A crisis of trust: Why Bangladesh’s insurance sector faces an uncertain future

Raj Kiron Das: Bangladesh’s insurance sector, once envisioned as a safeguard for social protection and economic stability, is now trapped in a deepening crisis of confidence. Rampant insurance fraud, fragile regulatory enforcement and a widening trust deficit between insurers and policyholders have collectively pushed the industry to a critical juncture. Unless laws are strictly enforced and governance significantly improved, the sector risks losing its credibility- and with it, the actual foundation upon which it stands.

The core of the insurance business is trust. Consumers pay premiums expecting financial protection during crises, while insurers are bound by law and ethics to deliver on legitimate claims. Yet, when fraudulent activities go unpunished, this trust collapses. Honest customers bear the burden of inflated premiums, while genuine claimants face delay and denial. Such erosion of confidence not only hurts individual companies but undermines the entire economic ecosystem that depends on insurance as a stabilising mechanism.

At the heart of this problem lies a failure: unsatisfactory public awareness and weak enforcement of laws. Many citizens still lack a clear understanding of how insurance policies work, what their rights are, or how to identify scam. This knowledge gap allows fraudulent agents and unscrupulous intermediaries to exploit public ignorance, often by selling fake policies or manipulating claims. Simultaneously, loopholes in monitoring, investigation and prosecution allow perpetrators to operate with impunity.

Bangladesh must adopt a holistic strategy secured in law, technology and institutional reform to restore order and credibility.

Firstly, the legal framework must be both strong and executable. Current insurance laws need not only reform but rigorous implementation. Fraud should be treated as a serious economic crime, with strict penalties, expedited legal proceedings and visible enforcement. The Insurance Development and Regulatory Authority (IDRA), as the primary watchdog, must assert its authorities concerned beyond licensing and approval- it must ensure compliance, conduct investigation and impose sanctions where essential. Regulatory silence or leniency only emboldens wrongdoers and discourages honest hands.

Secondly, technology should be leveraged to modernise fraud detection and claims verification. Artificial intelligence and data analytics may identify suspicious patterns in claims, while blockchain technology can make records tamper-proof and transparent. These tools, when integrated into insurance operations, may drastically lessen human error and manipulation. However, digitalisation must be coupled with skilled human oversight, ensuring that technology complement, rather than replaces, regulatory vigilance.

Thirdly, insurers must collaborate rather than compete in isolation when it comes to fraud prevention. A centralised data-sharing platform for reporting suspicious claims, blacklisted agents and fraudulent policyholders would help companies identify repeat offenders and systemic fraud patterns. Joint investigation under regulatory supervision could also assist track organised fraud networks that often target several firms simultaneously.

Fourthly, consumers’ empowerment is vital. People need to know their rights, responsibilities and paths for compensation. Public awareness campaigns through media, schools and community outreach may help demystify insurance. A confidential and easily accessible complaint mechanism should be established so that anyone can report fraud with no fear of retaliation or organisational hassle.

Furthermore, the industry must focus on training its own personnel. Claims officials, agents and field staff must receive nonstop professional development to detect inconsistency, verify documents and adhere to ethical standards. Insurance is not merely a financial contract- it is a social commitment that demands integrity at all levels.

Ultimately, enforcement remains the decisive factor. With no visible and consistent application of the law, all reforms risk being reduced to rhetoric. Every act of fraud left unpunished sends a signal that deceit is a low-risk, high-reward strategy. The government, regulators and insurers must therefore demonstrate zero tolerance—investigating, prosecuting and publicising cases of fraud to rebuild public confidence.

Bangladesh’s insurance industry holds vast potential to drive inclusive economic growth, safeguard small businesses and strengthen economic resilience. But that potential cannot be realised in an environment of mistrust. The sector’s survival depends on one principle: the law must not merely exist- it must be enforced. Only through robust governance, technological modernisation and collective accountability may the country’s insurance sector regain its lost credibility and ensure that insurance once again stands for safeguard, not deception.