1

Introduction to Insurance:

We read our daily newspapers stories about people being involved in road accidents, of aero

planes crashing, buildings burning down, theft of goods, peoples being injured at work and many

other mishaps. Behind each story lies a measure of Personal tragedy and anxiety for those closely

involved. Yet behind each one is also the vast, sophisticated mechanism of Insurance.

From an individual point of view, insurance is an economic device whereby the individual

substitutes a small certain cost (the premium) for a large uncertain financial loss (the risk insured

against) which would exist if it were not for the insurance Contract.

The primary function of insurance is the creation of the counterpart of risk. Which is security?

Insurance does not take away the risk. The insurer does not guarantee that the event insured

against will not happen. Whatever good the management and staff, losses do occur. The

“Titanic” was unsinkable and yet was lost in the very first voyage. Plants can be operatedfor

many years without accident and then be totally destroyed by Fire. The house may still burn

down, the car may still beinvolved in an accident but at least a large element of the cost involved

will be met by the insurer.

History to Establish in Insurance Company:

General Insurance in Bangladesh: Before the independence 49 insurance companies were functioning most of those were owned by

either Pakistanis or by other foreign nationals. After the independence of Bangladesh

Government nationalized all the insurance business which were operating in Bangladesh, mostly

owned by West Pakistanis and formed the subsidiary corporation‟s one for General Insurance

and other for Life insurance business under the controlling corporation the Bangladesh

JatiyaBima Corporation.

Later in 1973, SadharanBima Corporation was formed for transacting all General Insurance

business and JibanBima Corporation for Life Insurance business.

To bring efficiency into the sector and to provide quick services with better customer

care, Government passed a law in1984 allowing the formation of Private General

Insurance Companies.

SadharanBima Corporation was given the monopoly to underwrite the business of public

and private sector both. MoreoverRe-insurance of Private sector companies was made

mandatory with SadharanBima Corporation.

The Premium rates in Bangladesh are not yet opened up and are based on Tariffs

prepared by the Central RatingCommittee headed by the controller of insurance,

Government of People‟s Republic Bangladesh. All are bound to follow the Tariffs.

2

Effective Insurance Legislation in Bangladesh:

2 THE INSURANCE (AMENDMENT) ORDINANCE, 1984 (Ordinance No. L of 1984)

The Government of the People‟s Republic of Bangladesh allowed Private Insurance

Companies to operate on 11August, 1984.

THE INSURANCE CORPORATIONS (AMENDMENT) Act, 1990

50% Public Sector Business was allowed and distributed to Private Insurance

Companies by SBC with effectfrom 13 February, 1990.

Private Companies were allowed to do 50% reinsurance with SBC and 50%

outside SBC with effect from 13th

February, 1990.

Payment of Commission to the Agents prohibited from 13 February 1990.

THE INSURANCE (AMENDMENT) Act, 1993

Payment of Commission to the Agents as per Insurance Act, 1938 reintroduced from 14

March 1993.

Pioneer Insurance Company profile:

Pioneer Insurance Company Limited, sponsored & founded in 1996, is a publicly traded

company by shares having authorized capital of Tk. 1 (One) Billion & paid up capital of Tk.

353.44 million. The Company is enlisted with Dhaka Stock Exchange and Chittagong Stock

Exchange and has been declaring dividend every year since inception. The Company has been

assigned “AA” by Credit Rating Information and Services Limited of Bangladesh. AA rating

stands for “very high claims paying ability. Protection factors are strong. Risk is modest, but may

vary slightly over time due to underwriting and/or economic conditions.

Current Chairman Mr. TapanChowdhury, Managing Director, Square Group & Ex-Adviser of

the Care Taker Government of People‟s Republic of Bangladesh, former Chairman Mr. M

AnisUdDowla, Chairman, ACI Limited, former Chairman Mr. Syed ManzurElahi, Chairman

Apex Group & Ex-Adviser of two Care Taker Governments of People‟s Republic of Bangladesh,

former Chairman Mr. A.K.M. Rahmatullah, Member of the Parliament & Managing Director of

Apex Tannery Ltd. are the most successful business entrepreneurs of the country.

