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Executive Summary

Insurance is not a new business in Bangladesh. Almost a century back, during British rule in

India, some insurance companies started transacting business, both life and general, in Bengal.

After independence of Bangladesh, insurance industry was nationalized. Subsequently through

the enactment of Insurance Corporation Act VI, 1973, two corporations namely Sadharan Bima

Corporation (SBC) for general insurance and, Jiban Bima Corporation for life insurance were

established in Bangladesh.

Insurance is basically a contract between two parties. An insurer is a company selling the

insurance; an insured orpolicyholder is the person or entity buying the insurance policy. All

types of policies issued by a life company or by the life branch of a composite company whichare Personal accident and sickness insurance, ordinary life insurance, industrial life assurance,

annuity etc.

We have discussed about contribution of insurance industry of our country.

We can realize that the policy makers within the government and the insurance company should

adopt effective measures in order to make good use of the opportunities and to tackle the threats

for ensuring a healthy development of the insurance industry.

So if we develop economic condition as well as overcome the problems, it will help a lot to

flourish this business in our country.

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Chapter: One

Introduction

Origin of the report

This report is generated under the academic supervision of our course teacher FAHIM

MUNTAHA , Department of BBA, ASA University of Bangladesh. This report is prepared as

the requirement of Business Finance course. The topic is Contribution of insurance industry

in Bangladesh cover

Methodology

The data the project report contains is all secondary data. The secondary data was collected from

the internet, books, journals, magazines and newspapers.

Secondary data are those data that have already been collected by someone else and have already

passed through the statistical process. The secondary data is the type of data chosen by us.

Key Parts of the report

The main view of the report is to identify the impact of macro-environment forces on the

pharmaceutical industry to launch a new product. We focused on Life insurance trend in

Bangladesh and contribution of insurance industry of our country.

Objectives of the report

Broad Objectives: The main objective of the study is to evaluate the Practical trend of

contribution of insurance company in Bangladesh.

Specific Objectives:

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To be acquainted with the Insurance Company.

To learn clear knowledge of Life insurance.

To learn about the process of insuring life.

To have the practical knowledge of theoretical knowledge of Insurance.

Scope

In this report, at first we cover the preliminary concept of insurance. Then we go for the trend of

this insurance in our country.

Limitations

There were certain limitations of the problem we face both in report preparing analyzing.

Unavoidable conditions:Some of the unavoidable conditions also had a deterring effect on preparing the report.

Restrictions that we faced:Lack of information, lack of technology etc. are the restrictions within the problem.

Lack of proper information in the websites of the insurance company.

Lack of necessary information in the journals and official publications of insurance

companies.

Inexperience and time constraint is the limitation restricting this report from being more

detailed.

Secondary data has been collected from the hand books, magazines, which may biased to

the insurance business.

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Chapter: Two

Brief Discussion Regarding Insurance

Introduction

Insurance is basically a contract between two parties. Insurance, in law and economics is a form

of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in

exchange for payment.

An insurer is a company selling the insurance; an insured or policyholder is the person or

entity buying the insurance policy. The insurance rate is a factor used to determine the amount

to be charged for a certain amount of insurance coverage, called the premium. Premium is also

known as the consideration which the insured has to pay to the insurer for the protection given to

him. Risk management, the practice of appraising and controlling risk, has evolved as a discrete

field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in

the form of payment to the insurer in exchange for the insurer's promise to compensate

(indemnify) the insured in the case of a large, possibly devastating loss. The insured receives a

contract called the insurance policy which details the conditions and circumstances under which

the insured will be compensated.

There are many other important concepts regarding insurance. These are Re-insurance, annuity;

surrender value, paid-up value, bonus, valuation etc.

Principles of insurance

Insurance is based upon the two following principles:

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1. Principles of co-operation

In insurance the loss is shared by a group of people who are willing to co-operate.

2. Principles of probability

The loss in the shape of premium can be distributed only on the basis of theory of probability.

The probability tells what the chances of losses are and what will be the amount of losses.

Insurance of the person

All types of policies issued by a life company or by the life branch of a composite company

come up under the heading of Insurance of Person.

