The rate of insurance claim settlement in Bangladesh has been declining steadily. By the end of 2025, the volume of unsettled claims in the insurance sector had reached nearly BDT 80 billion. Of this, 33 percent of claims in the life insurance sector and 71 percent in the non-life insurance sector remained unsettled. The declining settlement rate has emerged as a major concern for the entire financial sector, further deepening the crisis of public confidence in the industry.
Despite the insurance sector controlling only a small share of the total assets within the country’s financial system, its role in long-term capital formation and mitigating macroeconomic risks is highly significant. Due to a growing trust deficit, the sector’s position continues to deteriorate. The claim settlement rate in the non-life insurance sector stood at 41.35 percent in 2023, according to Bangladesh Bank’s Financial Stability Report 2025. By the end of 2025, it had declined further to 28.51 percent. Similarly, the claim settlement rate in the life insurance sector fell from 72.43 percent in 2023 to 66.54 percent by the end of 2025.
The volume of unsettled claims in the life insurance sector reached BDT 44.03 billion at the end of 2025, according to unaudited statistics from the Insurance Development and Regulatory Authority (IDRA). In the non-life insurance sector, unsettled claims amounted to BDT 35.09 billion during the same period. Combined, the total volume of unsettled claims across the insurance industry stood at BDT 79.12 billion.
Despite the average claim settlement rate in the life insurance sector being comparatively higher, there are significant statistical differences among companies. While a handful of leading insurers settle claims on time, liquidity shortages at several large and financially distressed companies have left thousands of policyholders waiting years for their claims to be paid. The total number of unsettled policies in the life insurance sector stood at 1,185,516, according to IDRA’s unaudited data. But nearly 90 percent of the massive backlog of unpaid claims is concentrated in just five troubled insurance companies. This situation has further eroded policyholders’ confidence in the sector.
Historically, claim settlement rates in Bangladesh’s non-life insurance sector have remained low. Commercial claims are often not settled on time due to complex legal procedures, lengthy fraud detection processes, and delays in surveyor assessments. Business risks for the country’s productive sectors are consequently increasing. In 2025, only BDT 11.69 billion was settled against total claims of BDT 46.79 billion in the non-life insurance sector. Of this amount, the state-owned Sadharan Bima Corporation alone managed to settle only about BDT 3 billion against claims worth BDT 24.86 billion, representing a settlement rate of just 12 percent.
Nasir Uddin Ahmed Pavel, vice chairman of Meghna Life Insurance and Karnaphuli Insurance PLC, told Bonik Barta, “The claim settlement rate in the non-life insurance sector appears worse in the statistics than it actually is. This is because the IDRA begins counting time from the moment a claim is filed. But obtaining the necessary documents, particularly fire service reports or surveyor reports, often takes more than 90 days, which is beyond the control of insurance companies. So the statistics don’t fully reflect the actual situation. Another important issue is that, in many cases, settlement ratios in non-life insurance are calculated based on the number of claims rather than the monetary value involved. Recovery from Sadharan Bima Corporation for large claims also takes a long time, which is one of the key reasons behind delays in claim settlement. The nature of the problem is different in life insurance. The poor performance of a few large and weak companies is dragging down the industry-wide average settlement ratio. There are several companies whose claim settlement rates exceed 90–95 percent.”
The central bank’s report also highlights the adverse impact of the country’s broader macroeconomic challenges on the insurance sector. In recent years, high inflation and rising living costs have directly affected people’s surplus savings. As inflation has reduced the propensity to save, growth in first-year premium income in the life insurance sector has slowed. The rate of policy maturity renewals and premium renewals for existing policies has also declined, hindering the sustained growth of life insurance funds.
The non-life insurance sector is closely linked to industrial production, import-export trade, and large-scale infrastructure projects in Bangladesh. Due to the ongoing dollar shortage and import restrictions, the collection of gross premiums from fire, marine, and motor insurance has stagnated and grown more slowly.