The company has a good number of dedicated and highly professional employees supported by

qualified, experienced & technically sound executives. The Managing Director of the company,

Mr. Q.A.F.M. Serajul Islam who is a holder of Diploma in General Insurance from Bangladesh

Insurance Academy, has long experience in Insurance and Reinsurance. Prior to joining the

Company he was Deputy Managing Director of Pragati Insurance Ltd. and Deputy General

Manager of SadharanBima Corporation.

3

COMPANY AT A GLANCE:

Established 1996

Registered Head Office Symphony(5th

Floor),

Plot # SE(F), 9 Road # 142, South Avenue, Gulshan-1,

Dhaka-1212,Bangladesh.

Tel:8817512(Hunting),8816561

Fax:+88-02-8817234,8817264

Email: piclho@pioneerinsurance.com.bd, piclho@gmail.com

Number of Branches 35

Number of Employees 460

Authorized Capital 1 (One) Billion (Taka)

Paid up Capital 353.44 million (Taka)

INVESTMENT:

Investment Figures in Million (TK)

Statutory Deposit with Bangladesh Bank 9.00

Fixed Deposit with Scheduled Bank 768.67

Share of Mutual Trust Bank Ltd.

On pre IPO (40,00,000 shares) 50.00

Share of Mutual Trust Bank Ltd.

from secondary (9,00,000 shares) 33.26

Bonus Share of MTBL (89,12,990 shares)

Right Share of MTBL (19,26,950 shares) 19.27

Share of Central Depository Bangladesh Limited

( 4,56,945 shares) 2.56

Share of EXIM Bank Ltd. 0.01

Grameenphone (573,100 shares) 42.41

Malek Spinning Mills Ltd. (10,00,000shares) 25.00

18 Nos.General Insurance Co. (4,900 shares) 0.11

Secondary share 10.00

Grand Total (Taka) 960.29

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FIXED ASSET:

Description Taka

Furniture & Fixture 4,240,643.00

Office Machinery 1,358,637.00

Air Conditioner 4,060,321.00

Computer 2,904,728.00

Telephone Installation 757,345.00

Electric Equipment 888,476.00

Others 19,007,926.00

Office Space: ------- 7,375,661.00

01. V.I.P. Road Branch 7,375,661.00

City Heart, 9th floor,

67 NayaPaltan, Dhaka-1000

02. Imamagonj Branch 1,03,40,000

Tajmahal Tower (3rd

Floor)

66 Moulvibazar ,Dhaka-1100

03. Moghbazar Branch

Gulfesha Plaza (4th floor),

69 Outer Circular Road,

Near MoghbazarChourasta, Dhaka -1217

10,593,440

Total Amount 61,527,177.00

7,375,661.00

5

Year Figures in Million (TK) Growth(%)

1996 23.14

1997 85.47 269%

1998 105.33 23%

1999 131.99 25%

2000 141.48 7%

2001 144.58 2%

2002 136.27 -6%

2003 147.09 8%

2004 178.34 21%

2005 245.41 38%

2006 301.16 23%

2007 385.20 28%

2008 665.50 73%

2009 859.45 29%

2010 1252.37 46%

2011 1598.60 28%

Grand Total 6401.41

PREMIUM INCOME:

6

CLAIMS PAYMENT:

Claims statement as at September, 2012

Figure in BDT

2007 2008 2009 2010 2011 2012 Fire 111,974,255 3,49,61,666 147,981,702 164,442,032 136,772,711 23,430,076 Marine 36,141,341 12,445,126 16,960,608 27,111,402 42,663,217 13,086,232 Motor 29,135,180 52,769,964 48,109,616 60,264,260 50,504,834 11,877,135 Misc. &

Accident 6,213,021 3,297,437 3,306,366 15,546,843 16,236,689 418,746

Total Tk.= 183,463,797 103,474,193 216,358,292 267,364,537 246,177,451 48,812,189 Total No. of

Claims

Settled 379 634 709 861 757 202

Claims

Outstanding Nil Nil Nil 6 163 124

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Largest Claims Settled.

SI No. Class of Loss Name of Insured Year Settled Amount

(TK)

1 Fire Asia Composite

Mills Ltd.

2012 14,34,84,512

2 Fire Martin Spinning

Mills Ltd.

2010 92,944,709

3 Fire Square Consumer

Products Ltd.

2007 75,172,582

4 Fire Vidyut

Bangladesh (pvt.)

ltd.