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Personal accident and Sickness Insurance

This type of insurance scheme ensures a financial benefit arising out of accidental death or

bodily injury or specific diseases or all sickness to the insured. Different policies are:

Accident only policy

Accident & specific diseases policy

Accident & all sickness policy

Coupon schemes

Group schemes

Permanent contracts

Accident only policy

This is the most basic type of policy providing cover against accidental death or bodily injury to

the insured and also provides benefits in respect of temporary total or temporary partial or

permanent total or partial disablement of the insured arising out of accident. The usual scales of

benefit are:

Death Sum insured

Loss of two limbs or two eyes Sum insured

Loss of one limb or one eye 50% of the sum insured

Permanent total disablement Sum insured

Permanent partial disablement A percentage of the sum insured

Temporary total disablement Weekly benefit at a rate percent of sum

insured

Temporary partial disablement Weekly benefit at a reduced rate

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percentage of the sum insured than in

Accident & Specified Disease Policy

This is primarily an accident only policy and, therefore, covers all the items as mentioned there

under. In addition, weekly benefits are also available in respect of temporary total disablement

arising out of certain specified diseases. These policies are losing their popularity because of the

introduction of all sickness policy.

Accident & All sickness policy

This is also primarily an accident only policy but covers, in addition thereto, weekly benefits in

respect of temporary total disablement arising out of all or any kind of sickness. This policy is

wider than accident & specified disease policy in that it covers all sickness rather than

specified sickness only.

Coupon Schemes

Quick covers are arranged in this manner at airports so that it can be secured immediately and

without formality before going on a journey by air.

Group Schemes

Rather than taking individual policies by each member of a working group, cover may be

obtained by all members in one policy. A discount is usually allowed where all the employees of

a firm or the members of a club or organization are insured in this way

Permanent Contracts

Normal personal accident policies are insured for a year or sometimes only for a journey.

However, policies may also be taken for a consecutive number of years until the insured reaches

a particular age. Provided the premiums are paid regularly and conditions observed by the

insured, such policies cant be cancelled by the insurers until the stipulated period. Such

contracts are known as permanent contracts. Benefits are same as accident only policies,

accident & specified diseases policy, accident & all sickness policy.

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Ordinary life assurance

Various types of policies or schemes are available under the heading of ordinary life assurance.

Basically there are three types of covers and rests of the schemes are primarily the mixture or

modification of these three.

The three basic covers:

Term or Temporary Assurance

This is the oldest and simplest form of life assurance cover. The policy is issued for a certain

term or period. The contract provides that the sum-assured under the policy shall be paid only if

the life-assured dies within the period mentioned in the policy. Nothing is payable if the assured

survives this period, and the contract comes to an end. As the risk element is less in comparison

to other types of policies, this is the cheapest form of life cover available.

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This type of policy is of particular advantageous to:

Cover a debt or loan by affecting a policy, either by the creditor on the life of debtor, or

by the debtor on his own life to the extent of the loan for a period or term corresponding

the loan repayment period. The debtor will repay the loan in the usual way as per loan

agreement. Only if he dies during the period, ie., within the term period of the policy,

then policy money becomes available for loan repayment. Policy may be arranged on

decreasing-term basis also.

Businessmen or persons going abroad for short trip.

Young person or persons of lower income group who want to have a life cover but can

not pay higher premiums for other types of comparatively costly policies.

Whole Life Assurance

Under such type of policies assured sum is payable only at the death of the life assured,

whenever such death might take place. Premium is usually payable throughout the life span of

the life assured. However, arrangements may be made for the payment of premium up to a

certain selected age, where after the premium payment ceases, but the policy continues until the

death of the life assured when the sum assured is paid to the legal personal representatives of the

deceased. As the policy assures a capital sum payable at death whenever it might take place, such

a policy is comparatively a bit costlier than the term assurance. The policy is very much helpful

for those who have got dependent relatives and for whom the assured wants to make future

provisions on his death for a substantial amount with the premium available. This type of policy

is comparatively cheaper than the endowment assurance but costlier than the term assurance.

Pure Endowment Assurance

Under this type of policy the sum-assured is payable only if the life-assured survives a stipulatedperiod mentioned in the policy. Nothing is payable if the life assured dies during the specified

period. As the possibility of claim payment is less since there will be no payment if the life

assured dies within the specified period, the premium is also negligible like term assurance.

