Insurance firms flout commission ban, poach rivals’ customers

Acknowledging the flouting of the ban by some firms, Sadiq Arman, public relations officer of the Insurance Development and Regulatory Authority (Idra), told TBS that inspection teams were visiting insurance companies to ensure compliance and strengthen monitoring.

Some companies had also been fined for violations, he said, adding that Idra is working to bring all insurers under an integrated information technology system to monitor their business activities in real time, making it harder to conceal information or carry out irregularities.

Under the system, each insurance policy will have a unique identification number, and no company will be able to issue policies outside the designated platform.

“We expect the entire process to come under the automated system by December,” Sadiq said, adding that Idra was also working to integrate the platform with letter of credit operations, banks and other regulatory agencies to improve transparency and accountability.

A private insurance company said it had lost at least Tk13 crore in business after stopping commissions following the regulatory directive as rival insurers allegedly lured away its existing customers with financial incentives.

Reliance Insurance Managing Director Mohammad Khaled Mamun told this newspaper that his company had stopped commission-based business following the ban.

However, customers had informed the company about rival insurers offering commissions, leading some of them 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.

It was difficult to determine exactly how many customers had left because the company was also losing opportunities to secure new business, he added.

Questioning the enforcement of the directive, Khaled said, “If companies continue paying commissions despite the ban, those following the rules will inevitably fall behind in competition.”

Another insurance company’s managing director, speaking on condition of anonymity, warned that commission-driven competition could create risks for customers, particularly when it comes to settling large insurance claims.

He said marine insurance claims could involve substantial amounts in cases such as shipwrecks or damaged cargo. 

The managing director questioned whether smaller insurers accused of offering commissions had sufficient financial capacity to settle large claims.

Customers should assess an insurer’s financial strength, track record in claim settlements and reliability rather than choosing a company based on commission incentives, he said.

Regulatory ban

Under an Idra directive, individual agents have not been allowed to operate in the non-life insurance business since 1 January 2026. Insurers are also prohibited from paying individual agent commissions or providing other financial benefits under the guise of commissions.

On 23 December 2025, Idra issued a circular suspending individual agent licences in the non-life insurance sector.

The regulator said the decision was aimed at protecting policyholders’ interests, strengthening insurers’ financial foundations and safeguarding the broader interests of the insurance sector.

The circular also stated that violations would constitute an offence punishable under Section 58(1) of the Insurance Act 2010.

Industry insiders say multinational insurers are generally less involved in commission-driven practices. Local insurers, meanwhile, have reportedly lost customers, particularly among garment, textile and trading companies that previously purchased policies from them but have since moved to competitors offering commissions.