'Pay up or sell assets to pay,' FinMin warns defaulting insurers

Insurance companies that fail to settle valid claims must sell their own assets, if necessary, to pay policyholders, Finance and Planning Minister Amir Khosru Mahmud Chowdhury has said.

Around 57% of claims in the insurance sector remain unsettled, he said, warning that insurers cannot retain assets or make new investments while failing to pay policyholders.

"Those who have cash problems will have to sell their property and pay the claims of the people," the minister said while briefing journalists after visiting the office of the Insurance Development and Regulatory Authority (IDRA) in Dhaka today (14 September).

Khosru said people buy insurance to protect their lives, assets and businesses, but failure to settle legitimate claims erodes public confidence in the sector.

"No company will be allowed to purchase land or other assets, invest in different sectors or keep money in government securities while failing to pay what it owes to policyholders," he said.

The minister said insurers must prioritise settling valid claims and ensure adequate financial capacity, good governance and accountability.

Claims must be settled within deadlines

The finance minister said insurers that have failed to settle claims have already been given specific deadlines.

If claims are not settled within the stipulated period, action will be taken against the concerned companies, he said.

"The main purpose of the insurance sector is to ensure people's financial security," he said, adding that clearing long-standing legitimate claims is essential to restoring policyholders' confidence.

During his visit to IDRA, the minister was briefed on the current condition of the insurance sector, ongoing reforms and plans. He praised the regulator's reform initiatives, saying IDRA has an important role in establishing good governance, transparency and accountability.

Insurance laws to be amended

The government will amend insurance laws and relevant regulations to address the sector's longstanding problems, the minister said.

"The current condition of the insurance sector requires us to change the insurance laws and regulations. We have to bring these changes, and we hope to implement them in the days ahead," he said.

Khosru also said changes would be made to the management of insurance companies and indicated that the sector may require restructuring, similar to the banking sector.

However, he said it would be premature to comment on possible mergers before the necessary regulations are prepared.

"It would not be right to say anything in advance until the regulations are ready," the minister said.

Once the necessary laws, regulations and regulatory framework are in place, the authorities will assess what measures are required for individual companies, he said.

"The problems in the insurance sector have gone very deep. Irregularities, disorder and corruption have persisted for a long time. So bringing changes here will not be easy. But we have to undertake this difficult task," Khosru said.

Risk-based supervision, automation

The government is taking steps to strengthen risk-based supervision of insurance companies, the minister said.

He attributed part of the sector's current problems to the lack of proper risk-based supervision over a long period.

Going forward, technology, automation and digital systems will be used to monitor insurers' financial strength, governance and risk management more closely.

The government also plans to bring all insurance companies under automation to reduce irregularities and corruption.

Every insurer must have an automated system and conduct transactions online, the minister said. An interconnected digital system will also be developed among relevant institutions, with Bangladesh Bank and the Bangladesh Securities and Exchange Commission expected to be linked to the system.

He said insurers have also been instructed to discontinue the practice of maintaining a "two-server" system. Action will be taken through inspections if any company continues the practice after the deadline.

IDRA capacity to be strengthened

The minister stressed the need to strengthen IDRA's manpower and institutional capacity.

He said the regulator lacks sufficient skilled professionals and that the government plans to reduce its reliance on officials appointed on deputation. Instead, it aims to develop IDRA's own skilled workforce over the next three to five years.

As insurance is a specialised sector, the regulator needs professionals with relevant academic backgrounds and practical experience, he said. Existing officials will also receive training to improve their expertise.

The minister said the government's goal is to make the insurance sector law-abiding, professional, transparent, technology-driven and customer-focused.

He also praised the ongoing reforms under IDRA Chairman Mir Nadia Nivin and expressed hope that the measures would strengthen transparency and public confidence in the sector while increasing its contribution to the national economy.