Usefulness

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The person forming a capital

Unable to afford costlier policies

Do not have dependents.

Other types of cover/schemes

Endowment assurance

Decreasing term

Convertible term

Family income policy

House purchase scheme

Group life assurance

Group pension scheme

Joint life assurance

Juvenile policies

Educational policies

Marriage policies

Childs deferred assurances

1) Endowment Assurance

Endowment assurance is virtually combination or mixture of term assurance and pure

endowment. Under this type of policy sum assured is payable either at death of the life assured or

maturity of the policy whichever is earlier. This is a term or period mentioned in the policy..

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Normally it varies from 15, 20, 25, 30 years to be decided by the insured. If the life assured dies

within this period the policy money immediately becomes payable. If the life assured does not

die during this period the sum assured is payable on maturity, that is, on the expiry of the period.

This means that a claim is a must under this policy irrespective of life insureds death or survival.

This type of policy is indeed combination or mixture of term assurance and pure endowment

assurance since this policy secures a capital sum either at death during the period mentioned in

the policy( element of term assurance) or on survival of the period (element of pure endowment

assurance).

This policy is costlier in comparison to term assurance, whole life assurance or pure endowment

assurance since a payment is ensured either at maturity or at death prior to maturity.

Such policies are particularly advantageous where-

The assured has the means to pay a bit higher premium,

The assured wants to provide some financial benefits for his dependents in case of his

premature death,

The assured wants to secure a capital sum at a particular time

The assured wants to secure a pension or augment pension by purchasing an annuity withthe money available from the policy,

The assured wants to secure a loan or mortgage,

The assured wants to provide for his childrens education or marriage expenses

The assured wants to make a good investment and at the same time wants to get life

cover.

Endowment assurance policies are becoming very popular now-a-days forming a major portfolio

of a life branch or life office.

2) Decreasing term assurance:

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This is basically a term assurance with the only difference that under this policy the sum-assured

gradually reduces every year, at a predetermined rate, throughout the duration of the policy.

Policy is arranged in such a way that because of the reduction factor there remains no sum-

assured under the policy at the expiry of the term. If the life assured dies any time within the

term period then only the balance sum-assured is payable under the policy. For example, if a

policy is taken out for tk. 1000 for a term of 10 years, decreasing each year at the rate of tk. 100,

and if the insured dies after 3 years of effecting the policy then only tk. 700 will be payable as

that will then be the sum-assured remaining on the policy.

These policies are particularly useful for securing a loan, repayable over a period of years at a

certain rate per year. The policy is arranged linking up the loan repayment period, and the

decrease in the sum-assured is made corresponding to loan repayment installment. If the assured

dies any time within the term, the balance sum-assured is available for repayment of the balance

loan still unpaid.

3) Convertible term:

This is also basically a term assurance with the only difference that at a later predetermined date

(within the term period) the policy may be convertible into either whole life or endowment. If it

is not convertible at the option date, the policy remains a simple term assurance and comes to an

end at the expiry of the term. If the assured survives the period nothing is payable and if the

assured dies within the period full sum assured is paid.

The advantages of a convertible term assurance are:

The assured enjoys a relatively higher cover during the early years of assurance at a

lower premium.

He has the option to convert the policy into whole life or endowment when his premium

paying capacity increases.

At the time of conversion no further medical examination is required.

The premium is calculated on the basis of the age at entry.

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5) House purchase scheme:

It is issued when houses are purchased by obtaining loans and mortgaging the houses to the

creditor. If the mortgagor dies this policy repays the remaining loansIt is a decreasing policy

which decreases with the rate of debt repayment.

6) Group Pension Scheme

This scheme secures pension for individual employees from time of retirement. It depends

directly on salary and rate increases as the salary increases.

7) Joint Life Assurance

More than one life is assured under each policy. Sum-assured may be payable in various ways

like- a) on the death of the first life. b) on the death of the last survivor. c) on the death of a

specified life, if the death takes place during the life time of another.

