Private and Public Insurance Players In Bangladesh.docx

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Private and Public Insurance
Players In Bangladesh

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Private and Public Insurance Players In Bangladesh
Term paper
On
Private and Public Insurance
Players In Bangladesh
Submitted partial fulfillment if the requirement s for
the bachelor of the business administration
Supervisor
Rajib datta
Premier university

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Letter of Transmittal
, 2015
Rajib Datta
Lecturer
Department of Finance
Premier University, Chittogong.
Subject: To submit a report on “Private and Public Insurance Players in
Bangladesh”
Dear Sir
This is informing you that I have completed my report on “Private and
Public Insurance Players In Bangladesh”. Here I tried my best to give an
overview of private and public insurance business in Bangladesh, Specially
the number of insurance companies, their description, their policies, their
customers, and finally some findings and suggestions. In preparing this
report I have followed the instruction of yours, I shall be glad to clarify any
discrepancy that may arise.
Thank you for your cooperation.
Sincerely
Moutushi Mallik
Finance Interface
ID No.1022114383
Department of Finance,
Premeir University, Chittogong.

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Acknowledgement
This study is the outcome of a research work. At first I want to thank The Almighty who
has created us and gave up ability to do a type of research work. I am thankful to them
who have spontaneously assisted me in conduction the research. Specially, I am thankful
to my honorable teacher Mr. Rajib Datta, who not only relentlessly guided and advised
me throughout my journey of analyzing the Growth and Performance of Secondary
Markets in Bangladesh, but also persistently pushed me into undertaking further
challenges and continually strives for perfection. He helped me in every step of starting
and completing my research paper promptly. Without her help, it was impossible for me
to complete the research. I am also thankful to all those people who are directly and
indirectly support me for completing this report of allowing me to steal a portion of their
valuable time and catering to my barrage of questions. In addition, I must acknowledge
the contribution of my dear parents for their support and encouragement.

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Table of Contents
Chapter 1 1.1 Introduction 1
1.2 Objective of the study
1.3 Scope of the study
1.4 methodology of the study
1.5 Limitation of the study
Chapter 2 2.1
Chapter 3 3.1 sample enterprise at a glance
3.2 Analysis
3.3 Findings
Chapter 4 4.1 summerized view
4.2 Recommendation
4.3 Conclusion
4.4 reference

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Executive summery

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PREMIER UNIVERSITY CHITTAGONG
FACULTY OF BUSINESS STUDIES
BACHELOR OF BUSINESS ADMINISTRATION
DECLARATION
I do solemnly declare that this term paper submitted ,in partial fulfillment of
the requirements for the Bachelor of Business Administration of premier
university, Chittagong is the result of my own research work and written in
my own language. That no part of this term paper consists of materials,
copied or plagiarized from publication or unpublished work of other writers
and that all materials, borrowed or reproduced form other published or
unpublished source have either been put under quotation or duly
acknowledged with full reference in appropriate places. I understand that
the programme conferred on me, may be cancelled /withdrawn if
subsequently it is discovered that this term paper is not my original work
that it consists of materials copied/ plagiarized or borrowed without paper
acknowledgement.
Name & signature of guide supervisor Name & signature of
student
Rajib Datta Name: Moutushi
Mallik
Assistant Professor Sec:A
Department of Finance Programme:B.B.A
Faculty of Business Studies ID:1022114383
Chapter One

