Concerns over widespread mismanagement, corruption and regulatory weaknesses in Bangladesh’s insurance sector have renewed calls for stronger supervision and greater accountability. Finance Minister Amir Khosru Mahmud Chowdhury has compared the difficulties facing the insurance industry with those experienced by the banking sector, highlighting the growing concerns over unpaid claims and weak regulatory enforcement.
The issue is particularly significant for policyholders who have fulfilled their obligations but have faced delays or difficulties in receiving money due to them under the terms of their insurance policies. According to the figures cited in the discussion, as much as 57 per cent of claims remain unsettled. Such a high level of outstanding claims can undermine public confidence in insurance, which depends heavily on the assurance that legitimate claims will be honoured when policy conditions are met.
The concerns extend beyond individual companies. Insurance businesses are required to operate within a regulatory framework established under the Insurance Act 2010 and the Insurance Development and Regulatory Authority Act 2010. The Insurance Development and Regulatory Authority (IDRA) is responsible for overseeing the sector and taking action when companies fail to comply with the law. Questions have, however, been raised over the effectiveness with which existing regulatory powers have been exercised.
The finance minister has suggested the possibility of introducing an Insurance Resolution Act, drawing on the concept of resolution frameworks used in the banking sector. Such legislation could provide additional mechanisms for dealing with troubled institutions and unresolved obligations. Yet the effectiveness of any new law would ultimately depend on its implementation. Without stronger enforcement of existing provisions, another legal framework alone may not resolve the structural weaknesses within the industry.
One of the key concerns is whether insurance companies are managing their funds in a manner consistent with their obligations to policyholders. Questions arise when companies facing significant outstanding claims allocate money towards assets such as land and property or other investments while customers continue to wait for settlements. Such practices can create serious concerns about liquidity, financial discipline and the protection of policyholders’ interests.
The issue of maintaining multiple sets of records has also emerged as a serious regulatory concern. The alleged use of separate servers or records, including one reflecting genuine transactions and another containing different information, could make it difficult for regulators to obtain an accurate picture of a company’s financial position and business activities. The government has set a deadline for ending such practices, with inspections expected to follow.
The effectiveness of those inspections will depend partly on the capacity and independence of the regulatory authority. IDRA must have sufficient manpower and technical expertise to examine companies properly, while inspection teams need to work with diligence and integrity. Regular oversight by senior authorities could also help reduce opportunities for improper influence during inspections.
A proposed risk-based supervision system could offer a more targeted approach. Instead of treating every insurance company in exactly the same way, regulators could focus greater attention on institutions showing signs of financial weakness, unusually high numbers of unsettled claims or other indicators of regulatory risk. Such a system could also make better use of limited regulatory resources.
Digitalisation could strengthen the process further. Maintaining electronic records of premiums, policy payments, maturity settlements and claims would reduce dependence on paper-based records and make it harder to alter or conceal transaction data. Regular online updates could also allow regulators to monitor developments more closely and identify potential irregularities at an earlier stage.
The settlement of outstanding claims remains central to restoring confidence in the sector. The finance minister has suggested that insurance companies could sell assets or property where necessary to meet their obligations to policyholders. Any such measure would need to be implemented transparently and in accordance with the relevant legal and regulatory requirements.
For Bangladesh’s insurance industry, the challenge is therefore not simply the creation of another law. Effective enforcement, stronger institutional capacity, reliable financial records, digital monitoring and timely settlement of legitimate claims will all be necessary to improve accountability. If these measures are implemented consistently, they could help rebuild policyholders’ confidence and create a more disciplined environment for the insurance business.