8) Juvenile Policies: Various types of schemes are available under this:

1. Educational Policies: This policy aims at providing childs educational expenses at

different stages benefitting the need. It starts from the maturity date of the policy and the

amounts become available throughout the duration of the education period.

2. Marriage Policies: This policy aims to provide financial support for the parent at the

stage of childs marriage. It matures at a time when the child reaches the marriage age

and money is required to defray such expenses.

3. Childs Deferred Assurances: It usually takes out a policy by the parent for a period

expiring on the selected date that is the day when the gift is intended to be made.

Industrial Life Assurance

Industrial life assurance does not fall in the category of normal life assurance business. In our

country, industrial life assurance has not yet made any entry into the market. But it has a bright

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prospect here. Industrial life assurance basically evolved as a result of necessity arising out of the

socio-economic effects of the Industrial Revolution of the 19 th century. Industrial revolution and

automation made laborers to overcrowd the cities. Their future financial security lead and their

failure to pay annual, half-yearly or quarterly premiums lead to modern industrial life assurance.

Basis of Industrial Life Assurance

It is based on the same assurance principles as applicable to ordinary life assurance. Sometimes

some minor modifications are made in some special cases.

The usual types of policies are not varied like ordinary life assurance and are mostly limited to

whole life and Endowment assurances, even though Childrens Endowments are also

occasionally issued. The major portfolio mainly covers endowment assurances.

Basic Characteristic: Basic characteristics of industrial life assurance are given here:

Premium is required to be collected from the homes of the policy holders, by the

representatives of the insurers

Such collection of premium has to be at more frequent intervals, usually weekly,

fortingly or at best monthly

Average sum-assured is very small in comparison to ordinary life business

The simple system and procedure of industrial life assurance brings life cover to those

who, by reason of their circumstances, would not normally be interested in carrying life

assurance cover.

Policies may be affected on the lives of parents, step-parents and grandparents. It is not

possible under ordinary life assurance for a man to have a policy on the life of his parent,

step-parents or grandparents

It is acknowledged that policyholders will not exercise self-discipline in saving money towards

payment of annual, half-yearly or quarterly premium.

National Insurance

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National insurance is one kind of social security scheme run by the government of a country for

the required financial security of its citizens, more particularly for the persons who are employed

in various organizations or self-employed or non-employed. Even though it has various

advantages, it has not yet gained any access in our country.

Basic Characteristics

Scheme is administrated by the government and no entry for the private insurers

No policies and the scheme is managed by stamping of cards issued by government

Contribution (premium) normally deducted by the employers at source and credited to

appropriate government authority

Solvency of the scheme is guaranteed by the state

Annuities

Annuities is a contract between the insurance company and the annuitant .In consideration of the

purchase price, the other party undertakes to make annual payment .This process continues until

the death of the annuitant or for a fixed period.

Annuity for life

Under this annuity, the payment starts from a particular date. Payment continues until the

annuitants death and Payment stops from the death of the annuitant.

Annuity Certain

This is for a predetermined period. The payment stops when the period is over regardless of

whether the annuitant is dead or not.

Guaranteed Annuity

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Under this contract, annuity continues until the annuitys death. Annuity is guaranteed for a

certain minimum period. It is almost similar to annuity for life. Payments continue even after the

death of the annuitant. If guaranteed period is over, payment still continues and stops on death.

Reversionary Annuity

Here, payment to the annuitants starts from the time of death of another person mentioned in the

contract. Then payment continues for the remainder of the annuitants life.

Chapter: Three

Contribution of Insurance industry in

Bangladesh

Bangladesh and Insurance Business:

Insurance is not a new business in Bangladesh. Almost a century back, during British

rule in India, some insurance companies started transacting business, both life and general, in

Bengal. Insurance business gained momentum in East Pakistan during 1947- 1971, when 49

insurance companies transacted both life and general insurance schemes. These companies were

of various origins British, Australian, Indian, West Pakistani and local. Ten insurance companies

had their head offices in East Pakistan, 27 in West Pakistan, and the rest elsewhere in the world.