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1.1 Introduction
Since the emergence of Bangladesh as an independent nation, insurance industry was
nationalized along with banking and other major industrial sector. At the initial stage of
nationalization of insurance industry, Two government owned insurance corporations
including 60 public insurance corporation were steps. Under the challenging world
economic condition during many times insurance companies remains in a strong financial
position. Despite the world economic recession the continued progress in different areas
of the business.
1.2 Objectives of the Study
Purpose tells the reason of the report. Before going to the organization I set my objectives
that guided me until I finished the report. It always kept me focused to be on right track.
The objectives are to know the Performance of Insurance Company of Bangladesh.
General Insurance Company in Bangladesh and build an overall understanding on the
financial performance of Private Insurance company Ltd.
Insurance industry is one of the growing sectors in Bangladesh . Peoples Insurance
Company is to be amongst the leading insurance companies of the country with the clear
perception of upholding the principles of corporate governance and making Peoples a
profitable and growth oriented insurance company while creating insurance awareness
and culture. To ensure the smooth operation of the concerned insurance companies, the
regulatory bodies try to pass and implement new acts & regulations. There are 62
insurance companies in our country & there have been passed several acts to regulate
those companies properly. Peoples Insurance Company Limited is a private insurance
company in Bangladesh that serves with a variety of services to its valued customers.

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1.3 Scope of the study
There were huge scopes to work in the arena of the report. Considering the deadline,
the exposure and scope of the paper has been wide-ranging. The study, “Private and
Public Insurance Players in Bangladesh” has covered overall insurance business and
conditions of risk involved in business .
Bangladesh and its impact on our economy has been showed in this report. By
preparing this report, it becomes more understandable about the real condition of
insurance business and the importance of general insurance for minimizing different
risks and regulation of this business.
1.4 Literature Review
Uninsured risk leaves poor households vulnerable to serious or even catastrophic losses
from negative shocks. It also forces them to undertake costly strategies to manage their
incomes and assets in the face of risk, lowering mean incomes earned. Welfare costs due
to shocks and foregone profitable opportunities have been found to be substantial,
contributing to persistent poverty. Insurance has the potential to reduce these welfare
costs. By offering a payout when an insured loss occurs, it avoids other costly ways of
coping with the shock leaving future income earning opportunities intact. Furthermore,
the security linked to being insured can be expected to allow the avoidance of costly risk-
management strategies with positive impacts on poverty reduction. This literature review
provides an overview of the current state of research on Insurance identifies key
knowledge gaps and develops a conceptual framework to inform and organize the
research agenda of the insurance Facility in the area of impact evaluation, demand and
supply issues. For the purpose of this review, Insurance is defined in line with Churchill
(2006) as an insurance that (i) operates by risk-pooling (ii) is financed through regular
premiums and is (iii) tailored to the poor who would otherwise not be able to take out
insurance. The main focus of the literature review is on voluntary insurance1. Other ways
through which individuals or the public sector can insure against risks, such as
precautionary savings, access to credit or through public safety nets are therefore not
treated in detail in this review. However, this leads already to one key omission in the
existing literature: generally, the benefits of insurance are not compared to alternative
mechanisms that may provide insurance- like benefits, possibly in a more cost-effective
way, such as savings, consumer or emergency credit, and public safety nets.
Organization and private individuals take of insurance to protect them against possible
financial losses caused by a range of causes or unexpected factors. This means that
should the worst happen and these losses occur, they will receive financial compensation
from their insurance company. Therefore, insurance provides companies with financial
protection in the event of loss that could influence their operations. Individuals unwilling
or unable to handle their own funds have been pleased to find and outlet for their
investment in insurance policies. Endowment policies, multipurpose policies, deferred
annuities are certain better form of investment. An individual from his own capacity
cannot invest regularly with enough of security and profitability.
Many of the existing literatures reviewed above clearly indicate that the insurance in
Bangladesh has not yet stood on a solid footing. Many reasons are there for the
backwardness and underdevelopment of insurance in Bangladesh.
1.5 Limitations

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The preparation of this report was not an easy task. I had to face some problems &
limitations during the preparation of this report despite the fact that I have tried my best
to prepare this project successfully. The limitations were:
 The Insurance Act 2011 along with rules & regulations including the previous
acts for the insurance industry and most of the other supporting documents are
written and published in Bangla. Translating the entire act and relevant
information from Bangla to English was quite difficult.
 Confidential information that no organizations inclined to share due to their
business interest was another limitation.
 Data from different sources were quite inconsistent which created some problems
in making the report & compelled me to verify the data diligently.
 The data collection was full of complexities because relevant data sources were
hard to find out.
 There were so many obstacles because the company is not willing to disclose their
offerings and flexibilities towards general people.
 Due to lack of practical experience, some errors might be occurred during the
study. In spite of the maximum efforts was taken to avoid the mistake.
Chapter Two

