Govt to reform insurance law to reduce family control
Special Correspondent :
The government is set to bring major amendments to the Insurance Act, 2010 to modernize the 15-year-old legislation and strengthen the Insurance Development and Regulatory Authority (IDRA). The proposed changes aim to reduce family dominance in insurance companies, reform their boards, and introduce stricter penalties for irregularities.
Sources have confirmed that the revised law will significantly enhance the powers of the regulator, IDRA – powers that are currently limited under the existing act. A draft of the new law will soon be published on IDRA’s official website, inviting feedback from the public and stakeholders in the insurance industry.
Key highlights of the proposed amendments:
Power to Dissolve Boards: IDRA will be authorized to dissolve the board of any insurance company if customer interests are compromised. A new board must be constituted within two years.
Limiting Family Ownership: No individual, entity, or family will be allowed to directly or indirectly own more than 10% of shares in any insurance company.
Search and Seizure Powers: IDRA will have the authority to conduct office raids, seize documents, and seek police assistance. It can also sell company assets to settle claims if necessary.
Penalties for Capital Shortfalls: Companies failing to meet capital requirements within the designated timeframe will be barred from selling new policies or collecting premiums. They may face fines ranging from BDT 1 million to BDT 10 million, along with a daily penalty of BDT 50,000.
Loan Restrictions: Directors, shareholders, and their family members will be prohibited from taking loans using the company’s assets as collateral.
Eligibility and Tenure for Directors: Individuals must have at least 10 years of management, business, or professional experience to qualify as a director or chairman. Directors will be allowed to serve a maximum of six consecutive years.
Strict Punishments for Misconduct: Offenses will carry a maximum sentence of two years’ imprisonment or both fine and jail. Currently, the minimum punishment is just a BDT 500,000 fine.
Reduced Agent Commission: First-year commissions on premiums will be reduced from 35% to 25%, while second-year commissions will be increased from 10% to 15%. From the third year onwards, the rate will be fixed at 5%.
Growing concerns in the insurance sector:
In 2024, the claim settlement ratio in the insurance sector was only 57%, meaning that out of Tk 16,484 crore in claims, policyholders received just Tk 9,476 crore. In March this year, IDRA directed six insurance companies to submit special action plans due to ongoing irregularities.
Currently, Bangladesh has 82 insurance companies – 36 life insurers and 46 general insurers. Over the past 14 years, more than 2.6 million insurance policies have been canceled, exposing serious management flaws in the sector.
According to IDRA, unlike the banking sector where the central bank has full regulatory control, the insurance regulator lacks such authority – making reforms essential for sectoral recovery.
Dr. Mahbubur Rahman, Insurance Regulatory Expert & Former IDRA Advisor stated that “The proposed amendments are a long-overdue step toward restoring trust in the insurance sector. Family control has long been a root cause of mismanagement and conflict of interest in many companies. Giving IDRA greater enforcement power is essential if we want meaningful reform.”
Dr Md Omar Faruque, Associate Professor at Finance Department of Jagannath University, told The New Nation that “This initiative signals a shift toward aligning Bangladesh’s insurance laws with international best practices. Regulatory empowerment, if implemented fairly and efficiently, could improve capital adequacy, reduce fraud, and attract foreign investment in the long run.”