These were mostly limited liability companies. Some of these companies were specialized in

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dealing in a particular class of business, while others were composite companies that dealt in

more than one class of business. The government of Bangladesh nationalized insurance industry

in 1972 by the Bangladesh Insurance (Nationalization) Order 1972. By virtue of this order, save

and except postal life insurance and foreign life insurance companies, all 49 insurance companies

and organizations transacting insurance business in the country were placed in the public sector

under five corporations. These corporations were: the Jatiya Bima Corporation, Tista Bima

Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima Corporation, and Surma Jiban

Bima Corporation. Tista and Karnafuli Bima Corporations were for general insurance and Rupsa

and Surma for life insurance. The specialist life companies or the life portion of a composite

company joined the Rupsa and Surma corporations while specialist general insurance companies

or the general portion of a composite company joined the Tista and Karnafuli corporations.

After independence of Bangladesh, insurance industry was nationalized. Subsequently through

the enactment of Insurance Corporation Act VI, 1973, two corporations namely Sadharan Bima

Corporation (SBC) for general insurance and, Jiban Bima Corporation for life insurance were

established in Bangladesh. SBC was acting as the sole insurer of general insurance till 1984.

Between 1985 to 1988 first generation of private general insurance companies were emerged as

Bangladesh Government allowed the private sector to conduct business in all areas of insurance

for the first time in 1984. A total of 16 private general insurance companies were registered in

that phase. In 1996 another 8 private general insurance companies were registered. The third

generation of private general insurance companies, which included 18 companies, came into

operation between 1999 and 2001. The general insurance market in Bangladesh now consists of

43 private sector insurance companies and 1 state owned insurance company. Insurance

Corporation (amendment) Act 1990 provides that 50% of all insurance business relating to any

public property or to any risk or liability appertaining to any public property shall be placed with

the SBC and the remaining 50% of such business may be placed with this corporation or with

any other insurers in Bangladesh. But for practical reason and in agreement with the Insurance

Association of Bangladesh SBC underwrites all the public sector business and 50% of that

business is distributed among the existing 43 private general insurance companies equally under

National Co-insurance Scheme.

Insurance background in Bangladesh

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Tritorn insurance, Calcutta pioneer in general insurance established in 1850

Oreantel life insurance company, the first insurance company, established in 1818.

Were generally limited to the british people working in india.

Insurance business operated by basically private sector in Pakistan period.

Current scenario of insurance industry of Bangladesh

In Bangladesh, the Insurance business, after and early stage of dislocation, adventure and

experimentation through half a century has now being established as a nascent industry

distributed between the public and private sectors. Insurance business evolved in the Indian

subcontinent late in nineteenth century when several business companies started their business

and a few Christian missionaries began to operate mutual funds to serve their own community

members. From Bangladesh perspective insurance business was not a promising sector in its

early age but it is getting its pace day by day with the growth of overall economic condition of

the country.

The privatization policy adopted in the 1980s paved the way for a number of insurers to emergein the private sector. This resulted in a substantial growth of premium incomes, competition,

improvement in services, and introduction of newer types of business in wider fields hitherto

untapped.

Up to 2000, the government has given permission to 19 general insurance companies and 10 life

insurance companies in the private sector. Insurers of the country now conduct almost all types

of general and life insurance, except crop insurance and export credit guarantee insurance, which

are available only with the Shadharan Bima Corporation. Numerous institutions, associations andprofessional groups work to promote the development of insurance business in Bangladesh.

Prominent among them is the Bangladesh Insurance Association (formed on 25 May 1988)

having 30 members. It aims at promoting, supporting and protecting the interests and welfare of

the member companies. Another example is Bangladesh insurance academy.

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Surveyors and insurance agents occupy a prominent position in the insurance market of

Bangladesh. The system of professional brokers has not yet developed in Bangladesh. A total of

60 insurance companies are operating in Bangladesh till date. Of these companies, 57 are private,

two state-owned and one is foreign. Insurance Directorate, under the Ministry of Commerce, is

the regulatory-body of the country's insurance sector. At present there are 44 general insurance

companies running in Bangladesh. Many other private companies are about to commence

business.

62 insurance companies.

2 state-owned corporations

43 general & insurance companies

17 life insurance companies

SBC was acting as the sole insurer of general Insurance till 1984

Bangladesh Government allowed the private sector to conduct business in all areas of

insurance for the first time in 1984

At present, nearly all the companies place

The government guidelines for formation of an insurance company

are:

(1) The intending sponsors must first submit an application in prescribed form to the Chief

Controller of Insurance for prior permission.

