Tk7,000cr insurance claims in Bangladesh remain unsettled
Insurance companies collect premiums from people year after year, with a promise to stand by them in times of crisis. But when customers have to wait for years on legitimate claims, confidence in the entire system collapses.
In Bangladesh, around Tk7,000 crore in life and non-life insurance claims remain unsettled. Although the economy is approaching $450 billion, insurance penetration is at only 0.33% of GDP.
An analysis by the private research organisation Center for Strategic and Economic Research (CSER) says the insurance market remains far too small compared with the size of the economy. Limited products, weak distribution and low awareness are among the reasons, but biggest obstacle is a crisis of customer confidence.
Finance and Planning Minister Amir Khosru Mahmud Chowdhury has taken a tough stand on the issue, saying valid customer claims must be settled within a specific timeframe. If a company lacks cash, it should sell land or other assets, if necessary, to pay policyholders. His stand makes clear the government’s priority to have customers’ money first.
He also said that companies should not be allowed to keep their assets or make new investments in the absence of claim settlement. “Irregularities, disorder and corruption have taken deep root in the insurance sector,” he said, adding that customers buy policies with their hard-earned money to secure their future, but failure to receive claims destroys trust in the entire system. The government is working to amend the Insurance Act 2010 and has set up a crisis-resolution framework for troubled insurers.
Insurance Development and Regulatory Authority (IDRA) Chairman Mir Nadia Nivin said that there are around Tk7,000 crore in life and non-life claims unsettled, a large portion of them stuck in several financially weak companies.
She said that IDRA is reviewing insurers’ assets, fixed deposits (FDRs) and investments, with a focus on claim settlement. Where necessary, assets may be sold to pay customers. IDRA also plans to stop illegal and excessive commissions, risk-based supervision and introduce a unique ID for every policy. IDRA also wants to bolster digital services, including online complaints, policy verification and claim-status tracking, so that customers can get information directly, without relying on agents or brokers.
CSER Chairman and Labaid Hospital Group Managing Director Sakif Shamim said that although Bangladesh’s economy has grown significantly, its insurance sector remains underdeveloped as a risk-management infrastructure. Although the country has many insurers, market depth is low. Too many companies competing in a small market, excessive commissions, high operating costs and sales-driven business models are weakening the sector.
He said that simply selling more new policies will not sustainably expand the market. Insurance for health, agriculture, property and climate risks must be expanded according to people’s actual needs, with health insurance having particularly strong potential.
He said that high out-of-pocket medical spending can quickly devour a family’s savings when serious illness strikes. To reduce disputes between hospitals and insurers, Bangladesh needs common billing systems, electronic claim settlement and cashless healthcare.
Digital policies, online premiums, electronic claims, automated verification and AI-based fraud detection can also reduce costs and increase transparency. Banks, mobile financial services and digital platforms could help take insurance to rural communities, farmers, small entrepreneurs and informal-sector workers.
“Overall, the main challenge facing Bangladesh’s insurance sector is not expanding the market, but restoring trust first,” Sakif Shamim said.
According to CSER’s analysis, total insurance premiums stood at around Tk18,534 crore in FY2024-25, equivalent to only 0.33% of GDP. India’s insurance penetration is 3.7%. Bangladesh has 35 life insurers and 46 non-life insurers, with insurance accounting for only 3% of total assets in the financial sector.
The most serious problem is claim settlement. IDRA data cited by CSER shows that around Tk7,000 crore in claims are unsettled, including about Tk4,000 crore at seven life insurers. Claim settlement ratio fell from 85% in life insurance in 2020 to 66.06% in 2025. In non-life insurance, only 25% of claims were settled in 2025, falling to 11.3% in January-March 2026.
The sector also suffers from high expenses. In 2021, at least 17 of 36 life insurers exceeded legally prescribed expense limits. Weak regulation, frequent leadership changes and allegations concerning the regulator have further contributed to the trust deficit.
The distribution system is another concern. Insurance is largely sold through commission-based agents and sales targets, sometimes prioritising policy sales over customers’ actual needs. A World Bank assessment found that 60-70% of life policies in Bangladesh are cancelled within the first year, among the highest rates globally.
At the same time, insurance remains underdeveloped among informal workers, farmers and small entrepreneurs. Mobile financial services, bank networks and digital platforms could help expand low-cost insurance.
Health insurance is another major opportunity. Around 68-72% of healthcare costs are paid out of pocket in Bangladesh, while an icddr,b study found that health-cost shocks push around 6% of the population below the poverty line each year. Standard treatment packages, common billing codes, electronic claims and cashless networks could help resolve disputes between hospitals and insurers.
Experts say technology can solve some of the sector’s problems. Automated underwriting, digital onboarding, paperless processes, electronic claims and data-driven verification can reduce costs and expedite settlements. Data analytics can also detect fraudulent claims, while mobile-based microinsurance can help reach low-income and informal-sector workers at lower costs.
The first priority should be to restore trust by settling outstanding claims according to a clear timetable. Insurers’ claim-settlement rates could be published regularly to encourage competition based on reputation. Financially weak companies may need to merge or liquidate, while IDRA needs to hire stronger staffing and technical capacity and conduct risk-based supervision.
Distribution also needs to be reformed. Agent commissions could be tied to policy persistency, while training and certification should be mandatory. Insurance products should be diversified towards health, crop and climate risks, with public-private partnerships considered for low-income people.
IDRA also wants insurance to become a major source of long-term investment. If insurance penetration reaches even 1% of GDP, premiums would rise to more than Tk55,000 crore, roughly three-times the current level.
But this potential can only be realised after trust is restored. People must first believe their claims will be paid on time. Insurers must become financially stronger, regulators more effective, agents more accountable and products better aligned with people’s needs.
The future of Bangladesh’s insurance sector, therefore, depends not simply on selling more policies, but on its ability to keep its promises.