Life insurance sector faces severe credibility crisis; Policyholders drop by a million

Abdur Rahman Abir: Bangladesh’s life insurance industry is enduring one of the most severe trust crises in its history, driven by widespread irregularities, delayed claim settlement and persistent governance failure. In just two and a half years, more than one million policyholders have abandoned their life insurance coverage- a stark warning that the sector’s credibility and sustainability are at risk.

Data compiled from the Insurance Development and Regulatory Authority (IDRA) exposes a sharp contraction in active life insurance policies, declining by over thirteen percent between early 2023 and mid-2025. Once a promising path of economic safeguard for many Bangladeshis, the industry has been gripped by an erosion of public confidence.

The analysts link this decline to systemic weakness from ineffective fund management to an alarming rise in claim dispute. As lapses accelerate, companies are struggling to sustain both existing and prospective clients, highlighting the widening gulf between promise and performance in the country’s insurance ecosystem.

Various industry sources point to a troubling pattern of economic mismanagement and liquidity shortage across several life insurers. Misappropriation of policyholder funds and weak internal control have left many firms not able to honour claim settlement, undermining the core purpose of insurance- financial assurance during crises.

According to IDRA records, unpaid claims now amount to over Tk 3,600 crore, while the number of unresolved complaints has more than doubled in just two years. The result is mounting rage and disappointment among policyholders, many of whom say their repeated attempt to collect matured policies or death benefits have been met with silence and organisational delay.

A frustrated policyholder told Insurance News BD, ‘Paying premiums is easy- agents come right to your door. But once it’s time to get your claim, you’re left alone. I’ve been visiting their office for years without success.’

Former CEO of Jamuna Life Insurance Dr Bishwajit Kumar Mondal, warns that the situation reflects a deeper structural weakness. ‘The industry has lost focus on its primary responsibility- safeguarding policyholders. Companies must reallocate resources toward claim settlement and restore operational discipline,’ he said.

He stressed the need for transparent accounting, reduced administrative cost and sustainable investment practices, saying that rebuilding public confidence will need both time and integrity.

Ongoing investigation by IDRA, the Bangladesh Financial Intelligence Unit (BFIU) and the Anti-Corruption Commission (ACC) has exposed extensive embezzlement and irregularities involving several companies.

Experts say that delayed and inconsistent enforcement by IDRA has permitted irregularities to persist unbridled.

‘Even when misconduct is identified, regulatory response is often slow and penalties minimal,’ said A.K.M. Ehsanul Haque, FCII, Secretary General of the Bangladesh Insurance Professionals Society (BIPS). ‘This lack of decisive action emboldens wrongdoers while leaving policyholders unprotected.’

The industry’s fragile oversight structure, combined with administrative influence and inadequate staffing, has further limited IDRA’s capability to monitor solvency, audit accounts and ensure fair claim settlement.

A continued drop in premium income and fresh policy renewals emphasises the depth of the crisis. Industry analysts predict that if current trend continues, the number of active policies could fall below 6.5 million by 2026, marking a dangerous contraction that could cripple market competitiveness and investors’ confidence.

The crisis has also raised concern about the future of agents, brokers and other professionals whose livelihood depends on an industry now shaking on the edge of collapse.