortages could also be required to sell land or other property to generate funds for settling policyholders’ claims, the minister warned.
Alleged dual records raise fresh concerns
The government has also raised concerns about the way some insurance companies maintain their financial and operational records.
Khosru said several insurers had allegedly been operating two parallel systems, with one serving as the official record and another being kept separately. Such arrangements, he said, had allegedly been used to facilitate unauthorised transactions.
The government has made clear that maintaining dual servers is not permitted. Following a grace period, inspections will be conducted, and companies found violating the rules could face legal action.
The minister said around seven to eight insurance companies had repeatedly failed to comply with regulatory directives and were now under close scrutiny.
Those companies will be expected to resolve their outstanding problems within a specified period. Failure to do so could result in stronger action by the authorities.
IDRA itself faces staffing weaknesses
The reform programme also extends to the country’s insurance regulator. The government has identified structural weaknesses within IDRA, particularly its dependence on officials serving on temporary deputation.
Khosru said the regulator lacked a sufficiently large permanent and specialised workforce. Its reliance on commissioners and deputed officials can make it difficult to build institutional knowledge because such officials eventually return to their parent organisations.
The government plans to reduce this dependence over the next three to five years and develop a permanent, professionally trained workforce for IDRA. The proposed approach also includes clearer career-development opportunities for regulatory officials.
A stronger regulator will be central to the government’s wider reform effort. Effective supervision requires experienced personnel who can monitor insurers continuously, assess their financial condition and take timely action when companies fail to comply with regulations.
82 insurance companies in the sector
Bangladesh currently has 82 insurance companies, many of which the finance and planning minister described as weak.
Khosru said successive governments had failed to develop the insurance industry sufficiently despite its importance to the national economy. The government now wants to address both the immediate problems facing individual insurers and the structural weaknesses that have affected the wider sector.
Under the proposed changes, provisions allowing insurance companies to be restructured will be incorporated into the updated legal framework. This could provide authorities with a clearer mechanism for dealing with companies experiencing serious financial or managerial difficulties.
The reforms are also intended to strengthen IDRA’s enforcement capabilities and improve corporate accountability within the insurance industry. Ensuring that companies maintain adequate resources to meet claims will be particularly important as the government seeks to address the large backlog of unpaid policyholder dues.
For the sector, the challenge is not limited to changing legislation. The effectiveness of the reforms will depend on enforcement, stronger management, reliable financial practices and the ability of regulators to intervene when companies fail to meet their obligations.
The government’s proposed measures therefore seek to tackle both the immediate crisis and the longer-term weaknesses of the insurance industry. If implemented effectively, the changes could provide a stronger regulatory foundation, improve accountability and help rebuild public confidence in Bangladesh’s insurance market.
