Insurance Policy Lapses Decline but Trust Remains Fragile
The number of policyholders failing to pay their insurance premiums on time declined in 2024 from the previous year, but the rate of discontinued policies remains high, reflecting fragile customer confidence in the local insurance sector.
In 2024, 1.249 million policies were discontinued — a 19% drop from 1.542 million across 36 life insurance companies in the previous year, according to the Insurance Development and Regulatory Authority (Idra).
Astha Life Insurance reported no lapsed policies last year. In contrast, Sonali Life Insurance recorded the highest number of policy lapses, with 237,000 customers abandoning their coverage. Delta Life Insurance Company, Popular Life Insurance, National Life Insurance, and MetLife Bangladesh followed closely behind, according to Idra.
Reasons Behind Policy Lapses
A lapse usually occurs when a policyholder fails to pay premiums on time, resulting in the termination of coverage. The reasons, according to sector people, are often tied to affordability, misleading advice from agents, and broader regulatory issues. When a company’s condition deteriorates due to corruption or irregularities, customers lose confidence, according to Md Solaiman, deputy director of Idra’s non-life department and the regulator’s acting spokesperson.
“As a result, many choose not to continue their policies,” Solaiman said. Customers often forget to pay their premiums on time, while companies also do not send timely reminders. “Because of this, many policies become void,” he added.
Fragile Confidence in the Insurance Sector
On average, nearly half of life insurance policyholders in Bangladesh stop paying premiums after the first year, according to Idra data. This contrasts sharply with global figures, where 96% to 98% of policyholders maintain coverage. Neighbouring India’s lapse rate stands at around 10%.
Experts attribute the disparity to stronger oversight and enforcement in developed markets. “Lapsed policies are harmful to both customers and insurers,” said SM Ibrahim Hossain, director of the state-run Bangladesh Insurance Academy. “Customers lose a financial safety net, and insurers suffer revenue losses along with damage to trust and stability.”
Customer Engagement as a Solution
Several insurance companies are working to reduce lapses through customer engagement. Guardian Life Insurance reported 18,579 lapses in 2024 but managed to reactivate more than 14,500 policies through grace periods, policy loans, and outreach support. MetLife Bangladesh proactively reminds customers via SMS, phone calls, and their app, offering flexible solutions to retain coverage.
Idra Spokesperson Solaiman emphasized the regulator’s concern about policy discontinuation. “Rising policy lapse rates are eroding public trust and dragging down insurance penetration in Bangladesh,” he said. From 2009 to 2023, over 2.6 million life insurance policies lapsed, according to Idra figures. The total number of active policies fell from nearly 11.2 million in 2009 to just 8.588 million by 2023.
