Income Protection Insurance in Bangladesh: Challenges and Prospects

By 2026, the employment landscape in Bangladesh has become increasingly precarious. Recent statistical analyses indicate a mounting pressure on the labour market, characterised by rising job losses, escalating graduate unemployment, and persistent volatility within the industrial sectors.

The Scale of the Employment Crisis

Economic pressures in recent years have exacerbated the national employment crisis. According to joint analysis from the World Bank and the Centre for Policy Dialogue (CPD), approximately 2 million individuals lost their livelihoods during the 2023-24 financial year. This downturn was further compounded between August 2024 and July 2025, when 245 factories ceased operations, directly impacting roughly 100,000 workers.

Industry analysts attribute this prolonged instability to diminished global demand, rising production costs, and the structural vulnerabilities of export-oriented industries. The Bangladesh Bureau of Statistics (BBS) Labour Force Survey (LFS) 2024 revealed that the number of educated unemployed persons has reached approximately 900,000. Specifically, the unemployment rate among those with higher education stands at 13.5%, significantly outpacing other demographics.

While the official unemployment rate was recorded at 4.63% during the October-December quarter of the 2024-25 fiscal year, experts argue this figure fails to capture the full extent of the crisis. Underemployment and chronic income insecurity remain severe, particularly for the youth and educated workforce.

The State of the Insurance Sector

The potential for Income Protection Insurance—a product designed to provide monthly financial assistance following job loss—is high, yet the domestic insurance sector faces significant hurdles. Bangladesh’s insurance penetration rate remains one of the lowest in the region, hovering between 0.33% and 0.40% of GDP.

Comparative Insurance Penetration and Performance

During the first nine months of 2025, only 48% of total premiums collected in Bangladesh were disbursed as claims. This poor settlement record, particularly the 7.55% rate in non-life insurance, has severely undermined consumer trust, creating a barrier to the adoption of new protective financial products.

Global Trends and Local Initiatives

Globally, the income protection market is expanding rapidly. Valued at $43.52 billion in 2024, the sector is projected to reach $59.10 billion by 2032. In Bangladesh, the government has introduced limited pilot schemes to address these needs. The Employment Injury Scheme (EIS) currently provides coverage for 4 million workers in the Ready-Made Garment (RMG) sector against workplace accidents or death. Additionally, the ‘Unemployed Worker Protection Programme’ offers a monthly stipend of 5,000 BDT for up to three months to workers in export-oriented industries.

Despite these efforts, analysts maintain that a universal social protection framework is required. For income protection insurance to become a viable safety net for the middle and working classes, policymakers must focus on transparent claim settlements, regulatory reforms, and restoring public confidence in the insurance industry.