(2) After necessary scrutiny the Chief Controller shall forward the application with his

recommendation to the Ministry of Commerce.

(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet

Committee constituted for this purpose.

(4) The decision of the Committee, if affirmative, should be sent back to the Ministry of

Commerce which in turn should send it back to the Chief Controller of Insurance for

communicating the same to the sponsors.

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Companies and has 30 members. It aims at promoting, supporting and protecting the interests

and welfare of the member companies.

Surveyors and insurance agents occupy a prominent position in the insurance market of

Bangladesh. The surveyors are mainly responsible for surveying and assessing general insurance

losses and occasionally, for valuation of insurance properties, while the agents work to procure

both life and general insurance business against commission. The system of professional brokers

has not yet developed in Bangladesh. However, it is a common practice of the insurers to engage

salaried development officers for promotion of their insurance business.

Problem of insurance business in Bangladesh

Weak Economy:

The development of insurance business is dependable to the development of economy of

deferent sectors. But in Bangladesh there are many lacking to the development of economy. Our

export income in limited and 78% income come from cloths and nightwear sector. So the typesof economy are not suitable for insurance business.

Lack of capital:

The broadness of insurance business is helpful to survey. It needs to establish many branches in

different country. It requires lots of capital. But lack of capital in our country creates the problem

of insurance business.

Lower Rate of Savings:

In our country the average income of our people is very low. Maximum people are live under

poverty line. In 2004-2005 our internal saving was only 20.16% of total GDP. Life insurance and

other insurance are mostly dependable on the saving of the people. So it creates the Problems

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Weakness in Industrial Sector:

BANGLADESH is an agricultural country; the industrial sector of their country is poor. In our

country 9.71% are industrial labor from the total labor force. In 2004-2005 industrial

productivity was only 28.88% of the total national productivity. So these types of weakness are

one of the main barriers of insurance business.

Not Knowing What Customers Expect:

Based on interviews, the authors found that executives perceptions of superior quality service

are largely congruent with customers expectations. Customers expectations versus management

perceptions are the result of the lack of a marketing research orientation, inadequate upward

communication and too many layers of Management.

The Wrong Service-Quality Standards:

Arises when there is a discrepancy between what managers perceive that customers expect and

the actual standards that they (the managers) set for service delivery. This gap may occur when

management is aware of customers expectations but may not be willing or able to put systems in

place that meet or exceed those expectations.

The Service-Performance Gap:

Organizational policies and standards for service levels may be in place, but is front line staff

following them? A very common gap in the service industry is the difference between

organizational service specifications and actual levels of service delivery. Service specifications

versus service delivery is the result of role ambiguity and conflict, poor employee-job fit and

poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and

lack of teamwork.

When Promises Do Not Match Delivery:

Customers perceive that organizations are delivering low-quality service when a gap appears

between promised levels of service and the service that is actually delivered. This gap is created

when advertising, personal selling or public relations Over-promise or misrepresent service

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levels. Service delivery versus external communication may occur as a result of inadequate

horizontal communications and propensity to over-promise.

The discrepancy between customer expectations and their perceptions of the service

delivered:

as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part

of the service provider. In this case, customer expectations are influenced by the extent of

personal needs, word of mouth recommendation and past service experiences.

The discrepancy between customer expectations and employees perceptions:

as a result of the differences in the understanding of customer expectations by front-line service

providers.

The discrepancy between employees perceptions and management perceptions:

as a result of the differences in the understanding of customer expectations between managers

and service providers.

Overview of Recent DevelopmentsThe Insurance industry plays a significant role in a growing economy in terms of providing

indemnification of risks faced by both individuals and companies, in addition to being an

institutional investor . In the year 2004, the insurance industry continued to reap the

benefits of sustained GDP growth and increased economic activities, especially in the industrial

and consumer finance sectors. Moreover, the regulatory requirements set forth by the Securities

and Exchange Commission of Pakistan (SECP)1 also strengthened the financial soundness of the

companies as reflected in the increased paid-up capital base. Six companies that were unable to

meet the paid-up capital requirement continued to remain suspended from undertaking new

insurance business, and three new companies started business in the non-life insurance sector.

