For all its importance, the life insurance sector in Bangladesh has yet to develop into the strong and dependable financial pillar that citizens and the economy rightfully expect. The industry is supposed to provide one of the most basic forms of financial security, yet it now carries an unsettled claims backlog of Tk 44.12 billion, according to the latest official count by the Insurance Development and Regulatory Authority. People pay premiums for years with the expectation that when a death, maturity or other covered event occurs, the insurer will honour its obligation without forcing the policyholder or the family into a prolonged struggle. That expectation is clearly not being met. The scale of the unpaid claims is also such that they cannot apparently be cleared through a few special initiatives. Fareast Islami Life alone accounts for more than three quarters of the total unpaid amount with Tk 33.10 billion, while Padma Islami Life, Sunflower Life, Progressive Life and Baira Life add further weight to the crisis. What makes the situation even harder to accept is who bears the brunt of it. Rural policyholders with limited resources and even less access to legal recourse are left chasing claims for years even worth a few thousand taka. How can people be expected to trust an industry whose customers have to wait years to receive money that is already legally and contractually theirs?
Against this backdrop, the IDRA has begun to show visible activity by organising a cheque distribution ceremony at which Tk 145.10 million was handed over to 2,549 policyholders of seven companies. Welcome though it is, this is less than one percent of the Tk 44.12 billion in outstanding claims, making the effort negligible in relation to the magnitude of the problem. Symbolic gestures of this kind look more like public relations than a serious response to the crisis. Nor do they offer any assurance that insurers will stop allowing claims to pile up in the years ahead, as they have done for years.
The industry's business model appears to be a contributing factor behind much of the present paralysis. Reported acquisition costs of more than one and a half times the first year's premium in some cases raise serious questions about how insurers compete for customers. When a company spends this much simply to acquire a policy, it starts with a heavy financial burden. The problem becomes even more serious when policies lapse within a year or two, leaving the insurer with little or no opportunity to recover its initial costs through future premiums. Bloated management hierarchies and extensive networks of commission agents further inflate these acquisition costs. This destructive model is ultimately enabled by the regulatory authority, whose weak enforcement of its own commission directives has allowed the practice to continue largely unchecked. Making matters worse, poor asset and liability management has left several insurers failing to align the timing of payouts with the timing of their income and liquid assets. Consequently, companies may have sufficient assets on paper but still lack the cash needed to settle claims when payment is due.
None of this is new information to anyone inside the industry, yet meaningful corrective action remains elusive. The regulator must enforce strict limits on acquisition costs, require rigorous asset-liability matching and take firm action against chronic defaulters if the industry is to regain public confidence. Without such accountability and financial discipline, the backlog will only expand, leaving millions to pay the price for corporate incompetence.