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2.1Meaning & Definition of Insurance:
It is a contract in which one party known as the insured also known as assured, insures
with another party (person or organization), known as the insurer, assures or underwrites
his property or life, or the life of another person in whom he has a pecuniary interest, or
property in which he is interested, or against some risk or liability, by paying a sum of
money as the premium. Under the contract, the insurer agrees to indemnify the insured
against a loss which may accrue to the other on the happening of some event.
According to encyclopediaedia, Insurance is—
“A contract (policy) in which an individual or entity receives financial protection or
reimbursement against losses from an insurance company. The company pools clients’
risks to make payments more affordable for the insured.”
At present, insurance is being used widely and becoming more and more popular both in
personal life and in the business sector as a significant risk management tool which is
primarily used to hedge against the risk of a contingent, uncertain loss. Insurance contract
provides financial protection to the insured by the insurer against a loss arising out of
happening of an uncertain event. The insured can avail this protection by paying premium
to any insurance company with whom the contract has been made. Insurance works on
the basic principle and concept of risk-sharing. When a company insures an individual
entity (the insured), there leg al requirements to share the risks associated with the
insured by the insurer, breaking of which contract creates legal bindings. A great
advantage of insurance is that it spreads the risk of a few people over a large group of
people exposed to risk of similar type and the re-insurance system makes the total risk at
zero level in the long run. On the one hand, insurance can increase fraud; on the other it

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can help societies and individuals in preparing catastrophes and in mitigating the effects
of catastrophes on households, business operations and societies.
2.2Features of Insurance
Insurance has various effects on society through the way that it changes who bears the
cost of losses and damage of the insured according to the insurance contract. The
distinguished common features of any insurance are as follows:
Shifting or transferring risk of loss or damage of any life, asset, or property from one
party to another party.
 Sharing of losses by members of the group/company
 One party undertakes the loss incurred on the insured property or asset of the
other party.
 The risk is shared/ accepted by the insurer for a consideration of money from the
insured called as Premium (No risk to be assumed unless premium is received in
advance).
 It is assured to the insured by the insurer that the amount will be paid on
happening of the specified act or event. E.g. Death, Fire, Burglary, Accident, Any
peril in Sea etc.
2.3 Parties of Insurance Contract
As insurance business has insurance contract, there are mainly two parties in the contract
 Insurer : ( The person who undertakes the risk under the contract)
 Insured: ( The person to whom the undertaking is given)
The Insurer can be any of the following mentioned below:
 An individual
 Unincorporated body of individuals,
 Body corporate ( established by the Companies Act)
 An Association of partnership firm Registered,
 Any other agency permitted under any other Law in Bangladesh
In order to lower the huge amount of insurance risk, insurance companies intend to re-
insure their contract with any other (mostly larger) local of foreign insurance companies.
2.4 Prominent Features of Insurance Law of Bangladesh
The history of Bangladesh is a history of endless struggle. Since the independence of
Bangladesh, its citizens have been fighting for the improvement of their standard of
living as well as economic condition. But most of the time various accidental incidents
and disasters hamper the smooth continuation of the journey. Over the last 40 years,

