Tackling Defaulters In Life Insurance Business

Life insurance, long promoted as a tool for securing financial stability for commoners in old age or retired life, has become a source of frustration for thousands of policyholders across Bangladesh. While people pay premiums hoping for future protection, many are finding their money is effectively frozen even after their policies mature.

Rahima Khatyun, a domestic worker, purchased a policy from BAIRA Life Insurance Company Ltd. on December 28, 2010. Her policy, numbered 200400915-3, matured more than a year ago, yet she has not received any profit or bonus.

“I paid the premium instalments thinking I would get some benefit when the policy matured,” Rahima said, frustrated after months of waiting. She did not encash two bonuses hoping she would get a handsome amount when she would draw the final claim. But she has been refused the bonuses on the plea that the financial state of the company is not good and that the said bonuses had not been officially declared.

Company Admits It Cannot Pay Profit

In a written reply, Mobarak Hossain acknowledged that the company currently has no profit and is unable to pay the client. Repeated attempts to contact the acting CEO, Md. Mamun Khan, went unanswered.

While BAIRA Life markets pension and health safety schemes on its colourful website, analysts question whether the company can deliver on its promises. Critics also point out that executives continue to receive high salaries and commissions even as policyholders suffer on long wait.

Other Companies in Crisis

Rahima’s experience is far from being isolated or unique. Policyholders of Fareast Islami Life Insurance Company Limited and Sunlife Insurance Company Limited have also reported delays or non-payment of matured claims, raising concerns about systemic weaknesses in the sector. Have the companies failed to mobilise premium income to earn profit or they have invested money in sectors that don’t give profits at regular intervals.

According to the Insurance Development and Regulatory Authority’s September 2025 quarterly report, at least seven life insurers have life funds at zero or negative balance while holding over Tk 4,000 crore in claims from 1.3 million policyholders. Some claims have remained unpaid for five to ten years.

More data from IDRA the regulatory authority shows that by the end of the September 2024 quarter, total life insurance claims reached Tk 5,986 crore, of which Tk 3,880.58 crore remained unsettled. Astonishingly, over Tk 3,426 crore (nearly 88 percent) of unpaid claims are concentrated in just five companies:

Fareast Islami Life Insurance: Tk 2,780.05 crore unsettled out of Tk 2,815.01 crore

Padma Islami Life Insurance: Tk 255.29 crore unsettled out of Tk 257.42 crore

Sunflower Life Insurance: Tk 190.58 crore unsettled out of Tk 194.52 crore

Progressive Life Insurance: Tk 153.38 crore unsettled out of Tk 162.86 crore

State-owned Life Insurance Corporation: Tk 94.36 crore unsettled out of Tk 234.31 crore

A former chief executive officer of an insurer, speaking on condition of anonymity, told Green Watch, “Almost no company is paying claims according to the law. Even the few companies that are considered good are delaying settlement of claims beyond 90 days. In most firms, there is a culture of cheating customers.”

Human Cost: Years of Harassment

Yusuf Ali Mia, a policyholder of Progressive Life Insurance in Pabna, says his policy matured in 2021, yet he has not received his savings. He has been forced to visit the Dhaka head office for the last four years after the company closed its Pabna branch.

“It’s only harassment. There’s no intention to return the money,” he told reporters. Complaints to Insurance Development and Regulatory Authority yielded no resolution.

Commission Culture and Regulatory Gaps

Former Meghna Life Insurance Company Limited CEO Abu Bakar Siddique told Green Watch that unethical commission payments to employees and agents upon policy confirmation are a major factor behind the sector’s crisis.

“This practice, allowed by IDRA, the regulator, has destroyed healthy competition and service standards,” Siddique said.

Sector analysts agree that weak corporate governance, aggressive sales, and poor regulatory enforcement have created a trust deficit in the industry.

The Insurance Development and Regulatory Authority (IDRA) is playing a role that helps insurance company owners loot public money. IDRA is going through weak administrators blessed by previous governments and they do not deploy strict rules. Following the August 5 toppling of the Awami League government in a mass-uprising, the sector’s administration even weakened further. The Interim government’s role was not conducive to clients. Meanwhile, a national election held and new government has been formed. The IDRA chairman has resigned and no new chair has replaced him. Under such circumstances, none from IDRA was available for comment.

Life Insurance Failing Its Purpose

Life insurance is meant to provide future financial security, but many policyholders face not only long delays to get claims settled but are in uncertainty about getting back even their principal amounts of money they deposited as premiums over the years. The successful policyholders should have by now spent relatively comfortable time with money they saved over long periods of time. According to Insurance Development and Regulatory Authority data, from 2010 to 2024, life insurance policies declined by 5.4 million. In 2024 companies paid only 8,590.68 crore out of 12,965.74 crore in claims, leaving nearly 34 percent unpaid.

In the first quarter of 2025, out of Tk 6,375.68 crore in claims, only 37 percent were settled. While some companies fully settled claims, the majority failed to meet legal deadlines, leaving policyholders in trouble.

Alike Rahima and Yusuf, thousands highlight a systemic failure in Bangladesh’s life insurance sector. From mismanagement, siphoning of funds, unethical commissions, to weak regulatory oversight, the industry’s promise of security has turned out to be disastrous for thousands of policyholders. They are rather in great economic insecurity as their claims do not come true even after full payment of premiums.  

Unless insurers honour their commitments and regulators enforce solvency and settlement rules effectively, life insurance business in Bangladesh will remain a financial promise that policyholders cannot fully trust.