32 insurance companies at high risk as sector confidence fades: Regulator

Thirty-two insurance companies out of 82 operating in the country are considered to be at high-risk, raising concerns over the stability of the sector, according to the Insurance Development and Regulatory Authority (Idra).

Speaking at a press conference today (2 July), Idra Chairman M Aslam Alam revealed that the high-risk category includes 15 life insurance companies and 17 general insurance firms. Only six life insurers out of total 36 are currently in good standing, with another 15 classified as medium risk.

The high-risk life insurers identified include Fareast Islami Life, Padma Islami Life, Prime Islami Life, Sunflower Life, Sunlife, Golden Life, Baira Life, Progressive Life, NRB Islamic Life, Diamond Life, Best Life, Protective Islami Life, Jamuna Life, and Swadesh Life. A special audit is underway to assess the financial conditions of these firms.

Aslam said, "The insurance sector is grappling with a crisis of confidence; as numerous companies consistently fail to settle customer claims in a timely manner. This ongoing issue has led to a steady decline in public trust and interest in insurance services."

According to Idra data, 45% of life insurance claims and 47% of general insurance claims remain unsettled, severely damaging public trust and reducing insurance uptake.

Reflecting this erosion in confidence, insurance penetration as a share of GDP dropped from 0.94% in 2010 to just 0.41% in 2023, with further decline recorded in 2024. 

The regulatory body received 24,852 complaints last year, but only 38 written responses were submitted by insurers, underscoring systemic inefficiencies. Manpower shortages at Idra, with only 107 personnel employed against an approved 160 posts, have further limited oversight capabilities.

To address these issues, Idra has proposed several reform measures, including a 'Resolution Ordinance' modeled after banking sector frameworks to allow for mergers, acquisitions, or dissolutions of troubled insurers.

Amendments to the Insurance Business Registration Fee Rules, 2012 have also been drafted, proposing to raise the fee from Tk1 to Tk5 per thousand in premium to support expanded regulatory operations.

M Aslam cited the disparity in sector performance with neighboring India, where gross insurance premiums total nearly ₹6 lakh crore, compared to just Tk18,227 crore in Bangladesh for 2023. India's insurance regulator earns around ₹600 crore annually, while Idra's projected revenue for FY2025–26 stands at just Tk37.59 crore, barely covering its Tk37.68 crore in expenses. 

The regulator anticipates that future spending on infrastructure, training, and staffing may increase by four times or more.

Sector experts point to several structural issues impacting life insurance companies, including risky investments, excessive agent commissions, high operating costs, and chronic delays in claim settlements. 

Some firms have reportedly begun breaking fixed deposits to pay claims, cutting into interest income and weakening their capital base.

Experts urge insurers to adopt risk-free investment strategies, control administrative costs, and establish faster claim settlement processes to safeguard long-term sector viability.

Stakeholders have been asked to submit feedback on the draft rules for amendments within the next 15 working days, as Idra seeks to steer the industry toward recovery and restore public confidence.