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many helping hand especially insurance companies are trying to share their risk
associated with various tasks, assets, operations, and even of their life. The Insurance
business has been introduced & developed in proportion to the development of the
economic growth in Bangladesh. There are 62 insurance companies in the country,
including two state-owned enterprises, the Jiwan Bima Corporation (JBC) for life
insurance, and the Sadharan Bima Corporation (SBC) for general insurance.
Nevertheless, BD remains behind its neighbors, both in terms of premium income and
penetration. Only 1.5 percent of the population has life insurance coverage in
Bangladesh, as compared to 4.5percent in Pakistan and 7.5percent in India (as of 2010).
2.5 Regulatory Framework in BD
Every industry needs to be regulated and maintained properly to ensure the conflict free
operation in any country. In this regard, Parliament of Bangladesh, on 03 March 2010,
passed two insurance laws in a bid to further strengthen the regulatory framework and
make the industry operationally vibrant. The new laws, came in to effect on 18 March
2010, are Insurance Act 2010 and IDRA 2010.
Major Insurance Acts
 The Insurance Act, 1938
 Insurance Rules of 1958
 Bangladesh Insurance (Nationalization) Order 1972.
 The Insurance Corporations Act, 1973
 Insurance (Amendment) Ordinances of 1984
 The Insurance Act, 2010
2.6 History of Insurance & Insurance Laws in Bangladesh
Insurance business is not new in Bangladesh. Almost a century back, during the British
rule in India, some insurance companies started insurance business transaction, both life
and general, in this region (former Bangal or Indian Subcontinent). This business gained
momentum in East Pakistan during 1947-1971, when 49 insurance companies transacted
both life and general insurance schemes. The insurance sector was originally regulated by
the Insurance Act, 1938 and after the Independence in 1971; the industry was governed
by the Insurance Act 1973. In 2010 a new Insurance Act has been passed to modernize
the sector.
1947-1972 Period:
Insurance is not a new term in this territory of Bangladesh. Right after the great division
in 1947, the industry had got its momentum and 49 insurance companies started to
conduct their business during the Pakistan period (1947-1971). These companies doing
insurance business were of various origins like British, Australian, Indian, West Pakistan
and local. At that time, ten insurance companies had their head offices in East Pakistan,
27 in West Pakistan, and rest elsewhere in the world. Most of these companies were
Limited Liability Company. Some of these companies were specialized on dealing in a

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particular class or sector of business, while others were composite companies that dealt in
more than one class of business. After the Independence of Bangladesh in 1971 through
the war of liberation, the Government of Bangladesh nationalized insurance industry in
1972 by the Bangladesh Insurance (Nationalization) Order 1972.
1973 (After Nationalization):
By virtue of the nationalization order, all 49 insurance companies and organizations
transacting insurance business in the country were placed in the sector under fie
operations except postal life insurance and foreign life insurance companies. These
operations were: the Jatiya Bima Corporation, Tista Bima Corporation, Karnafuli Bima
Corporation, Rupsa Jibon Bima 31
Corporation and Surma Jibon Bima Corporation. The Jatiya Bima Corporation was an
apex corporation only to supervise and control the activities of the other insurance
corporations which were responsible for underwriting. Tista and Karnafuli Bima
Corporation were for general insurance and Rupsa and Surma for life insuance. The
specialist life insurance companies or for a life portion of a composite company joined
the Rupsa and Surma corporations while specialist general insurance companies or the
general portion of a composite company joined The Tista and Karnafuli corporations.
The basic idea behind the formation of four underwriting corporations, two in each main
branch of life and general, was to encourage competition even under a nationalized
system. But the burden of administrative expenses incurred in maintaining two
corporations in each front of life and general and an apex institution at the top
outweighed the advantages of limited competition. As a result of the nationalization of
the insurance industry, on 14 May 1973, a restructuring was made under the Insurance
Corporations Act 1973. Following the Act, the government formed two corporations in
place of five corporations: the Sadharan Bima Corporation for general business, and
Jiban Bima Corporation for life business. The postal life insurance business and the life
insurance business by foreign companies were still allowed to continue as before .In
reality, however, only the American Life Insurance Company Limited continued to
operate in the life sector 3 for both new business and servicing, while three other foreign
life insurance continued to operate only for servicing their old policies issued during
Pakistan days. Postal life maintained its business as before.
1973- 1984 Period :
After1973, general insurance business became the sole responsibility of the Sadharan
Bima Corporation. Life insurance business was carried out by the Jibon Bima
Corporation, the American Life insurance Company, and the Postal Life Insurance
Department until 1994, when a change was made in the structure arrangement to keep
place with the new economic trend of liberalization. The insurance corporations Act1973
were amended in 1984 to allow insurance companies in the private sector to operate side
by with Sadharan Bima Corporation and Jiban Bima Corporation.
1984-1994 Period :
The Insurance Corporations Amendment Act 1984 allowed floating of insurance
companies, both life and general, in the private sector subject to certain restrictions
regarding business operations and reinsurance. Under the new act, all general insurance
business emanating from the public sector were reserved for the state owned Sadharan

