Policyholders left in limbo as Tk6,934cr in insurance claims go unpaid
Industry insiders point out that the insurance industry has been under stress for years due to both local and global economic challenges
The country's insurance sector is facing a deepening crisis as thousands of policyholders continue to wait for their rightful compensation. Till June 2025, insurance companies received claims totalling Tk9,180 crore. However, they managed to pay only Tk2,246 crore, leaving Tk6,934 crore in unsettled claims, according to unaudited data from the Insurance Development and Regulatory Authority (IDRA).
This persistent backlog has left countless policyholders in limbo. Many have not received their money even years after their policies matured, leading to frustration and eroding public trust in the sector.
Industry insiders point out that the insurance industry has been under stress for years due to both local and global economic challenges. The situation worsened significantly in the second half of 2024, when policy payouts slowed dramatically.
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However, experts say the biggest reason behind the crisis is not only the economic slowdown but also weak regulatory enforcement.
The IDRA has often been accused of failing to take strict measures against companies that do not settle claims. As a result, many insurers have grown increasingly reluctant to pay their customers, knowing that there will be little consequence from the regulator.
Life insurance segment is losing trust
In the life insurance segment, the crisis has become particularly severe. Political and economic uncertainties have already weakened public confidence in the financial sector. On top of that, several life insurance companies have failed to settle matured policies on time, which has further damaged the sector's credibility.
Industry insiders warn that even companies that remain committed to paying claims promptly are being affected, as the overall perception of the life insurance sector is deteriorating. Policyholders now view the industry with suspicion, unsure whether they will actually receive their money when their policies mature.
"This is not just a financial problem, it's a crisis of confidence," said a senior insurance analyst, seeking anonymity. "When customers lose trust in insurance, the entire system is at risk of collapse."
Non-life segment is also struggling
The non-life insurance segment is also mired in delays. Policyholders often face months or even years of waiting to receive compensation. Many businesses that depend on timely payouts to recover from accidents, disasters, or losses are pushed into financial hardship due to unpaid claims.
According to the law, insurance claims are supposed to be settled within 90 days. But industry insiders admit that this rule is rarely followed.
A key reason, they say, lies with Sadharan Bima Corporation (SBC), the state-owned reinsurer. By law, insurance companies must reinsure 50% of their non-life policies with SBC, while the other half can be reinsured with foreign companies. However, SBC frequently delays settling its share of claims, leaving insurers unable to pay policyholders on time.
An official of IDRA, seeking anonymity, said, "One of the main reasons cited by companies for not settling claims on time is that SBC fails to clear their portion. We have already informed SBC of this issue, and its new leadership is now working to reduce the backlog."
Foreign reinsurers vs SBC
Sector insiders highlighted a stark contrast: foreign reinsurers generally pay promptly, while SBC often delays settlements. To safeguard their reputation, some private insurers choose to pay claims from their own funds rather than make policyholders wait for SBC.
Khawja Manzer Nadeem, managing director of United Insurance, explained, "We always prioritise claim settlement in line with the law. But many policyholders delay in submitting the necessary documents, which causes delays. Also, reinsurance through SBC takes extra time because of additional documentation requirements. In some cases, even fully paid claims remain pending for months, forcing insurers to dip into their own funds to settle claims."
Industry experts note that incomplete documentation is a recurring issue in claim settlements. Many policyholders fail to provide all the necessary papers, while some claims are tied up in lengthy court cases.
A senior official at the Bangladesh Insurance Academy said, "It is not reasonable to expect claims to be settled where premiums have not been paid. At the same time, the rising number of disputes in court is slowing down the entire process. Unless all parties sit together for a coordinated discussion, this situation will not improve."
According to him, a joint effort between insurers, reinsurers, regulators, and policyholders is the only way forward to rebuild confidence and speed up claim settlements.
Regulator's initiatives
Despite criticism, IDRA claims it is working to improve the situation. The regulator has launched special audits of 15 life insurers to identify why they fail to pay claims on time. IDRA has also asked several companies to submit detailed plans on how they will clear outstanding dues to their customers.
Saifunnahar Sumi, Media and Communication Consultant and spokesperson for IDRA, said, "Several proposed amendments to insurance-related regulations are now at the final stage. At the same time, initiatives have been taken to increase manpower at IDRA. Once these measures are implemented, we expect the crisis in the insurance sector to ease."
Experts warn that without urgent reforms, the insurance industry risks losing credibility altogether. If policyholders believe their money is unsafe, fewer people will buy policies, shrinking the industry further.
Some suggest that stricter penalties must be imposed on companies that fail to pay claims on time. Others call for restructuring SBC to make it more efficient and transparent.
