Bangladesh’s life insurance industry is facing a growing credibility problem as billions of taka in claims remain unsettled, raising serious questions about the sector’s ability to provide the financial protection it promises to policyholders and their families.
According to the latest official figures from the Insurance Development and Regulatory Authority, outstanding life insurance claims have reached Tk 44.12 billion. The size of the backlog indicates that the problem extends well beyond isolated delays involving individual policyholders. For many customers, money paid into insurance policies over several years is becoming increasingly difficult to recover when a claim becomes due.
Life insurance is designed to provide financial support at critical moments. A policy may become payable following the death of the insured person, the maturity of a policy or another event covered by the contract. Policyholders therefore commit a portion of their income to premiums with the expectation that the insurer will fulfil its contractual obligations when required.
Yet the prolonged accumulation of unpaid claims has weakened that basic promise.
The concentration of the outstanding liabilities is particularly striking. Fareast Islami Life alone accounts for Tk 33.10 billion of the total, representing more than three-quarters of all unsettled claims. Padma Islami Life, Sunflower Life, Progressive Life and Baira Life are among the other companies contributing to the wider backlog.
The consequences are especially difficult for policyholders outside major urban centres. Many rural customers have limited financial resources and little access to professional legal assistance. For them, even a claim worth only a few thousand taka can represent a significant amount of money. Years of correspondence, visits to offices and repeated attempts to obtain payment can turn what should be a straightforward contractual settlement into a prolonged ordeal.
The regulator has taken some steps to address the situation. At a recent cheque distribution ceremony, Tk 145.10 million was handed over to 2,549 policyholders of seven insurance companies. The distribution provides relief to those who received their money, but its scale remains very small compared with the total outstanding claims.
The Tk 145.10 million distributed represents less than one per cent of the Tk 44.12 billion backlog. As a result, such initiatives cannot by themselves resolve the underlying problem. What is required is a sustained mechanism capable of reducing existing arrears while preventing new claims from accumulating.
The financial structure of the industry also deserves closer scrutiny. Reported acquisition costs in some cases exceed one and a half times the first year’s premium. Such high costs can place considerable pressure on insurers from the moment a policy is sold. Extensive networks of commission-based agents and large management structures can add to the expense of acquiring and maintaining customers.
The situation becomes more difficult when policies lapse after only one or two years. An insurer that has already incurred substantial costs to secure a policy may then have limited opportunity to recover those expenses through future premium payments.
Weak enforcement of commission rules has also been identified as a factor allowing excessive acquisition costs to persist. Effective regulation therefore requires more than issuing directives. Rules need to be monitored consistently and breaches must carry meaningful consequences.
Another concern is the management of assets and liabilities. Insurance companies have to ensure that their financial resources are available when claims fall due. A company may appear to have substantial assets on its balance sheet but still face a cash-flow problem if those assets cannot be converted into liquid funds at the right time.
For an industry built on long-term financial commitments, matching the timing and nature of assets with expected liabilities is essential. Failure to do so can leave insurers struggling to meet legitimate claims even when their overall asset position appears adequate.
The present situation calls for stronger financial discipline across the sector. The regulator needs to enforce clear limits on acquisition expenses, strengthen oversight of commission practices and ensure that insurers maintain appropriate asset-liability matching. Companies with persistent claim-payment failures should also face closer supervision and firm regulatory action.
The challenge is ultimately one of public confidence. People will be reluctant to continue paying premiums if they believe that receiving the money promised under a policy may require years of effort. This is particularly damaging for life insurance because its value depends heavily on trust: customers are paying today for protection they may need many years later.
Clearing the existing Tk 44.12 billion backlog will not be easy, and a single distribution programme cannot solve it. But a credible recovery strategy, combined with tighter financial oversight and timely enforcement, could begin to restore confidence.
Without such measures, the claims backlog risks becoming a continuing burden for policyholders and their families, while weakening the role that life insurance should play in Bangladesh’s wider financial system.