One of these companies offers Islamic insurance facilities. The total assets of insurance

companies have seen a consistent improvement since CY01 with an average growth of over 14.5

percent in the last four years . The non-life sector has shown a faster growth of 16.2 percent in

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CY04, as compared to 14.6 percent growth in life and a moderate 6.1 percent growth in

reinsurance.3 This growth in the assets of the insurance sector has primarily been due to the

enhanced paid-up capital requirements which ultimately increased the risk management capacity

of the insurance companies and enabled them to undertake increased insurance business with

improved retention capabilities. As mentioned above, the asset structure of insurance companies

shows that the assets of the non-life business are increasing at a faster pace than the life

insurance business.

Future aspects of Insurance Business:

Prospects of insurance business in Bangladesh as well as the problems mentioned above, there

are many good signs for the insurance business in Bangladesh. The factors that can facilitate the

insurance business in our country are discussed below. These facts can be measured as the

Higher GDP

The GDP of our country is increasing than the previous years which results in

increase of per capita income. So this growing GDP and income holds bright prospects for insurance companies. The major problem is the incapability of our

people to pay the premium charged by the insurance companies. . With the growth in

the income more and more people are now willing to take an insurance policy for

safeguarding themselves from any danger.

Increased population

There is a big opportunity lies ahead for the insurance companies as the population ofour country are increasing day by day. Although most of people of our country live

under extreme poverty level and want to avoid insurance policy number of potential

policy holders in Bangladesh is growing with growth of the population. There is

somewhat relationship between growing populations with the number of public

vehicle. As we know all public vehicle must have an insurance policy. So growing24


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population also increase the motor insurance too. That is growth in population opens

greater scope for every kind of insurance business that results in growing prospect for

insurance companies.

New businesss individual insurance

There are so many new businesses starting every day and manufacturing sector is

booming with global demand. Every business is insured under an insurance company

to protect its company from any kind of accident. Therefore growing industry, mill,

factories are creating better scope for the insurance companies to flourish their

business.

Developing mass awareness about insurance

People are now much more conscious about their safety. So they are encouraged to

take an insurance policy for making their life free from any unexpected occurrence.

Increase in literacy rate is helping predominantly to create awareness among the

people regarding taking insurance policy. Besides this insurance companies are also

trying to eradicate the negative attitude of people towards the insurance company by

organizing various programs such as seminars, programs including social

responsibilities etc.

Micro insurance

Micro insurance can be a great prospective area for the insurance business in our

country. Most of the people of our country are unable to have costly and long term

insurance policies. Micro insurance can be provided to individual personnel or to

small business owners against little insurance premiums and with easy terms and

conditions. When they will afford to minimize their risks at a lower price, they will

take that opportunity and they will become to get used to it. This can cover a huge

portion of the society who can be a prospective target market for this business.

Development of new policy

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Insurance is not just a tool of risk coverage. It is also an attractive instrument of

savings. The mixture of risk coverage with savings gives the opportunity for

innovative product designing which means service diversification. In a dynamic

insurance market one can expect to see new products being promoted at regular

intervals. So far very little efforts have been taken to innovative and introduce need

oriented insurance services in response to existing threats.

The prospect of the insurance business in various sectors (that

affect our economy can be differentiated in the following way) .

Agriculture sector

The economy of Bangladesh is predominantly an agrarian one, with most people engage in

farming and fishing. The uncertainty of agriculture due to crop failure caused by climate

variation, drought, cyclone, flood and pests affects farmer income as well as government

revenue. Furthermore, in the last few years commercialization has occurred in some sections of

the agricultural sector. Increase in investment in the agricultural sector is creating a new

opportunity for insurance industry. Various agricultural insurance services are becoming

common these days. Demand for insurance protection against crop loans, livestock loans,fisheries loans and equipment loans are also increasing day by day.

Business sector

Nowadays in Bangladesh the SME plays a important role in the economic development. But they

are deprived from taking loans from bank for large amount. If insurance business focuses this

section in Bangladesh they are able to contribute more in the economy .Thus insurance business

has a bright prospect in business sector in a developing country like Bangladesh

Education sector:

Insurance companies can provide different types of scheme to expand education plan insurance.

