The life insurance sector in Bangladesh is facing a serious trust deficit, which has emerged as a major obstacle to its growth. According to industry experts, policyholders are increasingly reluctant to purchase life insurance due to procedural delays in claim settlements, financial mismanagement by some companies, lack of adequate consumer knowledge, and unsatisfactory service from insurance agents. Weak regulatory oversight has also created opportunities for misappropriation and irregularities, further undermining public confidence.
Decline in Active Life Insurance Policies: Recent data from the Insurance Development and Regulatory Authority (IDRA) indicates that over the past two and a half years, the number of active life insurance policies in the country has fallen by more than 1.02 million, signaling a worrying trend for the sector. Between January 2023 and June 2025, the customer base for life insurance companies declined by over 13 percent.
IDRA data shows that in January 2023, there were 7.89 million active life insurance policies in Bangladesh. By the end of 2024, the number had fallen to 7.09 million, a decrease of 719,344 policies in one year. By June 2025, the active policies further decreased to 6.78 million, a reduction of 325,266 policies within the year. In total, the sector has lost 1,025,924 policies over two and a half years, representing a 13.14 percent decline. Industry insiders point to delayed claim settlements, fund shortages, and public mistrust as the primary reasons behind this decline.
Fund Mismanagement and Claim Delays: Experts say that embezzlement and irregularities in some insurance companies have caused liquidity issues, preventing timely claim payments to customers. Policyholders often wait years to receive their entitled funds, even after their policies mature. Complaints lodged with IDRA have more than doubled in the past two years, with many cases remaining unresolved. According to IDRA’s latest quarterly report, outstanding life insurance claims in Bangladesh currently amount to Tk 36.28 billion.
Investigations by IDRA, the Bangladesh Financial Intelligence Unit (BFIU), and the Anti-Corruption Commission (ACC) have revealed massive embezzlement in several life insurance companies over recent years. Notably, three companies-Fareast Islami Life, Sonali Life, and Homeland Life-were implicated in the misappropriation of approximately Tk 32.57 billion. Such irregularities have delayed claim settlements and eroded confidence in both conventional and Islamic life insurance products.
Regulatory Weaknesses Aggravate the Problem
Despite receiving numerous complaints, IDRA has often been unable to take effective action, further increasing public frustration. Insurance experts warn that unless IDRA strengthens its human resources and legal framework, long-term protection of policyholders will remain elusive.
Professor Abu Ahmed, an economist, told Daily Industry, “Trust is the most important factor. Negative perceptions about insurance are widespread in the country. It is time to reassess whether so many insurance companies are necessary for a small economy. IDRA needs to restore confidence through international best practices.”
Dr. M. Aslam Alam, IDRA Chairman, recently stated in a press briefing that delayed claim settlements have heightened public distrust. “Without transparency and accountability, it is impossible to restore confidence,” he emphasized.
Experts Urge Companies to Focus on Policyholder Confidence
Professor Shahidul Islam Zahid, Chairman of the Banking and Insurance Department at the University of Dhaka, highlighted that insurance companies must proactively work to rebuild trust. “Currently, companies are primarily focused on their own business growth, with little regard for customer interests. To grow the sector, insurance services must reach rural areas as much as cities. Just as banks open more branches in villages to expand their reach, insurance companies must adopt similar strategies,” he said.
Insurance specialists also note that awareness and education campaigns are crucial. Many potential policyholders lack the knowledge to understand the long-term benefits of life insurance, making them hesitant to commit financially. In addition, inadequate agent performance and unsatisfactory customer service have further deterred new customers.
Sector Needs Strong Governance and Reform: The sector’s development is also constrained by weak governance structures and regulatory oversight. Industry insiders argue that without strong monitoring mechanisms, opportunities for fraud and mismanagement will persist. Strengthening IDRA’s capacity, implementing strict compliance measures, and ensuring timely claim settlements are essential to restore confidence and attract new policyholders.
Professor Zahid emphasized, “Insurance growth depends on trust. Companies must prioritize policyholder satisfaction and transparency. Expanding services to rural areas and providing clear, reliable information will help the sector recover.” Looking Ahead: Despite these challenges, there is potential for revival. Restoring public confidence could significantly expand the life insurance market in Bangladesh. Experts suggest that coordinated reforms, improved governance, enhanced consumer education, and transparent operations are necessary steps to rebuild the sector.
Professor Abu Ahmed added, “Insurance is not just a financial instrument; it reflects societal trust. If the sector can demonstrate reliability and accountability, it will attract more customers and contribute positively to the country’s financial ecosystem.”
IDRA has committed to implementing reforms, but stakeholders emphasize that meaningful change will require continuous monitoring, stronger legal frameworks, and effective enforcement. Until these measures are fully realized, the sector is likely to remain hampered by public skepticism and slow growth. The life insurance sector in Bangladesh is at a critical juncture. With over 1 million policies lost in the last two and a half years, restoring trust is essential. Effective regulation, transparent operations, better service, and customer-focused strategies are key to reviving the sector. As experts warn, without these reforms, the sector risks stagnation, leaving millions of potential policyholders underserved and the financial system weaker.
