Bangladesh insurance needs urgent merging for market reform

A.K.M Ehsanul Haque, FCII: Bangladesh’s insurance sector stands at a defining moment. Once projected as a pillar of economic security and confidence, it now faces an identity crisis caused by over-expansion, fragile regulation and mismanagement. The number of insurance companies working in the country far exceeds what the economy can reasonably sustain, making a market so fragmented that it undermines both efficiency and public trust.

At its core, insurance is meant to be a social contract made on faith- a promise that individuals and businesses will receive support in times of need. Yet, for many policyholders in the country, that promise remains unfulfilled. Delayed settlement, denied claim and unclear procedure have become unchanging. Instead of offering reassurance during crises, the sector has too often turned into a source of frustration and uncertainty. The actual foundation of insurance- the assurance of safeguard- is being gradually eroded.

The root of this decline may be traced to decades of misguided policymaking and unsatisfactory regulatory oversight. The Insurance Development and Regulatory Authority (IDRA), tasked with ensuring transparency and answerability, has often acknowledged the sector’s problem publicly but infrequently followed through with meaningful action. Oversight has become inconsistent and enforcement remains weak. The relevant ministry, meanwhile, appears disengaged, allowing irregularities and malpractice to continue unbridled. This arrangement of inaction and negligence has made a space where mismanagement thrives and answerability disappears.

The path forward must begin with structural reform and the most immediate step is the merger of economically unstable insurance companies. Consolidation has become not only a rational choice but a moral imperative to restore stability and safeguard policyholders. Merging weak institutions into stronger, more viable entities would help rebuild solvency, streamline operations and enhance regulatory control. It would also reduce unhealthy competition and enable companies to focus on improving customer service, digital transformation and claim management- areas that directly affect the public’s confidence in the system.

Recent initiatives in the banking sector, where mergers were executed to prevent systemic risk, provide a relevant example for the insurance industry. If consolidation can bring stability and fresh discipline to banking, the same logic must apply to insurance, where the stakes are equally high. Without swift action, continued fragmentation will only deepen financial insecurity, discourage investment and further erode the credibility of an industry already struggling to preserve public trust.

However, mergers alone will not solve all of the problems. They must be accompanied by strong regulatory reform, improved governance and the introduction of modern technology to ensure transparency and answerability. IDRA must evolve from being a passive observer to a proactive guardian of public interest. Every merger must be transparent, fair and performed with the protection of policyholders as the highest priority. The process should not become a rescue mission for negligent management but a step toward a stronger, more sustainable market.