Bangladesh’s life insurance industry is struggling to provide the financial security that policyholders expect, with a substantial volume of claims remaining unsettled for years. The latest official figure from the Insurance Development and Regulatory Authority (IDRA) puts the outstanding claims backlog at Tk 44.12 billion, raising serious concerns about the financial health of several insurers and the effectiveness of regulatory oversight.
Life insurance is intended to protect families against financial hardship following the death of an earning member and to provide policyholders with a predetermined financial benefit when a policy reaches maturity or another covered event occurs. Customers pay premiums over many years on the understanding that insurers will meet their contractual obligations when claims become payable.
The continuing accumulation of unpaid claims, however, has weakened that basic assurance.
The concentration of the outstanding liabilities is particularly striking. Fareast Islami Life alone accounts for Tk 33.10 billion, representing more than three quarters of the total unpaid 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 with limited financial means. In rural areas, many customers may have little access to legal assistance or the resources needed to pursue a disputed or delayed claim through lengthy administrative procedures. Even when the amount involved is only a few thousand taka, repeated delays can create significant financial pressure for a household.
Against this backdrop, IDRA has taken steps to facilitate payments. At a recent cheque distribution ceremony, Tk 145.10 million was handed over to 2,549 policyholders of seven insurance companies.
The initiative provides some immediate relief to those who received their money, but its scale remains small compared with the overall problem. The Tk 145.10 million distributed represents less than one per cent of the Tk 44.12 billion outstanding claims. A limited number of payment drives, therefore, cannot by themselves resolve a backlog that has accumulated over a prolonged period.
The more fundamental question is why such a large volume of claims has been allowed to remain unpaid in the first place.
One contributing factor appears to be the industry’s cost structure. In some cases, reported acquisition costs have exceeded one and a half times the first year’s premium. Such expenditure places a substantial burden on an insurer at the beginning of a policy’s life. If a policy lapses within the first year or two, the company may have little opportunity to recover the initial acquisition cost through subsequent premiums.
Large administrative structures and extensive commission-agent networks can add further pressure to operating expenses. The problem becomes more serious when regulatory directives concerning commissions and acquisition expenses are not effectively enforced.
Financial management is another critical concern. Insurers need to ensure that their assets and liabilities are properly matched, particularly in terms of timing. A company may appear to have sufficient assets on its balance sheet while still facing a shortage of readily available cash when a large number of claims fall due. For policyholders, the distinction is crucial: what matters at the time of settlement is not simply the value of an insurer’s assets, but whether sufficient liquid funds are available to meet legitimate claims on time.
The claims crisis therefore cannot be addressed solely through occasional cheque-distribution programmes. A lasting solution requires stronger financial discipline across the industry and more effective supervision by the regulator.
IDRA needs to ensure that insurers comply with prescribed limits on acquisition and commission-related expenses, while companies must strengthen their asset-liability management and maintain adequate liquidity for expected claims. Insurers with persistent payment failures should also face meaningful regulatory scrutiny and corrective measures.
Restoring confidence will ultimately depend on whether policyholders can see a consistent change in how claims are handled. Insurance operates on a promise made today in exchange for payments made over time. If that promise is not honoured when it matters most, the credibility of the entire sector suffers.
Reducing the existing Tk 44.12 billion backlog is therefore only one part of the challenge. The industry must also prevent new claims from accumulating at the same pace. Without stronger accountability, prudent financial management and effective regulatory enforcement, the gap between what policyholders expect and what insurers deliver could widen further.