General Insurance Reform: The End of the Agency Era

The foundational structure of Bangladesh’s general insurance sector is set for a radical realignment following a definitive intervention by the Insurance Development and Regulatory Authority (IDRA). For years, the “agent commission” has been a polarising element of the industry—viewed by some as the essential engine of business growth and by others as a primary catalyst for market corruption. In an effort to terminate decades of systemic irregularities, IDRA has issued a landmark circular (Non-Life: 109/2025), decreeing that from 1st January 2026, the role of the individual agent in the non-life sector will be abolished. Commissions will be set to zero and all individual licences suspended, marking an end to a system that has been internationally recognised since the 1938 Insurance Act.

The necessity for such a drastic measure is rooted in a market culture where “under-the-table” payments had become an open secret. While the statutory limit for commissions was strictly capped at 15%, intense competition between the 46 private non-life companies often saw actual payouts escalate to between 50% and 70%. This unregulated financial environment fostered “premium dumping,” where insurers drastically lowered prices to win contracts, ultimately compromising their ability to settle future claims. By removing the commission-based incentive, the regulator hopes to shift the industry’s focus from aggressive acquisition to technical underwriting and financial solvency.

However, the move is not without significant economic and logistical peril. Agents currently serve as the primary marketing arm for general insurance in Bangladesh, bridging the gap between complex policies and the end consumer. The sudden removal of this channel could lead to a sharp contraction in gross premiums as thousands of “feet on the street” are effectively decommissioned. Furthermore, there are pressing concerns regarding the fiscal impact on the national treasury, as the government stands to lose substantial revenue derived from agent registration fees and the 5% tax historically levied on commission payouts.

Revenue and Workforce Implications of Commission Abolition

Beyond the numbers, the human cost is substantial; over 3,000 agents face immediate loss of livelihood. Industry analysts argue that while reform is overdue, the IDRA should have prioritised the development of alternative distribution channels—such as bancassurance, corporate brokers, or digital platforms—before enforcing a total ban. Without these frameworks in place, the industry risks a period of severe volatility. As the 2026 deadline approaches, the success of this reform will depend on whether the sector can modernise its sales approach quickly enough to prevent a total collapse in new business acquisition.