Comparative Insurance Industries Overview between USA and Bangladesh

A Report on...
Comparative Insurance Industries Overview: USA and Bangladesh

Ms. Pallabi Siddiqua
Assistant Professor
Department of Finance
University of Dhaka
Course Name: Risk M anagem ent and Insurance
Course Title: F-210
Submitted by: Group no: 09
Sl. No. Name ID No :
1. Al-Amin Khandakar 20-019
2. Pantho Sarker 20-033
3. Shahriar Md. Lukman 20-047
4. Gourav Roy 20-059
5. Md. Gulam Kibria 20-075
Departm ent of Finance-20th Batch
University o f Dhaka
DATE OF SUBMISSION: 19thDecember, 2015

Letter of Transmittal
Decem ber 19, 2015
Ms. Pallabi Siddiqua
Assistant Professor,
Departm ent of Finance,
University of Dhaka.
Subject: Submission of the report on “Comparative Insurance Industries Overview: USA and
Bangladesh.”
Honorable Madam,
This is a great pleasure for us to submit the report on “Comparative Insurance Industries Overview:
USA and Bangladesh.” as a partial requirement of the BBA program in University of Dhaka. Writing
this report has been a great pleasure & an interesting experience. It enabled us to know about how
managers manage his activity within an organization.
This project helped us tremendously to understand the implication of theoretical knowledge in the
practical field. It has also shaped some of our basic views like how to manage the insurance company
in Bangladesh and USA.
We have undertaken our sincere effort for successful completion of the BBA program. If we have any
unintentional error and omission that may have entered into this report will be considered with
sympathy.
Therefore, we beg your kind consideration in this regard, we will be very grateful if you accept our
report and oblige there by
Sincerely,
Group no. 09
ID No. Name Signature
20-019 Al-Am in Khandakar
20-033 Pantho Sarker
20-047 Shahriar Md. Lukman
20-059 Gourav Roy
20-075 Md. Gulam Kibria
2ndst year 2nd Semester (20thbatch), Section: A
Department of Finance,
University of Dhaka

Acknowledgement
At first we would like to thank the mightiest and our parents. Without their blessing, we could not have
been successful in completing the study. We would like to thank our honorable course teacher of
Department of Finance, Ms. Pallabi Siddiqua for providing us such an opportunity to prepare the
Report on “Comparative Insurance Industries Overview: USA and Bangladesh.”. Without his
helpful guidance, the completion of this report was unthinkable. During our preparation of the report
work, we have come to very supportive touch of different individuals & friends and professionals who
lent their ideas, time & caring guidance to amplify the report’s contents. We want to convey our heartiest
gratitude to them for their valuable responses.

Executive Summary
The report on " Comparative Insurance Industries Overview: USA and Bangladesh” mainly
focuses on the comparative analysis between two regions of the world which are US and Bangladesh
regarding the insurance industries. There have been many things regarding the insurance issues which
have been shown as a matter of comparison between the countries.
In the very inception of the report, a brief overview has been discussed relating to the factors necessary
to be discussed about insurance industries to have better knowledge refreshment. Here, the types, roles,
significance of different types of insurance are shown to have a better outlook of the whole insurance
business as an industry.
In the next chapters, the Bangladesh experience has been discussed in the light of insurance
development and necessary details which represent the present condition of the insurance industries in
Bangladesh.
In the next chapters, the US experience has been discussed in the light of insurance development and
necessary details which represent the present condition of the insurance industries in the US.
The most important part of this report is the comparative analysis of the insurance industries between
the region of Bangladesh and US has been discussed. Here, five major corners have been drawn for
concentration in the light of comparative analysis to represent the position ofthe US insurance industries
and Bangladesh insurance industries. The factors that have been drawn for concentrating the
comparison have truly become successful in showing the actual condition of the insurance industries
concerning the regions.
At last, a recommendation has been shown followed by the case analysis in the aspects of both of the
regions’ insurance industries.
It’s purely hoped that the report has gained success in maintaining its authenticity in the sense of the
available in formation. Again, it’s the aspiration of the makers of the report that the report is worth
utilizing as a trustworthy source of secondary data for further concerned research.

Table of Contents
Chapter 1:................................................................................ 4
Introduction.............................................................................4
1.1 Origin of the Report:........................................................................................................................5
1.2 Objective of the Report:..................................................................................................................6
1.3 Methodology of the Report:...........................................................................................................7
1.4 Limitations of the Report:...............................................................................................................8
Chapter 2:................................................................................ 9
Brief Introduction to Insurance Business.................................9
2.1 Definition:........................................................................................................................................ 10
2.1.1 General Definition:................................................................................................................10
2.1.2 Functional Definition:........................................................................................................... 11
2.1.3 Contractual Definition:.........................................................................................................11
2.2 Nature of Insurance:.......................................................................................................................11
2.3 Origin of Insurance:.......................................................................................................................13
2.5 Principles of insurance:................................................................................................................. 14
2.6 Functions of insurance:................................................................................................................. 15
2.7 Types of Insurance:........................................................................................................................16
Chapter 3:...............................................................................19
Overview of the insurance industry of USA..........................19
3.1 Types of Insurance Policies available in USA:.......................................................................20
3.2 The Level of Importance and Role Created by USA Insurance Industries:.................... 25
Chapter-4............................................................................... 27
Overview of the insurance industry of Bangladesh.............. 27
4.1 Types of Insurance Policy Available In Bangladesh.............................................................28
4.2 The Level of Importance and Role Created by USA Insurance Industries:.................... 32
Chapter-5:.............................................................................. 35
Comparative Analysis on Financial Performance and
Condition between US and Bangladesh Insurance Industries35
5.1: Comparative Analysis of Households savings for Insurance Premiums in US and
Bangladesh:............................................................................................................................................ 36
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5.1.1: The Households Savings Trend in Bangladesh:............................................................36
5.1.2: The Households Savings Trend in U S:............................................................................37
5.1.3: Analytical Result:..................................................................................................................... 37
5.2: Comparative Analysis of Total Premium between the Insurance Industries of
Bangladesh and U S:............................................................................................................................. 37
5.2.1: Total Premium Analysis of Insurance Industries over the Years in Bangladesh: .38
5.2.2: Total Premium Analysis of Insurance Industries over the Years in U S:................38
5.2.3: Analytical Result:.................................................................................................................39
5.3: Comparative Analysis on Financial Performance between US Insurance Industries and
Bangladesh Insurance Industries:..................................................................................................... 39
5.3.1: Economic Contribution of Bangladesh Insurance Industries in the Economy of
Bangladesh:........................................................................................................................................40
5.3.2: Economic Contribution of US Insurance Industries in the Economy of U S:........40
5.4: Comparative Analysis on Market Share Capture of Self region’s Total Premium,
between US Insurance Industries and Bangladesh InsuranceIndustries:................................. 42
5.4.1: Analysis of Bangladesh Insurance Industries’ Market Share Capture of
Bangladesh:........................................................................................................................................42
5.4.2: Analysis of US Insurance Industries’ Market ShareCapture of U S :........................42
5.5: Comparative Analysis on Market Share Capture of the Whole World’s Total Premium,
between US Insurance Industries and Bangladesh InsuranceIndustries:................................. 43
5.5.1: Analysis of Bangladesh Insurance Industries’ Market Share Capture of the Whole
World:.................................................................................................................................................43
5.5.1: Analysis of US Insurance Industries’ Market Share Capture of the Whole World:
...............................................................................................................................................................44
5.6: Reasons of the Failure of the Bangladesh Insurance Industries in Comparative
Competition with the Insurance Industries of United States:.....................................................46
5.7 Ultimate Decision:...................................................................................................................... 47
Chapter :6.............................................................................. 48
SWOT Analysis.....................................................................48
6.1 SWOT Analysis: Theoretical Overview...................................................................................49
6.2 SWOT Analysis: Perspective of Bangladesh Insurance Industry.......................................55
6.3 SWOT Analysis: Perspective of USA Insurance Industry..............................................63
6.4 Comparative SWOT Analysis Scenario between Bangladesh and USA Insurance
Industry:..............................................................................................................................................67
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Chapter :7.............................................................................. 69
Real Cases............................................................................. 69
7.1 Real Cases: Bangladesh Perspective..........................................................................................70
7.2 Real Cases: USA Perspective....................................................................................................71
Chapter :7.............................................................................. 73
Recommendations.................................................................73
Conclusion............................................................................. 76
Bibliography.......................................................................... 77
Page 3 of 78

