IDRA scraps commission payments in non-life insurance sector

The Insurance Development and Regulatory Authority (IDRA) has scrapped the scope for paying commissions in the non-life insurance sector, suspending all individual agent licences with effect from 1 January 2026.

The decision was announced in a circular issued on 23 December, aimed at protecting policyholders' interests, strengthening insurers' financial health, and restoring discipline in the insurance market.

According to the circular, all individual agent licences of non-life insurers have been suspended following recommendations from the Bangladesh Insurance Association (BIA), decisions taken at IDRA meetings, and proposals submitted by insurers themselves. As a result, there will be no individual insurance agents operating in the non-life segment from the effective date.

IDRA said that since no valid individual agent licence will remain in force, insurers will have no legal scope to pay commissions to anyone. Citing Section 58(1) of the Insurance Act 2010, the regulator reiterated that commissions or any form of remuneration cannot be paid to anyone other than a licensed insurance agent or broker. Where no agents exist, any commission payment would constitute a violation of the law.

The circular also imposed strict restrictions on the remuneration of development officers. Their salaries, allowances, or benefits cannot be linked to a percentage of premiums collected. Except for contract-based appointments, all development officers must be paid according to the insurer's approved pay scale, clearly mentioned in their appointment letters. Salaries and benefits of all employees must be paid from designated management expense accounts through bank transfers or account-payee cheques. These restrictions, however, will not apply to banks operating bancassurance or to insurtech operators.

Explaining the legal basis, IDRA referred to provisions of the Insurance Act that define insurance agents and empower the authority to determine licence validity, renewal conditions, and suspension. The regulator noted that since the BIA and most insurers formally requested the suspension of individual agent licences, IDRA exercised its statutory authority to issue the order.

Industry stakeholders argue that commission-based business has become a major barrier to sustainable growth in the non-life insurance sector. Many insurers believe that eliminating commissions will reduce irregularities, curb unhealthy competition, improve underwriting discipline, and allow companies to strengthen reserves, pay higher dividends to shareholders, and contribute more to government revenue.

The BIA held several meetings with chairpersons and chief executives of insurance companies, where a majority agreed that scrapping agent commissions was essential to bring transparency, reduce misconduct, and restore order in the non-life insurance market. Insurers also assured that they would continue operations without relying on agent commissions.

Following BIA's request to reduce non-life agent commission rates from 15% to zero, IDRA held a meeting on 25 November. This was followed by a broader consultation with insurers' chairpersons on 27 November in Dhaka. Subsequently, IDRA instructed all non-life insurers to submit proposals on suspending agent licences by 5 December 2025leading to the issuance of the circular.

On the same day the circular was issued, the board of directors of Peoples Insurance PLC welcomed the move, praising IDRA for the decision. The company said copies of the circular had been sent to its head office and all branch offices with instructions to ensure strict compliance.

IDRA officials believe full implementation of the circular will address long-standing problems linked to excessive commissions, strengthen customer protection, and improve the overall stability of Bangladesh's insurance sector.