2010

75,172,582

5 Fire Apex Footwear

ltd.

2002 46,817,019

6 Fire Sun Gravures ltd. 2008 45,597,518

7 Fire Pioneer Apparels

ltd.

2009 40,409,331

8 Marine Cargo GBB Power Ltd. 2010 26,817,138

9 Fire(Flood) Dia-Ichi-

PexLeather

Industries Ltd

2005 10,894,774

10 Marine Cargo Square

Pharmaceuticals

Ltd

2003

9,963,650

11 Marine Cargo Shahjalal

Newsprint Ind.

Ltd.

2000

7,970,196

12 Fire BRAC Bank Ltd. 2009 6,289,832

13 Fire ACI Ltd. 2012 5,04,80,170

14 Marine Hull Bashundhara

Logistics Ltd.

2012 1,00,00,000

15 Fire Lipstic Ltd. 2012 2,13,66,907

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We Adjusted:

Bangladeshi Banks :

Sonali Bank Ltd.

Janata Bank Ltd.

Agrani Bank Ltd.

Rupali Bank Ltd.

Bangladesh Development Bank

Bangladesh Krishi Bank &

Bangladesh ShilpaRinSangstha

Arab Bangladesh Bank Ltd.

Al-ArafahIslami Bank Bangladesh Ltd.

Bangladesh Commerce Bank Ltd.

BASIC Bank Ltd.

BRAC Bank Ltd.

Bank Asia Ltd.

Dutch Bangla Bank Ltd.

Dhaka Bank Ltd.

Eastern Bank Ltd.

Exim Bank Ltd.

I.F.I.C. Bank Ltd.

ICB Islami Bank Ltd.

Islami Bank Bangladesh Ltd.

Mutual Trust Bank Ltd.

Mercantile Bank Ltd.

National Bank Ltd.

National Credit & Commerce Bank

One Bank Ltd.

Prime Bank Ltd.

Pubali Bank Ltd.

Premier Bank Ltd.

RajshahiKrishiUnnayan Bank

Social Islami Bank Ltd.

South East Bank Ltd.

Foreign Bank: Commercial Bank of Ceylone

Citibank N.A.

Hong Kong & Shanghai Banking Corporation Ltd.

Standard Chartered Bank

Habib Bank Ltd.

National Bank of Pakistan

State Bank of India

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Various Insurance & policy of Pioneer insurance company:

Fire :

Fire and Allied Perils Insurance

Consequential Lossmaterial

Damage by Fire or Allied Perils.

Household Insurance

Hotel Owners All Risks Insurance

Industrial All Risks Insurance

Marine:

Cargo Insurance

Hull Insurance

Motor:

Act Only Liability Insurance

Comprehensive Insurance

Increased Liability Insurance

Engineering: Boiler and pressure Vessels Insurance

Contractor‟s All Risks Insurance (CAR)

Contractor‟s Plant & Machinery Insurance (CPM)

Deterioration of Stock Insurance (DOS)

Electronic Equipment Insurance (EEI)

Energy Risks Insurance (Offshore & Onshore)

Erection All Risks Insurance (EAR)

Lift, Escalator and Hoisting Equipment Insurance

Machinery Insurance (MB)

Machinery Loss of profit Insurance

Power Plant Package Insurance

Aviation Insurance:

Deductible Insurance

Hull Insurance

Liability Insurance

WAR Insurance

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Miscellaneous Insurance:

All Risks Insurance

Abandonment of Cricket MatchInsurance

Air Travel Insurance

Burglary Insurance

Cash / Property in Premises

Comprehensive General LiabilityInsurance

Cellular Mobile Phone Insurance

Credit Card Holder Insurance

Directors and Officers Liability Insurance

Employer‟s Liability Insurance

Fidelity Guarantee Insurance

Group Hospitalization

Hole in One Golf Tournament Insurance

Money / Cash in Transit Insurance

Neon Sign Insurance

Overseas Medicaid Insurance

Public Liability Insurance

Professional Indemnity Insurance

Personal Accident Insurance

People‟s Personal Accident Insurance

Plate Glass Insurance

Poultry Insurance

Rubber Plantation Insurance

Safe Deposit box (Bank Lockers)

MARINE Insurance

Marine insurance contract is a contract between Insured and Insurer where the Insurer undertakes

to indemnity the insured in a manner and the interest there by agreed against marine losses

incident to a marine adventure.

