Job losses rise in Bangladesh: Can income protection insurance fill the gap?

Staff Correspondent: Bangladesh’s labour market has come under increasing strain in 2026, with rising job losses, educated unemployment and ongoing instability in key industries putting clear pressure on incomes. Against this backdrop, income protection insurance is emerging as a potentially important safety net, although significant gaps remain in preparedness and public trust.

Recent data and policy analyses suggest that employment challenges have intensified in recent years. According to estimates by the World Bank and the Centre for Policy Dialogue, around 2 million people lost their jobs during the 2023–24 fiscal year. The industrial sector has also come under considerable strain. Between August 2024 and July 2025, approximately 245 factories shut down, directly affecting nearly 100,000 workers. Economists say the impact of these closures has continued into 2026.

Analysts attribute the prolonged pressure to a combination of declining global demand, rising production costs and the vulnerability of export-oriented industries. These structural challenges are contributing to growing income uncertainty, particularly for workers dependent on manufacturing and trade-linked sectors.

Data from the Bangladesh Bureau of Statistics Labour Force Survey 2024 highlights another pressing concern: the rise in educated unemployment. Around 900,000 educated individuals are currently unemployed, with the unemployment rate among highly educated people standing at 13.5 percent, significantly higher than other groups. Economists warn that unless the mismatch between education and labour market demand is addressed, the situation could worsen further.

While the official unemployment rate stood at 4.63 percent in the October–December quarter of FY2024–25, experts caution that this figure does not fully reflect the ground reality. Underemployment and income volatility remain widespread, particularly among young and educated individuals, making financial security increasingly fragile.

Despite this growing need for protection, Bangladesh’s insurance sector remains relatively underdeveloped. Insurance penetration stands at just 0.33 to 0.40 percent of GDP, far below regional comparators such as India at around 4 percent and Pakistan at about 0.60 percent. Claims settlement performance also remains a concern. In the first nine months of 2025, only 48 percent of collected premiums were paid out as claims. The situation is more pronounced across segments, with life insurance settling 35.18 percent of claims and non-life insurance only 7.55 percent.

According to industry experts, these low settlement rates have weakened customer confidence in insurers. This lack of trust is seen as a major barrier to introducing and scaling new products such as income protection insurance.

Income protection insurance typically provides monthly financial support for a defined period when individuals lose their jobs or income sources. In the current environment of declining job stability, such a product could play a critical role in supporting workers and middle-income households during income shocks.

The government has already taken some initial steps in this direction. The Employment Injury Scheme (EIS) currently provides coverage to around 4 million workers in the ready-made garment sector against workplace accidents and fatalities. In addition, a worker protection programme offers cash assistance of Tk 5,000 per month for up to three months to workers in export-oriented industries who lose their jobs.

However, these initiatives remain limited in scope and coverage. Policy analysts say that a broader and more integrated social protection framework is necessary to address income insecurity at a national level.

Globally, the income protection insurance market is expanding steadily. The market was valued at $43.52 billion in 2024 and is projected to reach $59.10 billion by 2032. Experts say this global trend presents an opportunity for Bangladesh, provided that the insurance sector can be strengthened through regulatory reforms and improved governance.

In the current economic context, analysts emphasise that creating new jobs alone is no longer sufficient. Ensuring income stability has become equally important. Strengthening claims settlement efficiency, rebuilding trust in insurers, implementing policy reforms and increasing public awareness will be critical. If these challenges are addressed effectively, income protection insurance could evolve into a meaningful support mechanism for Bangladesh’s workforce in the years ahead.