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Bima Corporation, which could also underwrite insurance business emanating from the
private sector. The Act of 1984 made it a requirement for the private sector insurance
companies o obtain 100% reinsurance protection from the Sadharan Bima
Corporation.This virtually turned Sadharan Bima Corporation into a reinsurance
organization, in addition to its usual activities as direct insurer. Sadharan Bima
Corporation itself had the right to reinsure its surplus elsewhere outside the country out
after exhausting the retention capacity of the domestic market. Such restrictions aimed at
preventing outflow of foreign exchange in the shape of reinsurance premium and
developing are insurance market within Bangladesh. The restriction regarding business
placement affected the interests of the private insurance companies in many ways. The
restrictions were considered not congenial to the development of private sector business
in insurance. Two strong arguments were put forward to articulate feelings: Since the
public sector accounted for about 80% of the total premium volume of the country, there
was little premium left for the insurance companies in the private sector to survive. In this
context, adharan Bima Corporation should not have been allowed to compute with the
private sector insurance companies for the meager premium (20%) emanating from the
private sector; Being a competitor in the insurance market, Sadharan Bima Corporation
was hardly acceptable as an agency to protect the interest of the private sector insurance
companies and should not have retained the exclusive right to reinsure policies of these
companies. The arrangement was in fact, against the principle of laissez faire. Private
sethe Sadharan Bima Corporation, and The government modified the system through
promulgation of the Insurance Corporation (Amendment) Act1990.The changes allowed
private sector insurance companies to underwrite 50% of the insurance business
emanating from the public sector and to place up to 50% of their reinsurance with any
ctor insurance companies demanded withdrawal of the above restrictions so that they
could: Underwrite both public and private sector insurance business in competition with
reinsure of their choice, at home or aboard, keeping the remaining for placement with the
Sadharan Bima corporation.
1994 — Present position of insurance business in Bangladesh :
In Bangladesh, the Insurance business, after an early stage of dislocation, adventure and
experimentation through half a century has now being established as a nascent industry
distributed between the public and private sectors. Insurance business evolved in the
Indian subcontinent late in nineteenth century when several business companies started
their business and a few Christian missionaries began to operate mutual funds to serve
their own community members. From Bangladesh perspective insurance business was not
a promising sector in its early age but it is getting its pace day by day with the growth of
overall economic condition of the country. The privatization policy adopted in the 1980s
paved the way for a number of insurers to emerge in the private sector. This resulted in a
substantial growth of premium incomes, competition, improvement in services, and
introduction of newer types of business in wider fields hitherto untapped. Up to 2000, the
government has given permission to 19 general insurance companies and 10 life
insurance companies in the private sector. Insurers of the country now conduct almost all
types of general and life insurance, except crop insurance and export credit guarantee
insurance, which are available only with the Shadharan Bima Corporation. Numerous
institutions, associations and professional groups work to promote the development of
insurance business in Bangladesh. Prominent among them is the Bangladesh Insurance