Chapter 1:
Introduction
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Now a day’s education is not just limited to books and classrooms. In today’s world, education
is the tool to understand the real world and apply knowledge for the betterment of the society
as well as business. From education the theoretical knowledge is obtained from courses of
study, which is only the half way of the subject matter. Practical knowledge has no alternative.
The perfect coordination between theory and practice is of paramount importance in the context
of the modern business world in order to resolve the dichotomy between these two areas.
Therefore, for the B.B.A. program we are assigned to prepare a report on “Comparative
Insurance Industries Overview: USA and Bangladesh” for F-210 Insurance and risk
management course.
1.1 Origin of the Report:
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The main objective of the study is to present the comparative overview of insurance industries
in both USA and Bangladesh. Again some other objectives will be fulfilled through this study
which is given below:
> To relate the theoretical view with the practical view of insurance studies.
> To increase our experience in data collection and analysis.
> To know the comparative picture of insurance industry in Bangladesh and USA.
> To know the role of insurance in national savings and in national economy.
> To suggest of the findings.
1.2 Objective of the Report:
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1.3 Methodology of the Report:
To prepare this report we mainly depend on secondary data. But also take some help from our
course instructor.
Procedure of collecting secondary data:
• Records and documents.
• Books, texts and publications.
• Wikipedia.
• Related Websites.
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While preparing this report, we have faced some problems. The main problem was to co
ordination all the group members. Moreover, during data collection we faced several problems.
• Due to limited access of the data, this study may not be perfect to the decent percent.
• Lack of enough experience in analyzing of data.
• Due to inadequate information, in-depth analysis could not be done in the report.
• Lack of using practical knowledge in the report
For that reason it was pretty much contradictory. We tried to write the report in a sequential
way but there may be some problems in the sequence of the report. But all these errors are
totally unintentional. At the end we are very happy to present this report to the readers and its
success will depend on the positive response of the readers.
1.4 Limitations of the Report:
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Chapter 2:
Brief Introduction to Insurance Business
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In our day to day life, we are facing various types of risks that ultimately lead us to financial
risk of being unable to reducing uncertainty and casualties. To guard against these types of risk
insurance is the best armor. Insurance occupies an important place in the modern world because
the risks, which can be insured, have increased in number and extent owing to the growing
complexity of the present day economic system. It plays a vital role in the life of every citizen
and has developed on an enormous scale leading to the evolution of many different types of
insurance. In fact, now a day almost any risk can be made the subject matter of contract of
insurance. Now, the insurance industry is much more developing sector facing its necessity.
The different types of insurance have come about by practice within insurance companies, and
by the influence of legislation controlling the transacting of insurance business.
2.1 Definition:
Insurance is a social device for spreading the chance of financial loss among a large number of
people. Simply speaking, insurance is the means by which risks of loss or damage can be shifted
to another party (the insurers) on payment of a charge known as premium. The party whose
risk is shifted to the insurer is known as the insured. Obviously insurer is generally an
organization (Insurance Company), which is willing to share the loss or damage and it is also
qualified to do so.
The term insurance has been defined by different experts on the subject. The views expressed
by them through various definitions can be classified in to the following three categories for
the convenience of the study.
> General Definitions
> Functional Definitions
> Contractual Definitions
2.1.1 General Definition:
The general definition are given by the social scientists and they consider insurance as a
device to protection against risks, or a provision against inevitable contingencies or a co
operative device of spreading risks.
Some of such definitions are given below:
In the words of John Magee, “Insurance is a plan by which large number of people associate
themselves and transfer to the shoulders, of all risks that attach to individuals.”
In words of Sir William Bevridges, “The collective bearing of risk is insurance”.
In the words of Ghosh and Agarwal, “Insurance is a co-operative form of distributing a certain
risk over a group of persons who are exposed to it”.
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2.1.2 Functional Definition:
These definitions are based on economic or business oriented since it is a device providing
financial compensation against risk or misfortune.
In the words of D. S. Hansell “Insurance may be defined as a social device providing financial
compensation for the effects of misfortune, the payment being made from the accumulated
contributions of all parties participating in the scheme”.
In the words of Robert I, Mehr and Emerson Commack “Insurance is purchased to off-set the
risk resulting from Hazards which exposes a person to loss”.
2.1.3 Contractual Definition:
These definitions consider as a contract to indemnity the losses on happening of certain
contingency in future. It is a contractual relationship to secure against risks.
Some of such definitions are
In the words of Justice Tindall, “Insurance is a contract in which a sum of money is paid to the
assured as consideration of insurer’s incurring the risk of paying a large sum upon a given
contingency.
In the words of E. W. Patterson, “Insurance is a contract by which one party, for a compensation
called the premium, assumes particularly risks of the other party and promises to pay him or
his nominee a certain or ascertainable sum of money on a specified contingency.
2.2 Nature of Insurance:
The insurance has the following characteristics which are observed in cases of life, marine, fire
and general insurance:
(a) Sharing of risk:
Insurance is a co-operative device to share the burden of risk, which may fall on happening
of some unforeseen events, such as the death of head of family or on happening of marine perils
or loss of by fire.
(b) Co-operative device:
Insurance is a co-operative form of distributing a certain risk over a group of persons who are
exposed to it (Ghosh & Agarwal). A large number of persons share the losses arising from a
particular risk.
(c) Large number of insured persons:
The success of insurance business depends on the large number of persons insured against
similar risk. This will enable the insurer to spread the losses of risk among large number of
persons, thus keeping the premium rate at the minimum.
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(d) Amount of payment:
The amount of payment in indemnity insurance depends on the nature of losses occurred,
subject to a maximum of the sum insured. In life insurance, however, a fixed amount is paid
on the happening of some uncertain event or on the maturity of the policy.
(e) Payment of Happening of Specified Event:
On happening of specified event, the insurance company is bound to make payment to the
insured. Happening of specified event is certain in life insurance, but in the case of fire, marine
of accidental insurance, it is not necessary. In such cases, the insurer is not liable for payment
of indemnity.
(f) Transfer of Risk:
Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason
that may person observes, that insurance is a device to transfer some economic losses would
have been borne by the insured themselves.
(g) Spreading of Risk:
Insurance is a plan which spread the risk & losses of few people among a large number of
people. John Magee writes, “Insurance is a plan by which large number of people associates
themselves and transfers to the shoulders of all, risk attached to individuals”.
(h) Protection against Risks:
Insurance provides protection against risk involved in life, materials and property. It is a device
to avoid or reduce risks.
(i) Insurance is Not Charity:
Charity pays without consideration but in the case of insurance, premium is paid by the insured
to the insurer in consideration of future payment.
(j) Insurance is Not a Gambling:
Insurance is not a gambling. Gambling is illegal, which gives gain to one party and loss to
other. Insurance is a valid contact to indemnity against losses. Moreover insurable interest is
present in insurance contracts it has the element of investment also.
(k) A Contract:
Insurance is a legal contract between the insurer and insured under which the insurer promises
to compensate the insured financially within the scope of insurance policy, the insured
promises to pay a fixed rate of premium to the insurer.
(l) Social Device:
Insurance is a plan of social welfare and protection of interest of the people. Rieged and Miller
observe “Insurance is of social nature”.
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(m) Based upon Certain Principle:
Insurance is a contract based upon certain fundamental principles of insurance, which includes
utmost good faith, insurable interest, contribution, indemnity, cause proxima, subrogation etc,
which are operating in the various fields of insurance.
(n) Regulation under the Law:
The government of every country enacts the law governing insurance business so as to regulate,
and control its activities for the interest of the people. In India General Insurance Act 1972 and
the Life Insurance Act 1956 are the major enactment in this direction.
(o) Wide Scope:
The scope insurance is much wider and extensive various types of policies have been developed
in the country against risk of fire, marine, accident, theft, burglary, life, etc.
(p) Institutional Setup:
After nationalization, the insurance business in the country is operation under statutory
organization setup. In India, the General Insurance Companies and the Life Insurance
Corporation and subsidiary companies of General Insurance Corporation are operating the
various fields of insurance.
(q) Insurance for Pure Risk Only:
Pure risks give only losses to the insured, and no profits. Examples of pure risks are accident,
misfortune, death, fire, injury, etc., which are all the sided risks and the ultimate results in loss.
Insurance Companies issue policies against pure risk only, not against speculative risks.
Speculative risks have chances of profit of losses.
(r) Based on Mutual Goodwill:
Insurance is a contract based on good faith between the parties. Therefore, both the parties are
bound to disclose the important facts affecting to the contract before each other. Utmost good
faith is one of the important principles of insurance.
2.3 Origin of Insurance:
Although insurance nowadays is a modern medium of protection of financial losses against
financial losses, the concept of insurance developed in ancient times. We can discuss the origin
of insurance under two basic things. They are:
2.3.1 Bottomry Bonds and Respondentia Bonds:
It means loan taken against the pledge of vessel. In ancient times almost all business
transactions are performed by maritime way. Sometimes the master of the vessel used to need
funds in mid ocean. In this case he is entitled to raise such fund by pledging vessel. This is
called Bottomry Bonds. Similar loan could also be raised on the pledge of cargo and this was
used to be called as Respondentia Bonds.
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2.3.2 General Average:
It means sharing the loss of one by all. It is an old custom practiced in 916 B.C during the time
of Rhodians. The apportionment of financial liability for the loss arising from the jettisoning
of cargo by dividing the costs among all those whose property (ship or cargo) was preserved
by the action. The law of general average is a legal principle of maritime law according to
which all parties in a sea venture proportionally share any losses resulting from a voluntary
sacrifice of part of the ship or cargo to save the whole in an emergency. This system is still
followed in our modern insurance by sharing of loss of any individual by all the participating
parties.
2.4 Development of Insurance in Bangladesh:
The insurance industry in the country was nationalized in 1972 and two government
corporations- Sadharan Bima Corporation and Jiban Bima Corporation were set up for general
and life insurance respectively. All existing companies except American Life Insurance
Company (ALICO) were merged into these two corporations. The nationalized state of
Bangladesh insurance market continued until 1985 when the government had change in policy
and allowed setting up of insurance company by private sector. Over the year, a good number
of life and general insurance were in phases. Currently, in addition to the two
government corporations, 30s life insurance and 45 general insurance companies are operating
in the country.
2.5 Principles of insurance:
A principle of risk management, based on assumptions of expected outcomes, in which the law
of averages is applied in theory, or in practice to approximate those outcomes. Used by
insurance companies to quantify risk factors and determine the cost of indemnity. In the
following there is a short description of the core seven principles of insurance:
2.5.1 Principal of Utmost Good Faith:
• Both parties, insurer and insured should enter into contract in good faith
• Insured should provide all the information that impacts the subject matter
• Insurer should provide all the details regarding insurance contract
For example - John took a health insurance policy. At the time of taking policy, he was a smoker
and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John
didn't reveal the important facts.
2.5.2 Principle of Insurable Interest:
• Insured must have the insurable interest on the subject matter
• In case of life insurance spouse and dependents have insurable interest in the life of a
person. Corporations also have insurable interests in the life of it's employees
• In case of life or marine insurance, insured must be the owner both at the time of
entering of entering into the insurance contract and at the time of accident.
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2.5.3 Principle of Indemnity:
1. Insured can't make any profit from the insurance contract. Insurance contract is meant for
coverage of losses only
2. Indemnity means a guarantee to put the insured in the position as he was before accident
3. This principle doesn't apply to life insurance contracts
2.5.4 Principle of Contribution:
• In case the insured took more than one insurance policy for same subject matter, he/she
can't make profit by making claim for same loss more than once
For example - Raj has a property worth Rs.5, 00,000. He took insurance from Company A
worth Rs.3, 00,000 and from Company B - Rs.1, 00,000.
In case of accident, he incurred a loss of Rs.3, 00,000 to the property. Raj can claim Rs.3,
00,000 from A but after that he can't make profit by making a claim from Company B. Now
Company A can make a claim from Company B to for proportional loss claim value.
1.5.5 Principle of Subrogation:
After the insured gets the claim money, the insurer steps into the shoes of insured. After making
the payment insurance claim, the insurer becomes the owner of subject matter.
For example: - Ram took a insurance policy for his Car. In an accident his car totally damaged.
Insurer paid the full policy value to insured. Now Ram can't sell the scrap remained after the
scrap.
2.5.6 Principle of Loss Minimization:
• This principle states that the insured must take all the necessary steps to minimize the
losses to inured assets.
For example - Ram took insurance policy fo his house. In an cylinder blast, his house burnt.
He should have called nearest fire station so that the loss could be minimised.
2.5.7 Principle of Causa Proxima:
• Word "Cause Proxima" means "Nearest Cause"
• An accident may be caused by more than one cause. In case property insured for only
one cause. In such case nearest cause of the accident is found out.
• Insurer pays the claim money only if the nearest cause is insured
2.6 Functions of insurance:
Insurance performs multifarious functions, some of which are incidental to the individual
classes of business and some of which are functions of general. There are two types of functions
of insurance. This are-
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> Primary functions
> Secondary functions
2.6.1 Primary functions:
The functions which are incidental to the individual classes of business are called primary
functions. These are:
Provide certainty: Insurance provides certainty of payment at the uncertainty of loss. It is a
useful medium of removing the financial loss or distress arising out of various unexpected
incidents.
Provide protection: Provide protection against the probable chances of loss. This protection
is, of course, in financial way so that he might feel protected.
Risk sharing: Loss is shared by all the persons who are exposed to the risk. This is a unique
system of loss sharing where all the agreed parties are mutually consented through
participation.
2.6.2 Secondary functions:
Secondary functions are those which are functions of general. These are:
Prevention of loss: Insurance companies are joining with such companies which engaged in
preventing the losses of the society because the reduction in loss causes lesser payment to the
assured and so more saving is possible which will assist in reducing the premium
Provides capital: Insurance companies provide capital to the society by investing the
accumulated fund that they collect from people.
Improves efficiency: Insurance companies improve the efficiency of insured person by
eliminating worries and miseries of losses at death and destruction of property.
Helps for economic progress: By protecting the society from huge losses of damage,
destruction and death insurance companies help countries in economic progress.
2.7 Types of Insurance:
Insurance plays a vital role in the life of every citizen and has developed on an enormous scale
leading to the evolution of many different types of insurance. Broadly, insurance may be
classified into the following categories:
2.7.1 Classification on the basis of nature of insurance:
On the basis of nature of the insurance, it is classified into five types. They are:
Life Insurance: A protection against the loss of income that would result if the insured passed
away. The named beneficiary receives the proceeds and is thereby safeguarded from the
financial impact of the death of the insured.
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Fire Insurance: Insurance that is used to cover damage to a property caused by fire. Fire
insurance is a specialized form of insurance beyond property insurance, and is designed to
cover the cost of replacement, reconstruction or repair beyond what is covered by the property
insurance policy.
Marine Insurance: Marine insurance covers the loss or damage of ships, cargo, terminals, and
any transport or cargo by which property is transferred, acquired, or held between the points of
origin and final destination.
Social Insurance: Social insurance, public insurance program that provides protection against
various economic risks (e.g., loss of income due to sickness, old age, or unemployment) and in
which participation is compulsory. Social insurance is considered to be a type of social security,
and in fact the two terms are sometimes used interchangeably.
Miscellaneous Insurance: 'Miscellaneous Insurance' refers to contracts of insurance other
than these of Life, Fire and Marine insurance. This branch of insurance is of recent origin and
it covers a variety of risks. Examples: Burglary, product liability, cash in safe and transit,
fidelity guarantee etc.
2.7.2 Classification from business point of view:
From business point of view insurance is only two types:
Life Insurance: In this case the subject matter will only be the human life where pays out a
sum of money either on the death of the insured person or after a set period.
General Insurance: General insurance or non-life insurance policies, including automobile
and homeowners policies, provide payments depending on the loss from a particular financial
event. General insurance is typically defined as any insurance that is not determined to be life
insurance.
2.7.3 Classification from risk point of view:
On the basis of risk insurance is classified into four separate items. These are:
Personal Insurance: Personal insurance lines help protect individuals from potential losses
they could not afford to cover on their own and make it possible to do things like drive a car
and own a home without risking financial ruin.
Property Insurance: Property insurance provides protection against most risks to property,
such as fire, theft and some weather damage. This includes specialized forms of insurance such
as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance.
Liability Insurance: Liability insurance is a part of the general insurance system of risk
financing to protect the purchaser (the "insured") from the risks of liabilities imposed by
lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that
come within the coverage of the insurance policy.
Fidelity Guarantee Insurance: Liability insurance is a part of the general insurance system
of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed
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by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims
that come within the coverage of the insurance policy.
Classification of
Insurance
Based on risk
point of view
Life insurance Life insurance Personal
insurance
Fire insurance
I General
insurance
Property
insurance
Marine
insurance
Liability
insurance
Social insurance
Miscellaneous
insurance
Figure 1: Classification of insurance.
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Chapter 3:
Overview o f the insurance industry o f U SA
Page 19 of 78