There are two types of Marine Insurance in Pioneer Insurance Company Ltd.

Marine Hull Insurance

This cover is available for ocean going vessels, barges, tugs, dredgers, fishing trawlers, yachts,

wooden dhows, pleasure/speed boats etc., under Institute Time Clauses Hulls. Cover is also

provided for last breakup voyages to Chittagong.

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Marine Cargo Insurance:

An all-risk cargo insurance policy is the broadest form of shipping insurance and will cover any

physical loss/damage from any external cause. An all-risk policy will list any exclusions that are

not covered, which can be added on to the policy as an additional clause. An annual open cargo

policy automatically insures your shipments on set terms, conditions and rate without the need to

contact your insurance broker or company each time.

Marine Cargo insurance protects all goods while in transit depending upon the needs of the

client. For sea and air transits, the "Institute" Clauses, drafted by the Technical and Clauses

Committee of the Institute of London Underwriters are adopted for use in Bangladesh. Three

broad types of cover are available for sea transit-

Institute Cargo Clauses "A", "B" & "C"

Two types of cover are available for air transit

Institute Cargo Clauses, Air &, Air All Risks.

RATE-MAKING IN MARINE INSURANCE:

Cargo Insurance Rates:

The Premium on cargo depends upon the following factors

Ownership: The kinds of cargo, carried on the same ship & to the same place will

command different rates. Proper packing, profitable accounts & previous refusal of

insurance may be determining the rate.

Character of the cargo: The difference in hazard between various kinds of commodities,

different forms of the same commodity, different shipments, and different types of

packing & durability of the commodity may influence the premium rates.

Hazards & customs: The effects of seasons have important bearing commodities that are

seriously affected by cold & heat. The season at the port of destination may influence the

risk. In certain season the port is very busy with a particular cargo. Varying trade customs

associated with the different commercial routes will influence cargo rates materially. The

moral hazard is greater on certain routes.

Duration of voyage & policy condition: Insurers take into account the length of time.

Sometimes, loading of the goods aboard the vessels & protection of the goods while on

the dock are considered in calculation of premium.

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Hull Insurance:

Management: one management may be efficient in the upkeep of the vessel and the

appointment of officers and crew. Other management, through negligence, indifference

and undue economy, may show a mad record. To treat these managements alike would be

an injustice to the better managed concerns.

Natural Forces and Topography: some natural hazards are permanent while others are

of seasonal danger. References are made to storms, submerged shoals, shifting sand bars,

shallow water narrow channels, ice, currents, tides and seaquakes while calculating the

premiums to a particular route. Dangers form an underwriting points of view is associated

with the ports of departure, call or destinations.

Constructions, Type and Nationality of the Vessel: The underwriter wants to know the

vessel with respects to its builder and owner, structural plan, material used in

construction, type of populations, structural strength to resists stresses and strains,

adaptability to carry various kinds of cargo and its age and physical conditions. In foreign

countries, certain societies are formulated to promulgate rule for the constructions of

vessels supervising such construction and assigning a class each vessel.

Policy Conditions: Innumerable clauses are used to limit increase the under water‟s liability.

Some policies may cover against total loss. Some may cover partial losses. Other may relate only

to general average or particular average.

Return of premium:

By agreement in the policy: The assured may pay full payment while affecting the insurance.

The insurer may agree to return it wholly or partly at the happing of a certain event. The premium

is returnable by agreement in the following circumstances:

Improvement in the character of insurance, Change of ship to safer routes, use of first class liner,

good packing etc.

The insurer may encourage returning a part of the premium if claims do not arise.

Cancellation of policy due to change in the ownership of hull.

For Reasons of Equity: The premium is returnable for reasons of equity.

Non-attachment

Undeclared balance of an open policy is entitled for return of premium.

When the assured has no insurable interest throughout the life of the policy the premium is

returnable provided the policy does not amount to fraud.

The insurer can cancel the voyage when there is insurable delay in commencing the voyage.

The policies are taken at different times, and any earlier policy has at any time the entire risk

or if a claim has been paid on the policy in respect of the full sum insured, on premium is

returnable in respectable of policy.