A substantial portion of insurance companies’ funds is invested in the country’s economy and money market. But returns on investments have also declined in recent years. Under the Insurance Act, life insurance funds and non-life insurance companies are required to invest a specified percentage of their assets in government securities or treasury bonds. Even though higher interest rates have improved returns from bonds, these investments are not fully meeting the companies’ immediate liquidity needs.
A large share of the insurance sector’s total investments is held as fixed deposits (FDRs) in commercial banks. In recent years, severe liquidity shortages and irregularities in several banks have left millions of taka in FDRs belonging to several insurance companies effectively frozen. Consequently, even when companies wish to withdraw funds from banks to settle policyholders’ claims, they are unable to do so. This situation creates a systemic liquidity risk within the insurance sector.
Insurance companies have also incurred significant capital losses in their portfolios due to declining share prices in the stock market, as well as the prolonged impact of floor prices and sluggish market conditions.
Professor Dr Md Main Uddin of the Department of Banking and Insurance at the University of Dhaka told Bonik Barta, “There are several major reasons behind the decline in insurance claim settlement rates. First, the insurance sector has a prolonged crisis of confidence, resulting in weaker policyholders’ retention. Second, the financial capacity of insurance companies largely depends on how effectively collected premiums are invested. In many cases, however, fund misappropriation or weak investment management undermines that capacity, directly affecting claim payments. There’s also a tendency in some cases to deliberately delay claim settlements. IDRA’s weak supervision and oversight have further exacerbated the problem. The government, too, tends to give relatively less priority to the insurance sector, allowing those responsible for irregularities to evade accountability.
“In the non-life insurance sector, claim settlements may take longer because of delays in getting required documents and settling reinsurance claims. But such external complications are comparatively less in life insurance. So, a decline in claim settlement rates in the life insurance sector is often indicative of negligence, weak management, or misuse of funds. In short, while both sectors face certain structural challenges, the primary reasons behind the deterioration in claim settlement performance are deficiencies in governance and financial weakness.”
A company’s ability to absorb the impact of a sudden major disaster or large claim payout is measured through its solvency margin. Due to excessive management expenses and sluggish premium income growth, the solvency margins of many insurance companies have fallen below the legally required threshold.
Insurance companies in the country also have limited risk-retention capacity to absorb large industrial or marine risks domestically. Consequently, they are excessively dependent on the state-owned Sadharan Bima Corporation and international reinsurance companies, which places additional pressure on foreign exchange outflows.
The lack of public confidence has also continued to constrain insurance penetration in the country. Insurance penetration stood at 0.42 percent in 2021. Since then, it has declined consistently each year, reaching 0.34 percent by the end of 2025. Bangladesh also lags significantly in terms of insurance density. At the end of 2025, gross premium per capita stood at only BDT 1,084.
Mohammad Abu Bakar Siddique, a member of IDRA, told Bonik Barta, “A major reason for the decline in the overall claim settlement rate in the life insurance sector is that a handful of troubled companies are dragging down the industry average. In particular, the large volume of outstanding claims held by a few major insurers is negatively affecting the sector’s overall statistics. But the condition of most life insurance companies remains relatively stable. The situation in the non-life insurance sector is somewhat different. Claim settlement is measured in two ways — by the number of claims and by their monetary value. While the settlement rate is comparatively better in terms of the number of claims, it falls significantly when measured by value, especially for large claims. One of the primary reasons is dependence on reinsurance. Private non-life insurance companies in Bangladesh are required to reinsure with Sadharan Bima Corporation. But because many companies have overdue premium payments, recovery of large claims is often delayed, which in turn delays settlements at the customer level.”
“Another factor is the prevalence of unethical commission-driven business practices, which have weakened the non-life insurance sector. Such practices undermine the financial foundations of insurance companies and reduce their ability to pay claims. The low claim settlement rate is a matter of serious concern for the insurance industry because it further erodes public confidence and hampers the expansion of insurance coverage in the country,” he further said.
“For this reason, the regulator is working continuously with troubled companies. But improvements aren’t occurring as quickly as desired due to the broader economic slowdown and the large number of financially weak insurers,” he noted.