United States of America is one of the leading countries in the world. As a developed country
the standard of living of the citizen of USA is very high. United States of America is the world’s
largest nominal economy which represent 22% of nominal global GDP and its nominal GDP
is $17.42 trillion. So, such a country with a huge nominal GDP must have highly developed
insurance sector. The insurance sector of USA is highly developed and the citizen of USA
cannot think their daily life without the coverage of insurance. There are verities types of
insurance policy in USA. But, the health insurance is very crucial in USA, because it is must
for all citizen. They cannot think about medical treatment without insurance coverage because,
the medical treatment in USA is very expensive.
3.1 Types of Insurance Policies available in USA:
As the insurance industry of USA is very developed, they provide verities type of coverage to
the insured. The insurance companies of USA are introducing different new types of policies
based on the customers and overall socio-economic contingencies. Different types of polices
available in USA are shown in the following figure and described in details.
Life
' Insurance r
Policy fm B it
Health
Insurance f
nsuranc%
e Policies »
Available /
Marine
' Insurance
in VSA/// Fire k
Policy
' Insurance *
Policy
/ Terrorism
Insurance /
V
Figure 2 : Classification of insurance of USA.
3.1.1 Life Insurance
Life insurance is often considered the cornerstone of financial plans by many individuals and
their financial advisors. While the main purpose of life insurance is to help take care of your
family in the event of your death, policies can also serve other purposes including:
> Providing funds to pay final expenses.
> Creating an inheritance for your heirs.
> Making charitable contributions in the event of your death.
> Creating a source of tax-deferred savings.
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3.1.1.1 Term Life Insurance:
Term life insurance is as basic as it gets. It’s referred to as “term” because it’s only in effect
for a specific period of time, or term. This type of insurance is available in the most of the
insurance companies in USA. Unlike permanent life insurance, it doesn’t accumulate cash
value so it’s typically the most affordable insurance. It’s designed solely to protect the insured
family, home or savings should anything happen to insured. With an annually renewable term,
insured’s premiums may increase each year, but with level term, premiums stay constant. That
being said, the USA insurer companies managed to include life insurance policy enhancements
that no other major life insurance companies offer.
3.1.1.2 Whole life Insurance:
It is also a popular type of insurance in USA which are offered by most of the insurance
policies. A form of permanent life insurance, whole life insurance features guaranteed
premiums, death benefits, and cash value. Whole life insurance policies also give you the
potential to receive dividends, which can increase the value of the policy when the insured is
living or provide an increased death benefit for your beneficiaries.
3.1.1.3 Universal Life Insurance:
Now-a- day’s universal life insurance is getting more and more popular. It is permanent
insurance that provides protection in case of death, as well as a savings or cash value
component. The cash value of a universal life policy is based on the amount of premiums you
pay, the declared interest crediting rate and the policy charges.
Unlike Term Life insurance or Whole Life insurance, flexible premium universal life policies
permit flexibility in the amount and timing of premium payments (within limits), and they
generally offer you the ability to vary the death benefit amount based on your circumstances.
3.1.1.4 Indexed Universal Life Insurance:
Indexed universal life insurance combines life insurance protection with equity-linked
accumulation potential. It has some of the same features as Universal Life, like premium
flexibility, and offers more growth potential, but with potentially less risk than variable
universal life insurance.
3.1.1.5 Variable Universal Life Insurance:
Variable universal life insurance combines insurance protection with investment opportunity.
It has the same premium flexibility as Universal Life, but offers a range of investment choices.
Premium payments are flexible. After an initial payment, you can make additional premium
payments at virtually any time and in any amount (subject to certain minimums and
maximums).
Your policy continues as long as there is enough cash value to cover monthly insurance charges
and you can invest premiums in one or more underlying portfolios offering different levels of
risk and growth potential.
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Investment portfolios provide long-term growth potential, tax-deferred earnings, and the ability
to make tax-free transfers among the investment portfolios.
3.1.1.6 Survivorship Life Insurance:
Survivorship policies insure two lives, typically a husband and wife, under one life insurance
policy and pays a life insurance benefit after the surviving insured has passed away. The life
insurance benefit can be used to help pay estate taxes, estate settlement costs, or as a way to
leave an inheritance to children and grandchildren.
3.1.1.7 Endowment Insurance:
Endowment policy is the kind of insurance that the insured is paid a lump sum when the
insurance policy contract matures, when the insured suddenly becomes critically ill, or when
the insured person dies in which case the family or the beneficiary is paid. The typical maturity
terms are from 5, 10, or 20 years until at a certain age.
3.1.1.8 Group Term Life Insurance:
Group life insurance is one of the popular insurance policy in USA. Group life insurance is a
type of life insurance in which a single contract covers an entire group of people. Typically,
the policy owner is an employer or an entity such as a labor organization, and the policy covers
the employees or members of the group. Group life insurance is often provided as part of a
complete employee benefit package. In most cases, the cost of group coverage is far less than
what the employees or members would pay for a similar amount of individual protection. So if
you are offered group life insurance through your employer or another group, you should
usually take it, especially if you have no other life insurance or if your personal coverage is
inadequate.
3.1.2 Marine Insurance:
In a developed country like USA the marine insurance is very important type of insurance.
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or
cargo by which property is transferred, acquired, or held between the points of origin and final
destination. Different type’s marine insurance available in USA are described below:
3.1.2.1 Worldwide Marine Cargo Insurance:
As U.S.-based companies expand into the global market, the risks that can occur while
merchandise is transported between buyer and seller become more complex. Some leading
insurers are industry leaders in providing innovative cargo insurance solutions for international
and domestic trade. The worldwide marine cargo insurance policy protects against loss from
the time cargo leaves the point of origin until it reaches a final destination.
3.1.2.2 Marine Hull and Protection & Indemnity:
Companies in the marine transportation industry can minimize their losses with Marine Hull
and Protection and Indemnity products. Insurance companies of USA provide comprehensive
marine insurance for inland and coastal commercial vessel operators. Our marine claim and
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recovery experts work with our underwriting team to identify loss trends and industry
conditions to ensure the best rates and coverage for our customers.
3.1.2.3 Marine Liability Insurance:
Terminal operators, charterers, ship yards/repairers, marine contractors and stevedoring
operations must protect against risks that can impact their corporate assets. Businesses can
minimize their exposure with Marine Liability Insurance, designed to address the unique needs
of this segment of the U.S. marine market.
3.1.3 Health Insurance:
Health Insurance is mandatory in USA. The people of USA cannot think about medical
treatment without health insurance. Different types of Health policies are available in USA.
For the migrated people in USA and for the tourist it is must.
3.1.4 Aviation Insurance:
Aviation insurance is one of the most important insurance in USA. Different types of aviation
insurance available is described below:
1. General Aviation
2. Airline Insurance
3. Airport Liability Insurance
3.1.5 Environment Insurance:
Most of the insurance companies offer environmental risk products and services for every
sector - from small business to multinationals. We distribute solutions through retail and
wholesale channels for premises and services based exposures, addressing the needs of
contractors, consultants and facility owners and operators.
Premises Pollution Products: The types of premises pollution products are discussed below:
1. Premises Pollution Liability (PPL) Policy: The insurance companies of USA
understand that environmental liabilities can impact almost any business operation. We
specialize in underwriting pollution coverage with our suite of Premises Pollution
Liability (PPL) products, which can be structured to offer residential, commercial,
retail, agricultural and industrial property owners, managers and operators a broad
range of pollution liability protection for gradual, as well as sudden and accidental,
first-party and third-party environmental liabilities to help manage future, potentially
unforeseen pollution exposures
2. Public/Educational Entity Pollution Liability Endorsement: Public/Educational
Entities can access all the coverages and benefits of Premises Pollution Liability (PPL)
Policy, including specific enhanced coverages tailored to their specific industry risks.
Public Entities included in the program are normally political subdivisions, agencies,
authorities, and public and private schools (K-12) and colleges.
3. Premises Pollution Liability Portfolio (PPL Port) Policy: The Premises Pollution
Liability Portfolio (PPL Port) Policy offers broad-based pollution coverage for owners,
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operators and managers of commercial property, including residential, commercial,
hospitality, warehousing, retail and healthcare facilities.
4. Healthcare Premises Pollution Liability Endorsement: Healthcare facilities can
access all the coverages and benefits of Premises Pollution Liability Portfolio (PPL
Port) Policy, including specific enhanced coverages tailored to healthcare specific risks.
Contractor Pollution Products: The polices under contractor pollution products are discussed
below:
1. Contractors Pollution Liability (CPL): The Contractors Pollution Liability (CPL)
Policy offers solutions specifically developed for contractors, which prevent gaps in
coverage due to pollution-related exclusions on standard commercial general liability
programs. These policies are available for contractors on a practice, project or excess
basis.
2. Contractor Pollution Liability Healthcare Owner-Controlled Insurance Policy:
The CPL Healthcare Owner-Controlled Insurance Policy (OCIP) is designed for
healthcare owners to address specific environmental exposures associated with new
construction and/or renovation work.
3.1.6 Terrorism Insurance:
Terrorism insurance is insurance purchased by property owners to cover their potential losses
and liabilities that might occur due to terrorist activities. It is considered to be a difficult product
for insurance companies, as the odds of terrorist attacks are very difficult to predict and the
potential liability enormous.
It is a newly introduced insurance in USA and it is supported by the Terrorism Insurance Act.
3.1.7 Fire Insurance:
Insurance that is used to cover damage to a property caused by fire. Fire insurance is a
specialized form of insurance beyond property insurance, and is designed to cover the cost of
replacement, reconstruction or repair beyond what is covered by the property insurance policy.
Insurance companies of USA cover all risks against fire incidents, allied perils and
consequential loss
Verities of fire insurance policies are offered by the insurance companies of USA. These
policies are discussed below:
a. Property Damage All Risk Insurance Policy: Property damage all risk insurance
provides insurance coverage in respect of loss of property caused by Fire, Lightning,
Riot & Strike, Explosion, Malicious Damage, Earthquake, Flood, Cyclone & Electrical
Short Circuit and Burglary. Maximum insurance companies of USA provide property
damage all risk insurance policy enormously.
b. Industrial All Risk Insurance Policy: Industrial All Risks covers accidental loss or
damage to insured property at the location specified in the policy. This is a single policy,
which covers loss or damage to industrial property. Many insurance companies of USA
provide Industrial all risk insurance enormously under fire insurance plan.
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3.1.8 Miscellaneous Insurance Policy:
There are certain kinds of insurance policy, which have arisen in due course to meet the
specialized needs of the people of USA. These special policies are provided by insurance
companies of USA. These policies are given below:
Overseas Mediclaim
> 1. Health Plan Scheme
> 2. Burglary & House breaking Insurance
> 3. Cash in safe
> 4. Cash in Transit
> Cash on counter
> Personal Accident Insurance
> Fidelity Guarantee Insurance
> Product / Public Liability
> Workmen’s Compensation Insurance
3.2 The Level ofImportance and Role Created by USA Insurance Industries:
Insurance has evolved as a process of safeguarding the interest of people from loss and
uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life and
property. Insurance contributes a lot to the general economic growth of the country by provides
stability to the functioning of process. The insurance industries develop enrich economic
growth and reduce uncertainties by improving financial resources. The insurance industries of
USA have large contribution in development of personal, social, and economic sector. The
