Despite existing laws and regulatory frameworks, recent incidents in Bangladesh’s insurance sector have highlighted fundamental weaknesses and ongoing challenges, particularly in the life insurance domain where allegations of irregularities have been on the rise.
Currently, insurance fraud is primarily addressed under the Insurance Act 2010 and the Penal Code 1860, with the Insurance Development and Regulatory Authority (IDRA) serving as the chief regulatory body.
Under Section 130 of the Insurance Act 2010, any individual or institution found providing false information or submitting fraudulent documents in insurance-related activities may face a maximum fine of 5 lakh taka, up to three years’ imprisonment, or both. Administrative penalties imposed by IDRA range from 1 lakh to 10 lakh taka for violations such as issuing policies without approval, delaying claim settlements, or failing to follow regulatory procedures.
Meanwhile, the Penal Code 1860 prescribes stricter criminal provisions for fraud. Fraud under Sections 415–420 carries up to seven years’ imprisonment and fines, document forgery under Sections 463–465 up to two years, and accounting fraud under Section 477A also up to seven years with fines. Additionally, offences involving illicit financial transactions may fall under the Anti-Money Laundering Act 2012.
Recent media reports and sector sources have flagged cases involving private life insurance companies accused of misappropriating or unapproved utilisation of policyholders’ funds. In response, IDRA has intensified oversight and imposed fines in some instances; however, experts argue that the current penalties are insufficient to deter large-scale financial fraud.
To strengthen governance and accountability, IDRA is considering several reform proposals, including:
- Seizing personal assets of directors involved in proven fraud
- Enhancing consumer protection mechanisms
- Expanding regulatory authority and powers
- Increasing the severity of penalties for violations
These proposals remain under review by stakeholders as of mid-March 2026.
Comparative Overview of Penalties in Insurance Fraud
| Legal Provision | Type of Offence | Maximum Penalty |
|---|---|---|
| Insurance Act 2010, Sec. 130 | False information / fraudulent documents | 5 lakh taka fine, 3 years imprisonment, or both |
| IDRA Administrative Penalties | Policy issuance without approval, claim delays, non-compliance | 1–10 lakh taka fine |
| Penal Code 1860, Sec. 415–420 | Fraud | 7 years imprisonment + fine |
| Penal Code 1860, Sec. 463–465 | Document forgery | 2 years imprisonment |
| Penal Code 1860, Sec. 477A | Accounting fraud | 7 years imprisonment + fine |
| Anti-Money Laundering Act 2012 | Illicit financial transactions | Penalties per Act |
Analysts emphasise that restoring confidence in the insurance sector requires more than law enforcement alone. Effective reforms, regular oversight, and technology-driven monitoring systems are essential to overcome structural weaknesses and ensure transparency and accountability in the long term.