The Insurance Development and Regulatory Authority (IDRA) has issued a landmark directive banning the use of agents and the payment of agent commissions in the non-life insurance sector, signalling a major shift in regulatory oversight. The decision also introduces stricter rules governing salaries, allowances, and benefits for insurance company employees.
According to an official notification, effective from January next year, non-life insurers will no longer be permitted to conduct business through agents. Consequently, all forms of agent commissions in the sector will be fully abolished.
IDRA emphasised that, under the Insurance Act, 2010, no insurance agent is authorised to pay or receive commission—directly or indirectly—on behalf of any individual or institution. Any contravention of this rule will attract regulatory action.
The regulator also clarified that salaries, allowances, and other employee benefits cannot be determined solely on the basis of collected premium income. With the exception of risk-based investment incentives, all remuneration must align with an insurer’s approved service and investment policies.
Furthermore, all payments—including salaries, allowances, and benefits—must be made through designated bank accounts. Cash payments or other unauthorised methods will be strictly prohibited. Insurers are additionally required to submit quarterly statements in a prescribed format detailing employee remuneration and related payments.
Key Directives by IDRA
| Area | Directive |
|---|---|
| Agent Commissions | Completely prohibited from January; no indirect payments allowed |
| Employee Remuneration | Cannot be based solely on premium collection; must follow approved policies |
| Payments | Must be made through designated bank accounts; cash payments banned |
| Reporting | Quarterly statements on salaries, allowances, and benefits mandatory |
IDRA stated that these measures aim to protect policyholders’ interests, strengthen financial discipline, and enhance governance within the non-life insurance sector.
Rationale Behind the Reform
Industry experts describe this as one of the most significant regulatory interventions in recent years. Excessive reliance on commission-driven sales has historically undermined underwriting discipline, distorted pricing, weakened risk assessment, and delayed claim settlements.
By eliminating agent commissions, IDRA seeks to curb short-term, volume-focused growth strategies and foster a market oriented towards disciplined underwriting and policyholder protection. While the transition may be challenging, particularly for commission-dependent insurers, the reform is widely expected to lay the foundation for a more sustainable, transparent, and policyholder-focused non-life insurance sector in Bangladesh.