level of importance and role created by USA insurance industries is discussed below:
Increase Safety and Security:
Insurance industries of USA provide financial support and reduce uncertainties in business and
human life. Insurance industries of USA provide safety and security against particular event.
There is always a fear of sudden loss. Insurance provides a cover against any sudden loss.
Generates Financial Resources:
Insurance industry of USA generate funds by collecting premium. These funds are invested in
government securities and stock. These funds are gainfully employed in industrial development
of a country for generating more funds and utilized for the economic development of the
country. Employment opportunities are increased by big investments leading to capital
formation.
Encourage Savings:
Insurance industries do not only protect against risks and uncertainties, but also provide an
investment channel too. Life insurance industries of USA enable systematic savings due to
payment of regular premium. Life insurance industries of USA provide a mode of investment.
Insurance industries of USA develop a habit of saving money by paying premium. The insured
get the lump sum amount at the maturity of the contract.
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Promotes Economic Growth:
Insurance industries of USA generate significant impact on the economy by mobilizing
domestic savings. Insurance industry turns accumulated capital into productive investments.
Insurance industries of USA enable to mitigate loss, financial stability and promote trade and
commerce activities those results into economic growth and development. Thus, insurance
industries of USA play a crucial role in sustainable growth of an economy.
Spreading of Risk:
Insurance industries of USA facilitate spreading of risk from the insured to the insurer. The
basic principle of insurance is to spread risk among a large number of people. A large number
of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is
compensated out of funds of the insurer
Source of Collecting Funds:
Large funds are collected by the way of premium. These funds are utilized in the industrial
development of a country, which accelerates the economic growth. Employment opportunities
are increased by such big investments. Thus, insurance industries of USA have become an
important source of capital formation
Capital Market Role:
As well as stabilizing the financials of individuals, companies and the state. In their role as
institutional investors, insurance companies contribute to the development of a well
functioning capital market thanks to the huge amount of assets they have to invest.
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Chapter-4
Overview o f the insurance industry o f Bangladesh
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Bangladesh is the developing country in the world. As a developing country, the standard living
of the citizen of Bangladesh is medium. The economic growth of Bangladesh is rising, and
GDP growth rate of Bangladesh is 6%. Such a country with a small global GDP growth,
Bangladesh cannot develop its insurance sector enormously. The development of insurance
sector of Bangladesh is rising day by day and the purchase rate of insurance policy is very poor
in Bangladesh.
4.1 Types of Insurance Policy Available In Bangladesh
As the insurance industry of Bangladesh is rising day by day, they provide verities type of
coverage to the insured. The insurance companies of Bangladesh are introducing different types
of policies based on the customers and overall socio-economic contingencies. Different types
of polices available in Bangladesh are shown in the following figure and described in details.
Figure 3: Insurance Policies Available In Bangladesh
1. Life Insurance Policy:
Life insurance is often considered the cornerstone of financial plans by many individuals and
their financial advisors. While the main purpose of life insurance is to help take care of your
family in the event of your death, policies can also serve other purposes including:
■ Providing funds to pay final expenses.
■ Creating an inheritance for your heirs.
■ Making charitable contributions in the event of your death.
■ Creating a source of tax-deferred savings.
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Verities of life insurance policies are offered by the insurance companies of Bangladesh. These
policies are discussed below:
a. Term Life Insurance Policy:
Term insurance is a type of life insurance policy that provides coverage for a certain period, or
a specified "term" of years. If the insured dies during the period specified in the policy and the
policy is active - or in force - then a death benefit will be paid. The insurance companies of
Bangladesh provide term life insurance policy to insured.
b. Endowment Insurance Policy:
The insurance companies of Bangladesh provide Endowment Insurance Policy with Profit and
without profit. This is a fixed term policy. The premium has to be paid until the end of the term
or until the death of the policyholder whichever is earlier. In case the policyholder dies before
the end of the policy term, the sum assured plus the accumulated bonus is paid to the nominee.
If the policyholder survives until the end of the term, he gets sum assured plus bonus. It
provides family protection as well as old age provision at an affordable premium. This policy
is suitable for all categories of people.
c. Child Protection Insurance Policy:
The insurance companies of Bangladesh provide insurance policy for child protection. Child
Protection Policy of Bangladesh Insurance Company will insure both insured and insured’s
child under the same policy even if insured do not have a lot of income. Should the child loss
parents before the policy matures, all the future premiums will be waived, yet the full sum
insured and Bonuses will be paid to the child on the maturity of the policy. The child is offered
a variety of security under this plan.
d. Single Premium Insurance Policy:
Single Premium insurance plan is the popular insurance policy in Bangladesh. Single premium
insurance is a simple insurance plan introduced to customer by insurance company of
Bangladesh to take customer a step ahead. For those who wish to take up an insurance policy
but unwilling to disburse a regular payment rather pay the total premium at a time, this has
proved to be a very useful policy. In this plan, one has to pay the premium only once when
accepting the policy for the whole term and after maturity or death within the term of policy,
the policyholder will get double of the sum assured.
e. Whole Life Insurance Policy:
Whole life insurance policy is the most accepted insurance policy in Bangladesh. Whole life
insurance is a financial plan for the entire life is offered by insurance company of Bangladesh
in the form of Whole Life Insurance. This simple scheme asks one to pay premiums up to 85
years or until his death. The sum assured with accrued bonus is paid to the nominee after the
death of the policyholder.
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f. Pension Policy:
Pension policy is most helpful policy for retired people. Financial security is a major issue for
a person at his or her late age. It is certain that to live a tension free elderly life pension
insurance can definitely be a great deal of help. Pension insurance mitigates the insecurity due
to irregular income at old age as well as ensures handsome amount as death benefit to the
nominee. Many insurance companies of Bangladesh provide pension insurance policy.
2. Marine Insurance Policy:
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or
cargo by which property is transferred, acquired, or held between the points of origin and
final destination.
Verities of marine insurance policies are offered by the insurance companies of Bangladesh.
These policies are discussed below:
a. Marine Cargo Insurance Policy:
Marine Cargo insurance plays an important role in domestic trade as well as international trade.
Marine cargo insurance policy provides insurance cover in respect of loss of or damage to
goods during transit by -rail, -road -sea -air. Marine Cargo insurance protects all goods while
in transit depending upon the needs of the client. Many insurance company of Bangladesh
provide marine cargo insurance policy to businessperson.
b. Marine Hull Insurance Policy:
Marine hull insurance policy is most accepted marine insurance policy by owners of ship.
Under the hull insurance policy, the coverage is given to comprehensive risks for the vessels
and total loss of any package. Vessels may be stranded, grounded, sunk, or capsized and any
package may be lost overboard or dropped whilst loading on to, or unloading from, vessel, we
pay the amount equivalent to the estimated loss. Insurance companies of Bangladesh offer
marine hull insurance to the owners of ship and reduce uncertainty of ship.
c. Inland Transit Insurance Policy:
Inland transit insurance is unpopular insurance policy in Bangladesh. This policy is provided
under marine insurance by few insurance companies of Bangladesh. Inland transit insurance
provides insurance cover in respect of loss of goods during transit by rail, road, and water borne
in Bangladesh.
3. Fire insurance Policy:
Insurance that is used to cover damage to a property caused by fire. Fire insurance is a
specialized form of insurance beyond property insurance, and is designed to cover the cost of
replacement, reconstruction or repair beyond what is covered by the property insurance policy.
Insurance companies of Bangladesh cover all risks against fire incidents, allied perils and
consequential lossVerities of fire insurance policies are offered by the insurance companies of
Bangladesh. These policies are discussed below:
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a. Property Damage All Risk Insurance Policy:
Property damage all risk insurance provides insurance coverage in respect of loss of property
caused by Fire, Lightning, Riot & Strike, Explosion, Malicious Damage, Earthquake, Flood,
Cyclone & Electrical Short Circuit and Burglary. Maximum insurance companies of
Bangladesh provide property damage all risk insurance policy enormously.
b. Industrial All Risk Insurance Policy: Industrial All Risks covers accidental loss or
damage to insured property at the location specified in the policy. This is a single policy,
which covers loss or damage to industrial property. Many insurance companies of
Bangladesh provide Industrial all risk insurance enormously under fire insurance plan.
4. Aviation Insurance Policy:
Aviation insurance policy is very unpopular insurance policy for Bangladesh. Few
insurance companies of Bangladesh provide aviation insurance policy .Aviation insurance
is insurance coverage geared specifically to the operation of aircraft and the risks involved
in aviation. Aviation insurance policies are distinctly different from those for other areas of
transportation and tend to incorporate aviation terminology, as well as terminology, limits
and clauses specific to aviation insurance.
Verities of aviation insurance policies are offered by the insurance companies of Bangladesh.
These policies are given below:
> Hull Insurance policy
> Liability Insurance policy
> War Insurance Policy
5. Engineering Business Insurance Policy:
Engineering insurance refers to the insurance that provides economic safeguard to the risks
faced by the ongoing construction project, installation project, and machines and equipment in
project operation. Many insurance companies of Bangladesh provide engineering business
policy.
Verities of engineering business insurance policies are offered by the insurance companies of
Bangladesh. These policies are discussed below:
a. Contractors All Risks Insurance: The basic concept is to offer comprehensive and
adequate protection against loss or damage in respect of the contract works,
construction plant and equipment and/or construction machinery.
b. Contractors Plant & Machinery Insurance: This is an insurance of contractors' plant
and machinery on an annual basis. It covers any loss or damage occurring at works, at
rest or during maintenance operations and is limited to a specific construction site.
c. Deterioration of Stock Insurance: Deterioration of Stock in Cold Storage insurance
is designed to meet the requirements of those who want to insure their stocks against
deterioration due to temperature rise while in cold storage as a result of breakdown of
refrigerating machinery.
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d. Electronic Equipment Insurance: This insurance provides cover for loss or damage
to all electrical systems or equipment, which generally have only a moderate power
requirement while such equipment is at work, at rest or during maintenance operations.
e. Machinery Insurance: It is designed to provide effective insurance cover for plant,
machinery and mechanical equipment at work, at rest or during maintenance operations
6. Miscellaneous Insurance Policy:
There are certain kinds of insurance policy, which have arisen in due course to meet the
specialized needs of the people of Bangladesh. These special policies are provided by
insurance companies of Bangladesh. These policies are given below:
> Overseas Medical claim
> 2. Health Plan Scheme
> 3. Burglary & House breaking Insurance
> 4. Cash in safe
> 5. Cash in Transit
> Cash on counter
> Personal Accident Insurance
> Fidelity Guarantee Insurance
> Product / Public Liability
> Workmen’s Compensation Insurance
4.2 The Level ofImportance and Role Created by USA Insurance Industries:
Insurance has evolved as a process of safeguarding the interest of people from loss and
uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life
and property. Insurance contributes a lot to the general economic growth of the country by
provides stability to the functioning of process. The insurance industries develop enrich
economic growth and reduce uncertainties by improving financial resources. The insurance
industries of Bangladesh have large contribution in development of personal, social, and
economic sector. The level of importance and role created by Bangladesh insurance
industries is discussed below:
Page 32 of 78

