Despite IDRA moves, Tk7,158cr insurance claims remain unpaid

Despite numerous initiatives by the Insurance Development and Regulatory Authority (IDRA), the country's insurance sector is burdened with a staggering Tk7,158 crore in unpaid claims as of the end of March this year. 

This significant backlog is causing considerable distress among policyholders, many of whom are yet to receive their rightful compensation, with some claims remaining unsettled years after policy maturity.

Unaudited data from insurance companies, compiled by IDRA for March 2025, reveals that life insurers account for Tk4,007 crore of the outstanding amount, while non-life insurers are responsible for Tk3,151 crore in unpaid claims.

Industry insiders point to a challenging economic landscape, both local and global, as a key factor in the sector's recent struggles, with the crisis reportedly worsening in the latter half of last year.

In the life insurance segment, political and economic uncertainties have aggravated public mistrust, mirroring a broader crisis of confidence within the financial sector. The failure of several life insurance companies to settle matured policies promptly has further eroded public confidence and tarnished the industry's overall reputation.

For non-life insurers, delays in claim settlements have led to prolonged suffering for policyholders, many of whom face severe financial hardship. Although insurance law mandates claim settlements within 90 days, industry insiders confirm this rule is frequently disregarded.

Insurance companies argue that they are legally required to reinsure 50% of their non-life policies through Sadharan Bima Corporation (SBC). While the remaining 50% can be reinsured with foreign companies, SBC's delays in settling their share are preventing insurers from paying policyholders on time.

However, some companies, to protect their reputation, pay claims from their funds.

Industry insiders further noted that foreign reinsurance companies usually settle claims promptly, unlike SBC, which frequently delays payments.

On the other hand, SBC has informed IDRA that delays often occur due to incomplete documentation and the non-receipt of premiums on time from insurers.

Initiatives by regulators

Meanwhile, the insurance regulator said it has taken numerous initiatives to increase the claims settlement ratio in the sector. The regulator decided to conduct special audits for 15 life insurers to investigate why they fail to pay on time. Besides, IDRA has requested plans from some life insurers outlining how they will pay customers' dues.

However, IDRA stated that one of the main reasons cited by companies for non-settlement is that SBC, the state-owned reinsurer, fails to settle its share of claims on time. As a result, insurers are unable to clear a significant portion of claims themselves. IDRA has already informed SBC about the issue. The new leadership at SBC is now working to reduce this gap, said the insurance regulator.

Saifunnahar Sumi, media and communication consultant and IDRA spokesperson, said that several proposed amendments to insurance-related regulations are at the final stage. "In addition, steps have been taken to increase the manpower of IDRA." 

She expressed hope that once these initiatives are implemented, the ongoing crisis in the insurance sector will be resolved.