Clearing Tk7,000cr insurance claims tops reform agenda: New Idra chairman

Clearing nearly Tk7,000 crore in outstanding insurance claims accumulated over the past years will be the top priority of the Insurance Development and Regulatory Authority, alongside restoring policyholders' confidence to revive the sector, said the regulator's newly appointed chairman Mir Nadia Nivin.

With this aim, it has begun working with the seven most financially distressed insurance companies, whose unpaid claims account for almost Tk4,000 crore of the total due. The authority plans to liquidate their assets and use the proceeds to settle the claims in phases, she said.

A series of reform initiatives, including curbing commission malpractice, introducing Risk-Based Supervision, a unique policyholder ID, strengthening verification of educational credentials of senior executives and taking legal action against financial irregularities will be taken, the chairman announced the plans while speaking to journalists at a media briefing in Dhaka today (16 July).

Calling the crisis of public confidence a big challenge, she said, "If policyholders do not get their claims for years, people will lose interest in buying insurance. Our first priority is to begin settling outstanding claims as quickly as possible. Once claim payments start, confidence will gradually return."

The regulator already held separate meetings with the sponsors, boards and chief executive officers of the seven most distressed insurers over the past two weeks, reviewed their assets, investments, liabilities and financial condition, and ordered fresh valuations where there are doubts over asset values, the chairman said.

She said government treasury bonds and fixed deposits held with financially sound banks and other marketable investments would be liquidated in phases.

The proceeds will be deposited into separate bank accounts for each company under the supervision of independent auditors to ensure transparency. Claims will then be settled on a first-in, first-out basis, with policyholders who filed claims earlier receiving payments first.

Nivin added that the regulator will also work with Bangladesh Bank to resolve issues related to deposits stuck in financially weak banks.

Commissions are often paid indirectly through inflated salaries, consultancy fees or other contractual arrangements, weakening insurers' financial positions.

The regulator is now developing mechanisms to detect and prevent such hidden commission payments and expects to take visible action within the next month.

Nivin said financial statements submitted by insurers are often outdated, making it difficult to assess their actual financial health. Under the new framework, companies will be monitored using regularly updated information, enabling the regulator to identify risks, liquidity shortages and irregularities at an early stage.

Each valid insurance policy will be assigned a unique identification number, which will be sent directly to the policyholder's mobile phone.

"If a customer does not receive the unique ID, they should not pay the premium," the chairman said, adding that they will launch a nationwide awareness campaign on the initiative.

To curb the use of forged academic certificates submitted by senior insurance executives, Nivin said the regulator may use international databases, verify records directly with universities, coordinate with Bangladesh Bank and conduct background checks through the Credit Information Bureau.

Asked whether penalties imposed on financially weak insurance companies could be recovered from directors' personal assets, the chairman said the existing law does not allow such action.

However, she said the issue could be considered under future legal reforms.

Nivin said the industry suffers from long-standing structural problems that cannot be resolved all at once. Legal action will be taken if evidence of embezzlement or other unlawful activities is found, along with efforts to recover misappropriated funds.