Contributi
on to
GDP
r
r
Increase
afety an
security
L V
r 1
(
i
^apita
vlarke1
L
Role
/
Jromot(
conomi
3 1
c
L
growth
f
Figure 4: Importance and Role of Insurance Industry of Bangladesh
1. Increased safety and security:
Insurance industries of Bangladesh provide financial support and reduce uncertainties in
business and human life. Insurance industries of Bangladesh provide safety and security against
particular event. There is always a fear of sudden loss. Insurance provides a cover against any
sudden loss.
2. Generate financial resources:
Insurance industry of Bangladesh generate funds by collecting premium. These funds are
invested in government securities and stock. These funds are gainfully employed in industrial
development of a country for generating more funds and utilized for the economic development
of the country. Employment opportunities are increased by big investments leading to capital
formation.
3. Life insurance industries encourage to savings:
Insurance industries do not only protect against risks and uncertainties, but also provide an
investment channel too. Life insurance industries of Bangladesh enable systematic savings due
to payment of regular premium. Life insurance industries of Bangladesh provide a mode of
investment. Insurance industries of Bangladesh develop a habit of saving money by paying
premium. The insured get the lump sum amount at the maturity of the contract.
Page 33 of 78

4. Promote economic growth:
Insurance industries of Bangladesh generate significant impact on the economy by mobilizing
domestic savings. Insurance industry turns accumulated capital into productive investments.
Insurance industries of Bangladesh enable to mitigate loss, financial stability and promote trade
and commerce activities those results into economic growth and development. Thus, insurance
industries of Bangladesh play a crucial role in sustainable growth of an economy.
5. Spreading of risk:
Insurance industries of Bangladesh facilitate spreading of risk from the insured to the insurer.
The basic principle of insurance is to spread risk among a large number of people. A large
number of persons get insurance policies and pay premium to the insurer. Whenever a loss
occurs, it is compensated out of funds of the insurer
6. Source of collecting funds:
Large funds are collected by the way of premium. These funds are utilized in the industrial
development of a country, which accelerates the economic growth. Employment opportunities
are increased by such big investments. Thus, insurance industries of Bangladesh have become
an important source of capital formation.
7. Capital Market Role:
As well as stabilizing the financials of individuals, companies and the state. In their role as
institutional investors, insurance companies contribute to the development of a well
functioning capital market thanks to the huge amount of assets they have to invest.
8. Contribution of Insurance in GDP:
The insurance industries of Bangladesh also contribute in GDP of Bangladesh. The level of
contribution in GDP of insurance industries of Bangladesh is very poor.
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Chapter-5:
Comparative Analysis on Financial Performance and Condition
between US and Bangladesh Insurance Industries
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In this chapter, the report depicts on the key analytical facts that exist between the two
concerned regions in the light of comparison and informative statements. The chapter also
focuses on the different factors that the makers of the report have decided to be important to
focus as a matter of differential analysis among the countries with regard to insurance
industries.
5.1: Comparative Analysis ofHouseholds savings for Insurance Premiums in US
and Bangladesh:
The savings nature of the people of Bangladesh and US are shown here in Pie Chart so that we
can have a better understanding of the consciousness level, tendency and significance level of
buying coverages among the people of the concerned zones from the income they make.
5.1.1: The Households Savings Trend in Bangladesh:
In the following chart, the household savings trend in Bangladesh can be seen:
Constitution of Household Savings in
Bangladesh
Others savings
8%
Insurance Funds or Liquid money
Pemiums 20%
19%
Provision and Deposits in Banks
Pension Funds 47%
6%
Figure: Constitution o fHousehold Savings in Bangladesh
Interpretation:
Here, we can see that the average savings of the people in Bangladesh for different sort of
insurance is about 19%. The source from where we got the data is IDRA (Insurance
Development and Regulatory Authority in Bangladesh). Here, we see that, the analysis shows
a poor standing of the people’s buying coverage.
Source of data 1: IDRA (Insurance Development and regulatory Authority)
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5.1.2: The Households Savings Trend in US:
In the following chart, the household savings trend in United States can be seen:
The Household savings Trend in US
14% 5%
1 fm 30% ■ Liquid money
' ■ • . 1 ' W ■ Deposits in Banks
33%
■ Provision and Pension Funds
' ' 1 1 18%
■ Insurance Funds or Pemiums
^ 7 ■
■ Others savings
Figure: The Household savings Trend in US
Interpretation:
Here, in the Pie Chart, we can see that the very trifling amount of savings the US people keep
for their liquid hand cash and a very handsome amount of their income goes to paying the
premiums of the coverage amounting to about 33%. The source of this data is III (Insurance
Information Institute).
N.B: Here, the average o f the respective region ’s p e o p le ’s cases has been used to draw the
mean value to represent. The standard error exists in the information represented here. Also,
the data were secondary.
5.1.3: Analytical Result:
The analytical result of the analysis shows that, the US people are more trending in buying
more coverage near to double to Bangladesh’s people. So, here, we can conclude that US is
more ahead in this respect than Bangladesh.
5.2: Comparative Analysis of Total Premium between the Insurance Industries of
Bangladesh and US:
In this section of the chapter, the comparative analysis of total premium over the years is shown
with respect to the regions already concerned.
2 National Center for Education Statistics
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Here, the chart of the total premium charged by the whole insurance industries on the
policyholders of Bangladesh is given below:
5.2.1: Total Premium Analysis of Insurance Industries over the Years in Bangladesh:
3
Figure: Total Premium Analysis o f Insurance Industries over the Years in Bangladesh
Interpretation:
Here, the total premium analysis of Bangladesh Insurance Industries has been shown where it
is noticeable that from the Fiscal Year (FY) 2006 the premium or loading charge has been
increased gradually with no negative sloping trend. In the FY 2015, the loading has been
increased up to 2035 million taka which is very large amount in consideration of FY 2006. It
shows two important things side by side:
I The insurance industry in Bangladesh has developed from the very inception of its
journey till now at a very good extent.
I The Non Life insurance sector in Bangladesh is very dominant than that of LIP.
The analysis of the past nine years gives us the best views ever on the premium total charged
as loading by the insurance industries in Bangladesh.
5.2.2: Total Premium Analysis of Insurance Industries over the Years in US:
Here, the chart of the total premium charged by the whole insurance industries on the
policyholders of US is given below:
Source of data 1: IDRA (Insurance Development and Regulatory Authority in Bangladesh)
Page 38 of 78

