The Insurance Development and Regulatory Authority (IDRA) has taken a pivotal step in standardising the determination of Full Insured Value (FIV) in motor insurance, providing greater clarity for both insurers and policyholders. The authority has decided that the showroom invoice price will serve as the basis for FIV calculations for brand-new and reconditioned vehicles.
According to IDRA sources, the decision follows recommendations made at the 187th meeting of the Central Rating Committee held on 9 December 2025, and was formally approved at IDRA’s 193rd governing meeting on 6 January 2026. The authority subsequently issued Circular No. Non-Life 110/2026 to communicate the new directive to stakeholders.
Under the circular, the FIV for brand-new and reconditioned vehicles will now correspond directly to the showroom invoice price. For used vehicles, however, the FIV must be mutually agreed upon by the insurer and policyholder based on prevailing market prices. Importantly, the circular instructs that the calculation of FIV should disregard age-based depreciation outlined in the annual circular issued by the Central Rating Committee under the Insurance Directorate (Circular No. Motor-15/2009, dated 1 November 2009).
IDRA has also formalised the vehicle age-based depreciation rates, which are now as follows:
| Vehicle Age | Depreciation Rate |
|---|---|
| Up to 1 year | 0% |
| Over 1 year, up to 2 | 10% |
| 2–3 years | 15% |
| 3–4 years | 20% |
| 4–5 years | 25% |
| 5–6 years | 30% |
| 6–7 years | 40% |
| Over 7 years | 50% |
Industry experts have welcomed the decision, suggesting that it will eliminate long-standing ambiguities in the determination of FIV, which have often complicated insurance claims. By standardising FIV calculations, the move is expected to enhance transparency in claim settlements, reduce disputes between insurers and policyholders, and strengthen confidence in the motor insurance sector.
Analysts believe that the clear linkage of FIV to showroom prices for new and reconditioned vehicles will also facilitate faster policy underwriting, improve risk assessment accuracy, and provide a more reliable framework for both insurers and consumers when evaluating premiums and claim settlements.
The IDRA directive marks a significant step towards modernising motor insurance practices in Bangladesh, aligning them with international standards while protecting the interests of policyholders.