Bangladesh insurers ignore commission ban to poach customers
Bangladesh’s insurance sector is quietly undermining a regulatory ban on agent commissions, with insurers allegedly continuing to offer financial incentives to poach customers from competitors that have complied with the rules.
The Insurance Development and Regulatory Authority (Idra) banned commissions for individual agents in the non-life insurance sector, citing risks to policyholders and sector stability. Sources say most of the 46 non-life insurers operating in the country allegedly continue paying commissions or other financial incentives.
Compliant insurers are losing customers to rivals offering financial incentives. Reliance Insurance says it lost Tk13 crore in business after stopping commissions following the regulatory directive. The company’s managing director, Mohammad Khaled Mamun, told a newspaper that customers had informed them about rival insurers offering commissions, leading some to switch providers, particularly in marine insurance. He said the company’s business had declined by around 10% and it typically generates Tk400-500 crore in business per quarter.
Idra is conducting inspections and fining companies violating the commission ban. Sadiq Arman, the regulator’s public relations officer, said inspection teams were visiting insurance companies to ensure compliance and strengthen monitoring. Insurers allegedly continue paying commissions despite Idra’s regulatory ban, he acknowledged, adding that a new automated system aims to monitor insurance policies and prevent irregularities by December.
Under the system, each insurance policy will have a unique identification number, and issuance will be restricted to a designated platform. Idra plans to integrate the system with banks and letter-of-credit operations to improve transparency.
Industry insiders say compliant insurers are at a competitive disadvantage, losing existing customers and struggling to secure new business. An anonymous managing director warned that commission-driven competition could create risks for customers, particularly when settling large claims. The managing director questioned whether smaller insurers accused of offering commissions had sufficient financial capacity to settle large claims.
Idra’s directive suspended individual agent licenses and prohibited insurers from paying commissions or providing financial benefits. Violations are punishable under Section 58(1) of the Insurance Act 2010. Industry sources indicate that local insurers have lost customers to competitors offering commissions, particularly among garment, textile, and trading companies.