Ways of overcoming the problem

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In our country the problems that exist in insurance business can not be overcome over a

right .It needs long term planning. Besides making the people aware the insurance

businessman should come forward with govt. to make this business famous. Coming

from the existing problems following steps should be taken to make this business

famous.

1. Spread of insurance education: To make the insurance business people should be

made aware about the helpless & necessity of insurance. For this purpose effective

steps must be taken to speared of insurance education.

2. Publicity & increase of awareness: Mass publicity activities are very essential to

overcome from unwillingness wrong idea, doubt & unbelief of the people this

country. The people media can provide an effective help regarding country

interest.

3. Increase of training facilities: To continue the insurance business effective

standard training facilities must be arranged for the manager & workers who are

employed in this business.

4. Formulation of effective Principles: Long term formulation of effective principles

is compulsory to continue the insurance business successfully.

5. Uphold the interest of policy holder: Success of this type of business is depended on the trust of

insured persons. To gain the trust insurance companies should come forward to compensate the

real injured as soon as possible.

6. Importance to the economic development: Insurance business is depend on thedevelopment of the different sector of economic .So insurance business can never

be developed by retaining the weak situation of the sectors including industry

commerce transportation.

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Comments and suggestion

From the presiding discussions of the report, we can realize that the policy makers within the

government and the insurance company should adopt effective measures in order to make good

use of the opportunities and to tackle the threats for ensuring a healthy development of the

insurance industry. The following actions are suggested.

The insurance companies of Bangladesh should practice marketing through the use of

promotional tools such as advertising, sales promotion, public relation and publicity,

personal selling and direct marketing.

In order to create the growth of insurance business in our country, insurance companies

should expand their target market by providing responsive services and establish efficient

departments to perform such task.

Government must minimize the restrictions on premium so that insurance companies can

fix their premium according to their demand. This will increase the profitability of the

insurance companies.

One of the basic requirements for the insurance industry to have sustained growth is to

enhance training facilities. Bangladesh Insurance Academy is providing training facilities

and professional education to those engaged in insurance business in the country. The

syllabus, curriculum and training programs of the academy need to be modified to meet

the modern needs of the insurance industry.

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To regain and maintain a positive public image the insurance companies should

overcome the dissatisfaction in regards to services and claim settlements and should

maintain a service standard.

The collected premium should be invested in large and beneficial sectors so that

insurance companies can return their clients expected return in timely.

Government should have a regulatory body for the surveillance on insurance companies

so that they must perform their business maintains the ethical issues properly.

Insurance companies need to modify their recruitment strategies with increased focus on

the marketing and sales training because, insurance being a service marketing industry itrequires special attention.

In response to the opportunity of growing market the insurance companies can expand

their target market by identifying and providing responsive services. In order to do so

each company should established and effectively operate research and development

department.

Conclusion

In present insurance is too much important to the business and individual sector. Most of the

companies provide more or less same services. For this reason the competition is increasing day

by day between the insurance companies. On the other hand some new insurance companies are

going to start businesses in the competent market. BGIC need to develop their some productive

sectors. In present, a company cannot establish properly without developing information

technology. People search their desires requirement through Internet so, insurance companies

need to develop Web address to increase both foreign and local investors. So we have discussed

about both the problem and prospects of insurance business in Bangladesh. The progress of

insurance business depends on the progress of economic condition .Insurance business also faces

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many problem. So if we develop economic condition as well as overcome the problems, it will

help a lot to flourish this business in our country.

Reference

Ms. FAHIM MUNTAHA

Lecturer

Department of Finance

ASA University

Md. Tasmir Chowdhory

Senior Executive Officer

Green Delta Insurance LTD.

Books

Risk & Insurance (2nd ed)

Azizul Huq Chaudhuri

Websites

http://www.bangladeshtrades.com

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en.wikipedia.orghttp://www.banglapedia.org/
http://www.wikipedia.com/http://www.banglapedia.org/http://www.wikipedia.com/http://www.banglapedia.org/

contribution of insurance industry

Documents