The Insurance Development and Regulatory Authority (IDRA) of Bangladesh has drafted comprehensive proposals to cap management expenses for life and non-life insurance companies. The regulatory initiative aims to enforce financial discipline, curbing excessive operational expenditures that have long delayed the settlement of policyholders’ claims. However, the proposed reforms have met with strong resistance from industry leaders, who argue that existing rules should remain unchanged for several more years to allow companies adequate time to adjust to market conditions.
According to figures released by the IDRA, unpaid claims across the sector reached BDT 6,928 crore by the end of June this year. Over the past 14 years, inflated management expenses have contributed to the lapse of more than 2.6 million insurance policies, leaving nearly 1.1 million policyholders awaiting their lawful dues. IDRA spokesperson Saifunnahar Sumi highlighted that high operational spending remains the primary driver behind delayed payouts. She noted that about 75 per cent of policies lapse by their third year, underscoring the urgent need to protect policyholders, enhance corporate governance, and rebuild public trust. Weighing in on the crisis, Hasina Sheikh, a professor of banking and insurance at Dhaka University, stressed that cost reduction must be paired with strict monitoring, reminding insurers that premiums represent liabilities rather than disposable revenue.
| Sector or Policy Category | Coverage Details & Conditions | Existing Expense Limit (%) | Proposed Expense Limit (%) |
| Life Insurance (Annuity) | Annual premium policy management cost | 5% | 4% |
| Life Insurance (Installments) | Installment premium policy management cost | 10% | 7% |
| Group Insurance | Annual group policy management cost | 15% | 10% |
| Short-Term (1 to 5 Years) | First-year policy management expense | 95% | 85% |
| Short-Term (1 to 5 Years) | Policy renewal management expense | 25% | 20% |
| Mid-Term (6 to 10 Years) | First-year policy management expense | 94% | 84% |
| Mid-Term (6 to 10 Years) | Policy renewal management expense | 22% | 17% |
| Long-Term (10+ Years) | First year (Sum insured up to BDT 100 crore) | 95% | 82% |
| Long-Term (10+ Years) | First year (Sum insured BDT 100 to 500 crore) | 92% | 81% |
| Long-Term (10+ Years) | First year (Sum insured above BDT 500 crore) | 91% | 76% |
| Long-Term (10+ Years) | Renewal expense across all policy tenures | 15% | 10% |
| Non-Life (Fire & General) | Premium income up to BDT 15 crore | 35% | 25% |
| Non-Life (Marine) | Premium income up to BDT 15 crore | 26% | 16% |
| Non-Life (Fire & General) | Premium income exceeding BDT 15 crore tier | 22% | 12% |
| Non-Life (Marine) | Premium income exceeding BDT 15 crore tier | 16% | 6% |
The draft rules have drawn sharp criticism from prominent business executives within the sector. Managing Director of Pragati Life Insurance, Mohd. Jalalul Azim, argued that regulations introduced in 2018 for non-life and 2020 for life insurance ought to be maintained. He pointed out that agent commissions—which are set directly by the regulator—account for 60 to 70 per cent of life insurance costs, making overall management cuts impractical without altering the commission framework. Echoing similar concerns, Nura Alam Siddiqui and Mohd. Khalid Mamun, Chief Executives at Alpha Islami Life Insurance, urged the regulator to focus on enforcing existing limits across all firms before introducing tighter caps. Syed Shehabullah Almanzoor, Chief Executive of Pragati Insurance, described the proposed reductions as unrealistic amidst rising inflation and an economic slowdown. Offering a broader perspective, Adeeba Rahman, First Vice-President of the Bangladesh Insurance Association, acknowledged positive aspects in the draft but noted that certain provisions were overly stringent, confirming that industry suggestions would soon be submitted to IDRA to achieve a balanced framework.
