As unpaid claims in Bangladesh’s life insurance sector continue to rise, regulatory authorities are turning to legislative reform as a potential lifeline for thousands of affected policyholders. The proposed Insurance Regulation Act 2025, currently in draft form, is being positioned as a mechanism to resolve deep-rooted structural failures that have left insurers unable—or unwilling—to honour their obligations.
The scale of the problem is undeniable. Of nearly Tk 6,000 crore in life insurance claims submitted during the first nine months of the year, Tk 3,880 crore remains unpaid. Most of this liability is concentrated in a small number of companies that regulators now openly admit lack the financial resources to settle claims.
IDRA officials concede that companies such as Far East Islami Life Insurance have exhausted their available funds. With more than Tk 2,500 crore in unpaid claims and virtually no liquidity, conventional enforcement measures have become ineffective. In this context, the proposed legislation seeks to introduce tools such as forced mergers, restructuring, and state-backed financial assistance.
Under the draft framework, troubled insurers could be consolidated into stronger entities, potentially supported by government funding similar to banking sector bailouts. Proponents argue that this approach may be the only realistic way to recover policyholder funds, given the magnitude of financial mismanagement involved.
Industry leaders cautiously support the idea but stress that mergers alone will not solve the crisis. Progati Life’s CEO has emphasised that accountability must accompany consolidation. Without identifying how funds were misused and imposing consequences, he warns that poor governance will simply be absorbed into larger institutions.
Critics of the proposed law fear that government intervention could create moral hazard, encouraging reckless behaviour if insurers believe future losses will be socialised. They argue that any rescue plan must be accompanied by stricter licensing requirements, enhanced audits, and personal liability for directors and senior executives.
Despite these concerns, policymakers acknowledge that inaction is no longer an option. The social impact of unpaid life insurance claims extends far beyond financial loss, affecting widows, retirees, and vulnerable families who depend on timely payouts.
As Parliament prepares to debate the Insurance Regulation Act 2025, the future of Bangladesh’s life insurance sector hangs in the balance. Whether the legislation restores trust or merely postpones deeper reform will depend on how firmly it is implemented—and whether regulators are willing to confront long-standing failures head-on.