Figure: Total Premium Analysis o fInsurance Industries over the Years in US
Interpretations:
Here, in the chart the pointing focal points show a gradual development of the US insurance
industries as same as that of Bangladesh. Because the growth of U S’s insurance industries is
almost as same as that of Bangladesh. But the numeric figures shown are on an average more
than 10 times of the loading charged in the region of Bangladesh. The insurance industries of
US now charge a premium loading of about $305250000 shown in the FY 2015 comparing to
that of $74700000 in the FY 2006 in case of Non Life Sector and $132150000 in the FY 2015
and comparing to $490000 in 2006. So, also the US insurance industries have a positive
trending having an upward sloping.
The analytical result shows that the US insurance industries and Bangladesh insurance
industries both have a positive trending with increasing premium loading. The following points
matter in this case with a backing of strong judgments:
I In both of the regions, the insurance industries are developing and number of
policyholders is increasing.
I The comparative factors are the numerical values are more than ten times larger in the
US region’s insurance industries’ premium loading factors. It shows that US insurance
industries are much more in a grown stage than that of Bangladesh.
5.3: Comparative Analysis on Financial Performance between US Insurance
Industries and Bangladesh Insurance Industries:
In this part of the chapter, the report tends to show the financial and economic contribution of
US insurance industries and Bangladesh insurance industries and after that a brief discussion
on analytical result is going to be provided on the findings.
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Here, the economic contribution of the insurance industries of Bangladesh in the economy of
Bangladesh over the past ten years has been shown. Also, the 2015-16 has been estimated by
the makers of report on the basis of their findings from the related and relevant information
and statistical analysis.
5.3.1: Economic Contribution of Bangladesh Insurance Industries in the Economy of
Bangladesh:
Table: Contribution ofInsurance Sector to the Economy ofBangladesh4
Table 1: Contribution ofInsurance Sectortothe Economy ofBangladesh
Year Contribution of Growth of Contributi Contribution Contribution
Insurance on (as % of GDP) (% of FS)
( Tk. Millio (% Growth)
2003-04 2400 14.7 0.158 10.5
2004-05 2840 18.3 0.178 11.8
2005-06 3370 18.3 0.203 13.9
2006-07 3810 13.3 0.217 14.4
2007-08 4380 14.9 0.237 15.7
2008-09 4960 13.5 0.256 16.9
2009-10 5600 13.1 0.273 18.1
2010-11 6360 13.5 0.295 19.5
2011-12 7140 12.4 0.317 20.5
2012-13 7880 10.3 0.332 21.2
2013-14 8510 9.9 0.346 22.0
2014-15 9220 8.3 0.341 21.3
2015-16
(Estimated)
9910 7.4 0.347 21.3
Here, we can see that the insurance industries of Bangladesh have a gradually increasing but
reducing growth rate of return to the economy of Bangladesh. There have been many reasons
associated with the reducing growth rate such as political turmoil, negative impact of climatic
change, demographic disorder, or other trends of business and economic cycles etc.
Here, the makers of the report have estimated the value of the FY 2015-2016. By applying
formula of basic statistical techniques, on the basis of the previous data and future financial
trends, the estimation has been done.
5.3.2: Economic Contribution of US Insurance Industries in the Economy of US:
Here, the economic contribution of the insurance industries of US in the economy of US over
the past ten years has been shown. Also, the 2015-16 has been estimated by the makers of
4 Bangladesh Bureau of Statistics
Page 40 of 78

report on the basis of their findings from the related and relevant information and statistical
analysis.
Table 2: Contribution ofInsurance Sector to the Economy of US5
Table 1: Contribution ofInsurance Sectortothe Economy ofUS
Year Contribution of Growth ofContributi Contribution Contribution
Insurance on (as %ofGDP) (%ofFS)
( Tk. Millio (%Growth)
2003-04 1587 18% 0.118 15.5
2004-05 1873 12% 0.135 17.2
2005-06 2097 11% 0.167 18.4
2006-07 2349 13% 0.193 19.5
2007-08 2725 16% 0.253 22.4
2008-09 2970 9% 0.178 17.8
2009-10 3297 11% 0.193 18.2
2010-11 3693 12% 0.282 18.7
2011-12 3988 8% 0.168 16.4
2012-13 4386 10% 0.303 17.3
2013-14 4869 11% 0.201 17.9
2014-15 5843 20% 0.364 25.2
2015-16
(Estimate
__
6894 18% 0.342 24.7
Here, we find that the contribution of US insurance industries fluctuate on the basis of the
country’s own business cycle, trade cycle, monetary policies and other fiscal policies. Also the
US chart shows that the recent trends are very positive comparing to the previous years of
contributions. All the necessary details shown in this table help in the estimation that also
includes a bit standard error. However, it’s in very good position to support the US economy.
The analytical results of the previous analyses show the following points in brief:
I The insurance industries of Bangladesh are making gradual and positive efforts over
the past ten years but the US insurance industries’ show a fluctuating trend of
contribution in the US economy.
I The growth rate of contribution is reducing because of the previously mentioned factors
in Bangladesh. On the other hand, the growth rate of contribution of US insurance
industries is fluctuation due to many reasons previously mentioned.
I There is a positive relationship between the variables given the charts both in case of
US and Bangladesh insurance industries coincidentally.
5 Bureau of Economic Analysis (BEA)
Page 41 of 78

