Finance Minister Amir Khosru Mahmud Chowdhury has raised serious concerns over what he described as widespread mismanagement, corruption and regulatory failures in Bangladesh’s insurance sector. His remarks highlight a problem that has increasingly affected policyholders, particularly those who have faced prolonged delays or difficulties in receiving legitimate claims.
The finance minister has also drawn a parallel between the challenges facing the insurance industry and those that have troubled the banking sector. While a small number of insurance companies are seen as operating more responsibly, many others have been accused of engaging in questionable practices and avoiding the settlement of genuine claims on various grounds. According to the concerns raised, as much as 57 per cent of insurance claims remain unsettled, leaving a large number of policyholders waiting for money they are entitled to under their policies.
Insurance is built fundamentally on trust. Policyholders pay premiums with the expectation that the insurer will honour its contractual obligations when a covered event occurs or when a policy reaches maturity. Persistent delays in claim settlement can therefore undermine public confidence in the entire sector and discourage people from using insurance products.
The existing legal framework already provides provisions for regulating the industry. The Insurance Act 2010 and the IDRA Act 2010 give the Insurance Development and Regulatory Authority (IDRA) significant responsibilities and powers to oversee insurance companies and take action when rules are violated. Yet questions have been raised over the effectiveness of enforcement and the extent to which these legal powers are being used in practice.
Against this backdrop, the finance minister has suggested the need for an Insurance Resolution Act, broadly comparable to resolution mechanisms used in the banking sector. However, introducing another law alone may not resolve the sector’s longstanding problems. Effective implementation of the existing laws, stronger supervision and credible enforcement will remain essential.
One of the major concerns is the alleged diversion of funds by insurance companies into property, including land, and other investments while legitimate claims remain unpaid. Such practices, if established, would represent a serious failure of corporate responsibility and regulatory compliance. The regulator needs to ensure that companies meet their contractual obligations before engaging in activities that could affect their ability to settle claims.
Another serious issue highlighted by the finance minister is the reported use of two servers, one genuine and another allegedly used to conceal questionable business activities. Such practices can create opportunities for manipulation of financial and policy-related information. A deadline has reportedly been set for ending the practice, with inspections expected after the deadline.
The effectiveness of those inspections, however, will depend heavily on the capacity and integrity of the regulatory authorities involved. Questions about IDRA’s manpower and the quality of inspections need to be addressed if the regulatory drive is to produce meaningful results. Inspection teams must operate under effective supervision, while their findings should be properly reviewed to prevent opportunities for irregular dealings.
The proposed introduction of risk-based supervision could provide a more structured approach to monitoring the insurance industry. Under such a system, regulatory attention can be directed towards companies, transactions and areas presenting higher risks. Stronger digital systems could also reduce opportunities for manipulation. Maintaining accounts and transactions electronically would lessen dependence on paper records and make it easier to monitor financial activities.
Regular online updating of premium payments, policy terms and maturity settlements could provide policyholders and regulators with clearer records of transactions. Greater transparency in these areas would make it more difficult to alter information or conceal outstanding obligations.
The issue of unpaid claims remains central to restoring confidence in the sector. The finance minister has suggested that insurance companies should sell assets or property where necessary to settle outstanding claims. Such measures could help address legitimate dues if implemented through transparent and properly regulated procedures.
Ultimately, the insurance sector does not necessarily require a fresh start through legislation alone. What it urgently needs is effective enforcement of existing rules, stronger institutional capacity, transparent financial practices and consistent accountability. If IDRA can exercise its legal authority effectively and ensure that insurers honour their commitments to policyholders, confidence in the industry can gradually be rebuilt.