IDRA motor insurance sees low response amid high premiums, non-compulsory rules
Drivers remain unprotected as motor insurance struggles to attract buyers
Bangladesh recorded 6,729 road accidents in 2025, resulting in 9,111 deaths and 14,812 injuries, highlighting road safety as a pressing national concern.
Third-party motor insurance, intended to provide financial coverage for those affected by such incidents, remains underutilised despite its potential as a social protection tool.
The Insurance Development and Regulatory Authority (IDRA) relaunched third-party motor insurance in August 2025 under the name "Motor Liability Insurance" on a pilot basis. Non-life insurers are allowed to sell the policy for one year and report statistics to IDRA after the period ends. Yet, six months into the pilot, uptake remains minimal.
Experts cite two main reasons: the policy is not mandatory, and premiums are relatively high.
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How Motor Liability Insurance Works
The policy covers financial liability if a third party suffers death, injury, or property damage caused by an insured vehicle. Maximum compensation is Tk2,00,000 per person in the event of death or permanent total disability. Partial permanent disability is compensated as per a prescribed schedule, while serious injuries with recovery potential receive up to Tk20,000. Vehicle or property damage is covered up to Tk60,000, with legal, arbitration, and related expenses up to Tk10,000.
Previously, third-party insurance was abolished in December 2020, following the Road Transport Act 2018, which removed the mandatory requirement.
Customer reluctance
A visit to Dhaka's IDRA office revealed widespread unawareness among motorcyclists about the insurance. Those familiar with it are reluctant to purchase it since it is optional.
Golam Rasul, a private-sector employee who occasionally drives passengers via ride-sharing platforms, told The Business Standard, "I would take it if the government made it mandatory. Right now, I don't see the need to pay such high premiums. Careful driving should be enough to avoid accidents."
Insurer frustration
According to United Insurance Company Limited, around Tk48 crore in premiums were collected between January and September 2025, but none came from motor insurance.
Khawja Manzer Nadeem, Managing Director, told TBS, "No one is purchasing motor insurance because it is not legally required. Under the pilot, we haven't even issued a single policy yet. Unlike in other countries, there's no system to quickly determine compensation, so people don't see practical benefits."
Brig. Gen. (Retd.) Md. Shafique Shamim, MD and CEO of Sena Insurance Company, added, "Limited awareness and interest exist. The policy won't work unless it's mandatory. Premiums should also be reconsidered."
An anonymous insurance official noted that most companies are not actively marketing the policy, leaving sales stagnant.
IDRA's position
IDRA spokesperson Saifunnahar Sumi told TBS, "Motor insurance should be mandatory. We've discussed this with BRTA, transport owner associations, and other stakeholders. However, trust issues in the insurance sector mean agreement has not been reached yet. We are continuing to work on this."
Premiums and coverage
Under the new policy, a 150cc motorcycle requires a total premium of Tk1,006, a 350cc three-wheeler with four seats, Tk1,696, a private car (1,300cc, five seats including driver), Tk2,070, and a two-seat three-ton truck, Tk3,651.
In case of accidents, compensation follows IDRA circulars: Tk2,00,000 for death or permanent total disability, Tk20,000 for serious injuries, Tk60,000 for property damage, and Tk10,000 for legal or arbitration costs.
Practical challenges
Implementation of third-party motor insurance in Bangladesh faces several practical challenges. Many vehicle owners remain unaware of the policy or purchase it only for formality, without fully understanding its coverage or benefits.
Even when an accident occurs, claimants often have to navigate lengthy legal procedures to receive compensation, making the process cumbersome and time-consuming.
Experts also note that the current compensation limits, such as Tk2,00,000 for death or permanent total disability, are insufficient to cover the needs of affected families in today's economic context.
In addition, disputes frequently arise between insurers and policyholders, with claims sometimes denied due to unauthorised drivers, exceeding vehicle usage limits, or delayed accident notifications. Such disputes are generally resolved through civil courts or arbitration, a process that, while considered a risk management tool by insurers, can further delay compensation and add to the financial strain on victims.
Future steps
Experts suggest updating compensation limits, digitising claims settlement, increasing public awareness, and coordinating among government, regulators, and insurers. Improved road safety would also reduce accidents and ease the burden on third-party insurance.
Third-party motor insurance is not just a legal requirement; it is a critical social safety net. Given the scale of road accidents in Bangladesh, the system must become stronger, more transparent, and more effective.
A combined effort from the law, the insurance sector, and the public can transform motor liability insurance into a robust protection mechanism.