5.4: Comparative Analysis on Market Share Capture of Self region’s Total
Premium, between US Insurance Industries and Bangladesh Insurance Industries:
In this very last part of the chapter, an ultimate analysis of the market share capture of the
world’s total premium is going to be shown both numerically and graphically for better
understanding. Here, in this part, the top ranking insurance companies of both of the countries
are shown with their respective market values of gross premiums and after that an analysis of
the GDP estimators and at last the world’s market capture of both of the region’s insurance
industries are shown in a sophisticated way.
5.4.1: Analysis of Bangladesh Insurance Industries’ Market Share Capture of Bangladesh:
Here, below a table has been shown where the analytical and statistically calculated values are
shown for analysis:
Table: Analysis o fBangladesh Insurance Industries’M arket share capture o f Bangladesh
Year Population of
Bangladesh
Average
Percentage of
People Buying
Coverage
2012 158, 570,535 9 %
2013 161, 083,804 12%
2014 163,654,860 15%
2015 166,280,712 19%
Interpretation:
Here, we find that only 9% of the whole population of Bangladesh used to remain under
coverage of any type of insurance policy directly or indirectly. But the percentage gradually
increased to 19% in the year of 2015 which is a tremendous success for the insurance industries
only in four years expansion.
5.4.2: Analysis of US Insurance Industries’ Market Share Capture of US:
Here, below a table has been shown where the analytical and statistically calculated values are
shown for analysis:
Table: Analysis o f US Insurance Industries’M arket share capture o f US.
Year Population Of US Average Percentage of
People Buying Coverage in
US
2012 3 1 3 ,232,044 65%
2013 3 1 3 ,847,465 66%
2014 3 1 6 ,668,567 68%
2015 3 1 8 ,892,103 70%
Page 42 of 78

The analytical result of above analysis shows the following factors:
I The US insurance industries have less growth in comparison to that of Bangladesh.
I But the US insurance industries are three times stronger than that of Bangladesh with
relevance to market share capture.
5.5: Comparative Analysis on Market Share Capture ofthe Whole World’s Total
Premium, between US Insurance Industries and Bangladesh Insurance Industries:
Here, the whole world is going to be concerned in comparison with our each country now for
a worldwide view:
5.5.1: Analysis of Bangladesh Insurance Industries’ Market Share Capture of the Whole World:
The following analyses are based on the statistical calculation and some information is shown
from different sources from where they have been derived.
Life Insurance Companies Gross written premiums
BDT Mn USD Mn
MetLife Alico 16,687.7 203.9
Fareast Islami Life 7,031.3 85.9
National Life 7,025.1 85.8
Popular Life 6,617.8 80.8
Delta Life 5,085.6 62.1
Meghna Life 4,011.8 49.0
Jiban Bima Corporation 3,199.9 39.1
Sandhani Life 2,249.0 27.5
Prime Islami Life 2,071.3 25.3
Progressive Life 1,714.1 20.9
Table: The Top Raking Non Life Insurance Industries in Bangladesh with Relevance to
Premium
Here, the top ranking Non Life Insurance industries in Bangladesh in the Fiscal year 2015 has
been shown both in BDT and US$ to have a better comparison of premium loading.
Here, the top ranking Life Insurance companies in Bangladesh in the Fiscal year 2015 has been
shown both in BDT and US$ to have a better comparison of premium loading.
Now, the market capture of the insurance industries of Bangladesh in the whole world is shown
below:
Page 43 of 78

Table: Percentage o f Market Share Capture by Bangladesh Insurance Industries
Non Life Insurance Companies Gross written premiums
BDT Mn USD Mn
Green Delta Insurance Co 2,601.4 31 8
Ltd
Sadharan Bima 2,212.0 27 0
Corporation
Pioneer Insurance Co Ltd 1,701.3 20.8
Reliance Insurance 1,486.3 18.2
Limited
Pragati Insurance Ltd 1,151.3 14.1
Rupali Insurance Co Ltd 759.5 9.3
Eastland Insurance Co Ltd 650.1 7.9
Phoenix Insurance Co Ltd 614.6 7.5
Bangladesh Gen Ins Co 591.5 7.2
Ltd
Continental Insurance Ltd 451.2 5.5
Interpretation:
From the table, it’s found that Bangladesh insurance industries have achieved altogether only
0.02% of the whole world’s market premium holdings. So, it can be said that the Bangladesh
insurance industries are in a very trifling stage now in the FY 2015 but much better condition
than its previous FYs.
5.5.1: Analysis of US Insurance Industries’ Market Share Capture of the Whole World:
The following analyses are based on the statistical calculation and some information is shown
from different sources from where they have been derived.
Table: Top ranking Non Life Insurance Companies in Us with Relevance to Premium
Loading
Particulars Direct premiums
Written ($Mn)
Nonlife premiums (1) 2035
Life premiums 881
Total premiums 2916
Percent of total world
premiums
0.02%
Here, the top ranking Non Life Insurance companies in US in the Fiscal year 2015 has been
shown both in US$ to have a better comparison of premium loading.
Page 44 of 78

Table: The Top Raking Life Insurance Industries in US with Relevance to Premium
Particulars Direct premiums
Written( In Mn $)
Nonlife premiums 30525
Life premiums 13215
Total premiums 43740
Percent of total
world
27.13%
Now, the market capture of the insurance industries of Bangladesh in the whole world is
shown below:
Table: Percentage o f Market Share Capture by US Insurance Industries
Non Life Insurance Companies in US Direct premiums written (1)
USD Mn
State Farm Mutual Automobile
Insurance
55,994.2
Liberty Mutual 28,906.3
Allstate Corp. 27,583.6
American International Group 23,169.1
Travelers Companies Inc. 22,842.9
Berkshire Hathaway Inc. 18,284.1
Farmers Insurance Group of 18,079.5
Companies (2)
Nationwide Mutual Group 17,802.7
Progressive Corp. 17,562.6
USAA Insurance Group 14,562.0
Top Ranking Life Insurance Industries in Direct written premiums (1)
US
USD Mn
MetLife Inc. 85,001.7
Prudential Financial Inc. 41,407.4
Page 45 of 78

Jackson National Life Group 25,728.1
AEGON 24,499.9
Lincoln National Corp. 24,274.1
New York Life Insurance Group 24,223.4
American International Group 21,698.6
Voya Financial Inc. 20,228.6
Manulife Financial Corp. 19,263.2
Principal Financial Group Inc. 18,909.4
Interpretation:
From the table, it’s found that US insurance industries have achieved altogether 27.13% of
the whole world’s market premium holdings. So, it can be said that the US insurance
industries are in a very dominating stage now in the FY 2015 but only a bit better condition
than its previous FYs.
5.6: Reasons of the Failure of the Bangladesh Insurance Industries in
Comparative Competition with the Insurance Industries of United States:
The insurance industries of United States (US) and those of Bangladesh have huge differences
in many sectors. The reasons of the differences may have been many but some of the key
reasons of the sky-earth differences are shown below:
Bangladesh’s Independence being far later than that of US’s:
Bangladesh got its independence in the year of 1971. Comparing to that of the U S’s, it’s a mere
child. That’s why the development of the insurance industries in Bangladesh is also a late
consequence.
The Consciousness among the People:
The consciousness among the people of Bangladesh is also in a neglecting stage in comparison
with that of the U S’s. As the people of Bangladesh are not so much health or property conscious
because of many concerned reasons, that’s why, buying policy is also a matter of superstition
to them.
Difference of Education Level between the Countries:
Where in US, more than 90% of the people on an average are educated; the people in
Bangladesh are very drastically poor in education. That’s why they don’t understand the value
of safety from risk and insurance. They have least idea over this issue for what buying coverage
is less present in the region of Bangladesh.
Page 46 of 78