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Valuation by services:

The valuation by services removes the defects of memorandum clause which is used to free

certain commodities from particular average and in the case of other commodities the damage

has to amount to at least 5% to become recoverable. Specifically the provisions are:

Corn, fish, fruit flour & seed etc are warranted free from particular average unless the

ship be standard

Sugar, tobacco, hemp flax, hides & skin s etc are warranted free from particular average

unless the ship is standard unless amounting to 5%.

All the other goods etc are warranted free from particular average unless the ship is

standard unless amounting to 3%.

Documents require for claim:

The following documents are required at the time of claim:

Policy or certificate of insurance.

Bill of lading. It determines the scope of the contract of carriage.

Invoice or bill stating terms and conditions of sale.

Copy of protest: In the event of stranding of or accident to the vessel, the master of the

ship notes „protest‟ before a counselor notary public. The protest states that everything

was done to bring to safety the ship and cargo and loss or damage was not to lack of

diligence on the part of the master or crew.

Certificate of Survey: This is necessary to find out whether the necessary franchise is

reached or not in case of particular average.

Account sales or Bill of sale: Similar documents where goods have been sold. The

difference between gross sound value and proceed as per account sales might be accepted

as amount of loss.

Letter of subrogation: It gives the underwriters to sue and recover compensation from

third parties where the same is due.

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Documents in Different types of claims:

Total loss:

Insurance policy: It finishes an evidence of the terms & contract of insurance.

Bill of Lading: It is the correspondence of the insurance contract with the voyage and vessel.

Copy of the invoice: A copy of the invoice relating to the goods insured should be sent. It will

help in estimating the correct value of the goods.

Protest: A copy of protest is required when the total loss is due to the loss of the vessel or other

accident.

Letter of subrogation: A letter of subrogation is sent if anything‟s remains of the subject matter

insured after the total loss or if there are rights or reminders regarding the interest or against third

parties.

Notice of Abandonment: There is a constructive total loss.

Partial loss:

In case of partial average loss:

The policy or the certificate.

The invoice for whole shipment

The bill of lading should be sent to the underwriters

The copy of the master‟s protest or an extract from log book of the ship is to be presented

with the policy if the particular average is recoverable in certain circumstances according

to the term of policy.

A surveyor‟s report prepared by some recognized surveyor should be appended to the

above documents when evidence is necessary to show that the settled franchise has

reached.

When there is a sale of the damaged goods the bill of sale is required by the measured.

The letter of subrogation should be duty finished by the insured if required by the

insurers.

The cost of protection is paid by the underwriters apart from the particular average if

there was a successful claim. In unsuccessful claims, insurers are not liable to pay these

charges.

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The Information which mentioned in the marine insurance policy is:

Name of insured

Subject matter of insurance

Insured amount

Premium

Name of vessel

Identity of vessel captain & crew

Time duration of voyage

Signature of both parties

Condition for Marine insurance Policy for Policy Member:

There are two types of condition

1. Express Condition

2. Implied Condition

Express Condition (Which is known by policy holder):

Time duration of voyage

Defense group

Impartiality of voyage

Implied Condition (Which is Assume by policy holder):

Seaworthiness of ship

Legality of voyage purpose

Voyage without delay

No change in Voyage

Time duration of marine insurance policy:

This insurance for just “At &From the Port”, “From the Port”.

The limitations of Marine insurance policy:

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Mission & Vision of pioneer insurance company ltd:

Pioneer’sMission:

To become the leading insurance company of Bangladesh excelling in every aspect of its

business and in delivering its obligations as a good corporate citizen to its clients, employees,

shareholders, public and to the country.

Caring for you, forever

We Strive for

Best Service to our Clients.

Protection of Investment of Shareholders

Welfare of our Employees

Ethical and moral social order.

Transparency in Disclosures.

Good governance for us & all around us.

Pioneer’s Vision:

To Foster the industrial & Economic growth of Bangladesh.

To optimize the retention of Bangladesh business.

To work towards minimization of losses and develop Risk Management Technologies.

To function as a strong and dynamic non-life insurer.

Reference:

1. Book: Insurance Principles And Practice by M.N. Mishra & S.B. Mishra

2. Tarikur Rahman, A.M.D., Pioneer insurance Company Ltd. 3. www.pioneerinsurance.com.bd