Trust building in insurance system imperative for economy
Staff Reporter :
Why trust is failing to develop in Bangladesh’s insurance system has become a pressing question for everyone—from regulators to customers. Experts say this crisis did not emerge overnight; rather, it is the result of years of accumulated structural and policy failures.
According to them, the primary reasons behind the severe trust deficit in the insurance sector include long-standing delays and complexities in claim settlement, opaque and misleading policy terms, weak corporate governance within insurance companies, and large-scale corruption and irregularities involving crores of taka.
Without digital claims, a central database, and e-KYC, a modern insurance system is effectively dysfunctional. In the case of a central database and digital claims, a clear lack of coordination is evident. Customers widely believe that insurance does not actually pay out money.
Under these circumstances, sweeping reforms in the insurance sector are being urged to overcome this crisis of mistrust. Without giving the highest priority to policy decisions, sustainable change in this sector will not be possible.
Recently, speaking to the media about the challenges facing the country’s insurance sector and the importance of the industry to the economy were Dr. M. Aslam Alam, Chairman of the Insurance Development and Regulatory Authority (IDRA); economist (FSA, FLMI) and Deputy Managing Director of LabAid Group, Sakif Shamim; and banker and economic analyst Mamun Rashid.
According to them, the first and most important issue is to firmly establish claim protection as a legal right. Without enforcing fixed timelines for claim settlement, automatic penalties, and provisions for customer compensation, restoring trust will not be possible.
Unless customers are placed at the center, insurance can never become a trust-based sector. The regulator must visibly and exemplarily enforce governance. If rules are violated, swift and strict punishment must be ensured—this may include license suspension, changes to boards of directors, or even exit from the market.
Such actions will clearly distinguish good institutions from bad ones and restore discipline in the market. In addition, it is essential to build professional human resources and technology-based infrastructure.
Without making risk-based underwriting, digital claims, a central database, and e-KYC mandatory, the insurance sector cannot become part of a modern financial system.
They further emphasize that to pull the insurance sector out of crisis and place it on a path of sustainable development, it is extremely urgent to enforce the relevant laws without delay.
Digitalization will play a crucial role in enhancing transparency, accountability, and customer trust in the insurance sector.
Dr. M. Aslam Alam stated that the shortage of trained and professional human resources is a major challenge in the insurance sector, and there are controversies regarding the top-level qualifications of senior executives; therefore, emphasis must be placed on developing skilled manpower.
He also noted that due to limited authority, IDRA is unable to take adequate measures to prevent corruption and fraud—this lack of power creates obstacles to preventing and controlling insurance evasion. He added that in the face of increasing risks caused by climate change, building strong social protection and a sustainable insurance system is critically important.
Sakif Shamim said, “Insurance exists, but trust does not—can sustainable development be achieved without health insurance, the silver economy, and pensions?” He explained that although the insurance sector in Bangladesh has existed on paper for many years—with laws, institutions, and a growing realization of its necessity—it has still failed to become a symbol of trust in the lives of ordinary people. Strong policy reform and digital transformation in the insurance sector are indispensable. From policy issuance to claim settlement, every step must be transparent, time-bound, and technology-driven.
He further added that according to World Bank statistics, in developed countries the insurance sector contributes an average of 7–12 percent to GDP, whereas in Bangladesh this figure is still only around 0.4–0.5 percent—far below even genuine mid-level markets by global standards.
In the context of healthcare expenditure, the country is facing a serious crisis. Recent data show that more than 80 percent of healthcare spending in Bangladesh is paid directly out of people’s own pockets, which not only causes economic hardship but also increases the risk of poverty.
Mamun Rashid said that Bangladesh’s insurance sector has long been described as a “sector in crisis of trust.” This situation did not arise suddenly; it is the outcome of years of accumulated structural and policy failures. The root of mistrust begins with weak claims management.
When a customer pays premiums regularly but still does not receive claim payments within a reasonable timeframe, it is not merely a failure of a single institution—it damages the credibility of the entire sector.
In practical terms, Bangladesh’s current insurance products are unable to adequately meet the country’s real needs, particularly in critical areas such as health insurance, pensions, and agricultural insurance.