Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
The country's insurance sector is in a deep crisis as insurance companies have exploited the public over the past 15 years, while the regulatory authority has remained ineffective due to a lack of enforcement power, according to the chief of the insurance regulator.
To bring discipline to the insurance sector, the regulatory body must be significantly empowered.
Chairman of the Insurance Development and Regulatory Authority (IDRA), Dr M Aslam Alam, said, “A few days ago, the Governor of Bangladesh Bank stated in the media that the banking sector is on the brink of disaster. However, I believe the insurance sector is facing an even deeper crisis.”
“The misdeeds in the insurance sector over the past 15 years have led to this crisis. The previous regime granted insurance company licenses with the intent of exploiting the public. Those involved systematically looted people’s money under the guise of business,” he added.
Dr Aslam Alam also said the Insurance Development and Regulatory Authority (IDRA) has been unable to prevent these irregularities because it operates with very limited or almost no authority. The minimal power that IDRA does possess is nearly impossible to enforce.
He made these remarks while addressing a seminar titled “Insurance Sector Reforms and Our Responsibilities” as the chief guest on Wednesday (March 12) at the IDRA office.
The seminar was jointly organised by the Insurance Development and Regulatory Authority (IDRA) and the Insurance Reporters Forum (IRF).
Presided over by IRF President Gazi Anwar, the seminar featured two research papers.
The paper on the life insurance sector was presented by Md Jalalul Azim, Managing Director & CEO of Pragati Life Insurance, while Brigadier General Shafique Shamim, Managing Director & CEO of Sena Kalyan Insurance, presented a paper on the non-life insurance sector.
The event was attended by IDRA members, CEOs of life and non-life insurance companies, and journalists covering the insurance sector.
Dr Aslam Alam criticised the Insurance Act, calling it highly flawed, and argued that it was designed in favour of insurers by weakening IDRA. He noted that when IDRA suspends an entity, they often obtain a stay order from the court and continue operations. Therefore, extensive empowerment of IDRA is necessary.
Dr Aslam Alam said, “IDRA faces significant limitations in its authority. For example, my first case after joining IDRA involved Sonali Life Insurance. To address the issue, we appointed an administrator, but the company’s owner challenged our decision in court. As a result, a stay order was issued, preventing the administrator from carrying out their duties.”
“Under existing laws, IDRA does not have the power to restructure the board—we can only suspend it. However, once the suspension is lifted, the same board members return and overturn all reforms made by the administrator. Additionally, IDRA lacks the authority to remove the chairman or directors or even approve board appointments.
In the banking sector, the central bank must approve the appointment of a chairman, but IDRA has no such authority over insurance companies. We also lack the power to approve independent directors,” he added.
“The Insurance Act of Bangladesh is fundamentally flawed. It was designed to favour insurance businesses rather than empower the regulatory authority. The law has intentionally weakened IDRA, making it difficult to enforce regulations,” he said.
“Almost every decision made by IDRA is challenged in court, and the opposing parties frequently obtain stay orders against our rulings. When we appoint administrators, the affected parties secure stay orders. If we suspend a board, the very next day, they obtain a court order reversing our decision.
Without the ability to exercise regulatory power, the consequences are obvious. The current crisis in the insurance sector is a direct result of these limitations,” said the IDRA chairman.
“If we truly want to change the situation, IDRA must be empowered, and a proper regulatory environment must be established, allowing it to enforce its authority effectively. Otherwise, any power granted to IDRA will be meaningless,” said the IDRA chair.
He emphasised that accurate information is essential for decision-making, but insurance companies are often reluctant to provide correct data. He also raised concerns about the authenticity of the data they submit, questioning whether it is fabricated. According to him, digitalisation could eliminate 85 per cent of irregularities and corruption. “We take initiatives, but cooperation is often lacking,” he added.
Speaking about the Insurance Management System (IMS), formerly known as UMP, Dr Alam mentioned that it currently provides ten essential services for monitoring insurance companies. If complete and accurate data is fed into IMS, IDRA will be able to function effectively. However, the newly formed committee of the Bangladesh Insurance Association (BIA) has stated that they will not cooperate in implementing this system.
Dr Alam further stated that apart from digitalisation, an adequate workforce is also essential. However, IDRA is currently operating with a limited number of staff and inadequate technology. Despite these challenges, efforts are underway to develop the insurance sector, but change will take time and cannot happen overnight.
Regarding outstanding insurance claims, he mentioned that IDRA lacks the authority to liquidate major shareholders’ assets to settle claims, which necessitates legal proceedings. Several cases in this regard are already ongoing. He added that if unresolved claims are not settled, public trust in the insurance sector will not improve. He stressed that establishing good governance is essential to restoring confidence in the industry.