Average Less Net W ealth among people of Bangladesh:
On an average, the net wealth among the people of Bangladesh is very scarce, that’s why the
risk level is also very low the resultant consequence is nothing but the less enthusiasm to buy
more coverage.
Income Effect:
The income effect matters a lot. When more income emerges, risk also associates with the
income. Income level is very low in Bangladesh for what the people in Bangladesh also face
less risk to buy more coverage.
Less Publicity and Marketing:
Less publicity and marketing among the target markets and the common people have made it
difficult for the insurance industries in Bangladesh to develop to a larger extent.
Legal Bindings for the Citizens:
It’s a legal binding for the people and citizens of the United States to purchase some specific
coverages or policies for a convenient life there but in Bangladesh it’s not mandatory. Even,
it’s not suggested to buy any coverage in Bangladesh for convenient and safe lifestyle.
Government Subsidy:
There is no specific government subsidy applicable to the insurance industry in the region of
Bangladesh but there are lot of subsidies and motivational packages for the insurers from the
side of government.
Financial Capacity of the Insurance Industries in Bangladesh:
The financial capacity of the insurance industries in Bangladeshis not so much flourished to
captivate the policyholders from all types of risks and uncertainties, for what the coverage is
also not enthusiasized from even the side of the insurers.
Number of Insurance Companies:
The number of insurance companies in Bangladesh is not so much overwhelming in
comparison with that of the United States. That’s why the overall insurance industry is
considerably in a minor stage with respect to other industries in becoming a matter of focus to
the government, people, and the foreign investors.
So, these are the reasons of lagging behind the US insurance industries that are not so much
difficult for Bangladesh to overcome if proper initiatives are taken immediately.
5.7 Ultimate Decision:
So, it can be concluded that the chapter mainly has focused on different sort of comparative
analysis among the US insurance industries and Bangladesh insurance industries from five
different and major comparable factors’ viewpoints. So, it has been found that in many sectors,
it is proven that US insurance industries are well accomplished but Bangladesh insurance
industries, though in a very scarce position now, but still it is growing in faster mode than that
of the US insurance industries.
Page 47 of 78

Chapter :6
SWOT Analysis
Page 48 of 78

6.1 SWOT Analysis: Theoretical Overview
A SWOT analysis is commonly used in marketing and business in general as a method of
identifying opposition for a new venture or strategy. Acronym for Strengths, Weaknesses,
Opportunities and Threats, this allows professionals to identify all of the positive and negative
elements that may affect any new proposed actions.
It is impossible to accurately map out a business's future without evaluating it from all angles,
which includes an exhaustive look at all internal and external resources and threats. A SWOT
accomplishes this in four straight-forward steps that even rookie business owners can
understand and embrace.
6.1.1 History of SWOT Analysis:
This remarkable piece of history as to the origins of SWOT analysis was provided by Albert S
Humphrey, one of the founding fathers of what we know today as SWOT analysis.
The origins of the SWOT analysis technique is credited by Albert Humphrey, who led a
research project at Stanford University in the 1960s and 1970s using data from many top
companies. The goal was to identify why corporate planning failed. While working on a
research project at the Stanford University sometime around 1960s to 1970s, Albert Humphrey
developed an analytical tool to evaluate the strategic plans and find out why corporate planning
failed. He coined this technique as SOFT analysis where -
S stood for what things are Satisfactory at present,
O denoted what Opportunities can be explored in the future,
F meant the Faults in the present and
T signified the Threats that could surface in the future.
In 1964 Urick and Orr at a conference changed the F to a W, and it has stuck as that, soFt to
sWot.
Page 49 of 78

6.1.2 The Purpose of a SWOT Analysis:
The SWOT analysis enables companies to identify the positive and negative influencing factors
inside and outside of a company or organization. The main purposes of SWOT analysis are-
• To help decision makers and compare ideas.
• To bring a clearer and common purpose and understanding of factors for success.
• To organize the important factors linked to success and failure in the business world.
• To analyze issues that have led to failure in the past.
• To provide linearity to the decision making process allowing complex ideas to be
presented systemically.
• To revise plans to best navigate systems, communities, and organizations
• As a brainstorming and recording device as a means of communication
• To enhance “credibility of interpretation” to be utilized in presentation to leaders or key
supporters.
6.1.3 Scope of Using SWOT Analysis:
SWOT is meant to be used during the proposal stage of strategic planning. It acts as a precursor
to any sort of company action, which makes it appropriate for the following moments:
• Exploring avenues for new initiatives
• Making decisions about execution strategies for a new policy
• Identifying possible areas for change in a program
• Refining and redirecting efforts mid-plan
The SWOT analysis is an excellent tool in organizing information and presenting solutions,
identifying roadblocks and emphasizing opportunities.
Besides, the above mention fields here are some examples of when a SWOT analysis can be
used to assess:
• A company (its position in the market, commercial viability, etc)
• A method of sales distribution
• A product or brand
• A business idea
• A strategic option, such as entering a new market or launching a new
product
Page 50 of 78

• A opportunity to make an acquisition
• A potential partnership
• Changing a supplier
• Outsourcing a service, activity or resource
• Project planning and project management
• An investment opportunity
• Personal financial planning
• Personal career development - direction, choice, change, etc.
• Education and qualifications planning and decision-making
• Life-change - downshifting, relocation,
• Relationships, perhaps even family planning
6.1.4 The elements of a SWOT analysis
A SWOT analysis is a common strategic business planning tool that involves composing a list
of four elements related to a new business project: strengths, weaknesses, opportunities and
threats.
-I- Strengths
In a SWOT analysis, strengths describe the core competencies of a business, strategic factors
that may make a certain project more likely to succeed and areas where the business may have
advantages over other similar businesses. Strengths are resources and capabilities that can be
used for competitive advantage. For example, if an established cereal company plans to launch
a new product, brand recognition might be listed as strength. Examples of strengths that are
often cited include:
• Strong brand names
• Good reputation
• Cost advantages of proprietary
• Proprietary technology / Patents
• Consistent / growing revenue streams
• Strong customer base across multiple vertical industries
• Experienced Management Team
• Organizational expertise field
Page 51 of 78

• Financial Resources / investor relationships
• Strong brand awareness in the marketplace
• Partnerships with industry leaders
• Refined operations process
• Strong company culture
Businesses that are aware of their strengths are better able to improve and exploit them to their
advantage.
-I- Weaknesses
Weaknesses are things that can make a certain project less likely to succeed and areas where a
company is particularly lacking. Weaknesses can derail a project before it even begins. For
instance, a brand new company might be unknown to most consumers; low brand recognition
and lack of customer loyalty could be weaknesses. Other Weaknesses include:
• Weak brand name
• Poor reputation
• Ineffective and high cost structure etc.
• Poor financial position (debt, declining revenue, etc.)
• Unskilled workforce in critical areas
• Unfavourable perception of brand in marketplace
• No proprietary technology / patents in critical areas
• Out of date equipment / machinery / technology
• High costs of doing business
• Poor location for access to customers / partners / talent
• Scalability issues with core products / services
• Poor relationships with customers
• Unresolved litigation, other legal issues
Once weaknesses are identified, a business takes steps to lessen the impact or turn them into
strengths.
Page 52 of 78

-I- Opportunities
Opportunities are things that have the potential to increase profits, productivity or benefit a
business in some other way. These factors could involve vendors who wish to work with the
company to help achieve success, the positive perception of the company by the general public,
and market conditions that could make the project desirable to the a segment of the market.
Additional Opportunities include:
• Arrival of new technology
• Unfulfilled customer needs
• Taking business courses (training)
• New technology in development / beta testing
• New markets for existing products
• Partner product bundles
• Partner co-marketing
• Access to skilled workforce
• Competitors facing problems (bankruptcy, lawsuits, etc.)
• New sales tools to penetrate existing markets
• Diversification into new markets with new products
• International distribution partnerships
• Favorable impacts of new legislation
Recognizing and taking advantage of opportunities are important aspects of running a
successful business.
-I- Threats
Threats are the final element of a SWOT analysis; they have the potential to harm a business.
For instance, if you run the only pizza shop in town, the possibility that a new competitor will
open a shop and take some of your business is a threat. Unfavorable changes to laws, higher
taxes and changes in consumer preferences other possible threats. Some other threats include:
Page 53 of 78

• Trend changes
• New regulations
• New substitute products
• Competitors getting stronger
• Market trends moving away from core products
• Pressure from supply chain squeezing margins
• Rising costs of doing business
• Consumer ability to shift to substitute products
• Slow market growth / decline in market size
• Change in customer needs
• Key employees leave (to competitors, family reasons, etc.)
• Threat of lawsuits (employees, customers, partners)
• Local economic / political climate inhibiting growth
Page 54 of 78

6.2 SWOT Analysis: Perspective of Bangladesh Insurance Industry
Observing different aspects of Bangladesh insurance industry, we have performed SWOT
analysis. While performing SWOT analysis we detected various strengths, weakness,
opportunities and threats in the perspective of Bangladesh insurance industry.
-I- Strengths:
1
New business’s
individual
insurance;
1
Micro insurance;
1
Increased
population;
1
Emerging middle
income groups;
-I- Explanation:
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.
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
Page 55 of 78

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.
The emergence of middle income group has a positive impact on the insurance industry of
Bangladesh.
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 growing
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.
4- Opportunities:
1_____
Development of new policy;
1
Scope in non-traditional
sector;
1
Service diversification;
i_____
Business sector;
Higher GDP;
i________________________
Scope of investment;
i________________________
Agriculture sector;
i________________________
Education sector;
4- Explanation:
Shadharan Bima Corporation (SBC) has long been the sole reinsures in Bangladesh and private
insurance companies were statutorily compelled to place 100% of their reinsurance business
with SBC. In 1990 the government amended the relevant provisions of the insurance Act
allowing 50% of all reinsurance of general insurance business to be placed compulsorily with
SBC and the rest to private reinsurance companies .About 70% of premium income from
general insurance business in Bangladesh is retained locally and the rest 30% goes to reinsures
abroad. Permissions to private insurance companies to act as reinsures will open up new
opportunities to them. This will initiate open competition between the SBC and the private
reinsures within the country and will reduce the reinsurance cost and increase efficiency. This
amendment of the existing rules can be another important policymaking that will facilitate the
Page 56 of 78

Comparative Insurance Industries Overview between USA and Bangladesh

Comparative Insurance Industries Overview between USA and Bangladesh

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