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Association (formed on 25 May 1988) having 30members. It aims at promoting,
supporting and protecting the interests and welfare of the member companies. Another
example is Bangladesh insurance academy. Surveyors and insurance agents occupy a
prominent position in the insurance market of Bangladesh. The system of professional
brokers has not yet developed in Bangladesh. A total of 62 insurance companies are
operating in Bangladesh till date. Of these companies, 60 are private, two state-owned
and one is foreign. Insurance Directorate, under the Ministry of Since then the Industry is
growing steadily despite many back logs, several amendments were made in the
Insurance Law since 1984. In 2010, a New Insurance Act passed by Parliament called
Insurance Act, 2010 to replace the old Act of 1973. As soon as the new insurance act has
been passed, the old one has become inactive and from now on the entire insurance
industry will be regulated by the new Insurance Act 2010.
2.7 The Government Guidelines for Formation of an Insurance Company
(1) The intending sponsors must first submit an application in prescribed form to the
Chief Controller of Insurance for prior permission.
(2) After necessary scrutiny the Chief Controller shall forward the application with his
recommendation to the Ministry of Commerce.
(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet
Committee constituted for this purpose.
(4) The decision of the Committee, if affirmative, should be sent back to the Ministry of
Commerce which in turn should send it back to the Chief Controller of Insurance for
communicating the same to the sponsors.
(5) The sponsors would then be required to apply in a prescribed form to the Registrar of
Joint Stock Companies to get registration as a public liability company under the
Companies Act. Memorandum and Articles of Association duly approved by the
Controller of Insurance would have to be submitted with the application.
(6) Once the registration process was completed the sponsors would have to obtain
permission of the Securities and Exchange Commission to issue share capital.
(7) Reinsurance arrangements would have to be made at this stage.
(8) After all the above requirements were fulfilled the license to commence business
under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance.
Application can only be made subject to government announcements in this regard.
2.8 Overview of the New Insurance Act 2010

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Bangladesh‘s insurance industry is set to start a new journey with the passage of two new
laws in the parliament recently. The House passed two insurance laws in a bid to further
strengthen the regulatory framework and make the industry operationally vibrant. The
new laws are Insurance Act 2010 and Insurance Development and Regulatory Authority
Act 2010. The government has taken the pragmatic step to boost the insurance sector.
Name The Insurance Act, 2010
Act Number 13 of 2010
Summary This law is related to the matters of Insurance
Ministry Ministry of Finance
Passing Date March 03, 2010
Date in Force Thursday, 18 March, 2010
Regulatory Authority Insurance Development & Regulatory Authority
(IDRA)
Insurance Act 2010 and Insurance Development and Regulatory Authority Act 2010 were
passed to better regulate the insurance industry and protect customers’ interests. And
Insurance Bill 2010 said the bill was moved aiming at modernizing and updating the old
Insurance Act and to trim down the risks of investment in trade and commerce and of
course particularly in the insurance industry. The laws update Insurance Ordinance 2008
and Insurance Regulatory Authority Ordinance 2008 of the past caretaker government.
Insurance Development and Regulatory Authority (IDRA) were passed by the Jatiya
Sangshad in March, 2010. The newly established IDRA started functioning in January,
2011. There are about 50 rules and regulations to be framed under the Insurance Act,
2010. The IDRA have been working on the initial drafts prepared under an Asian
Development Bank (ADB)-funded Technical Assistance (TA) project.
2.9Insurance Companies in Bangladesh:
According to Bangladesh Bank, there are 60 private & 2 public insurance companies in
Bangladesh—
| LIST OF PUBLIC INSURANCE COMPANIES |
01. | Sadharan Bima Corporation(Gen. Ins) |
02. | Jiban Bima Corporation (Life Ins.) (Source : IDRA) |
LIST OF LIFE INSURANCE COMPANIES |
01. | American Life Insurance Company (Foreign Company) |
02. | Baira Life Insurance Company Ltd. |
03. | Delta Life Insurance Company Ltd. |
04. | Farest Islami Life Insurance Co. Ltd. |
05. | Golden Life Insurance Ltd. |

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06. | Homeland Life Insurance Company Ltd. |
07. | Meghna Life Insurance Company Ltd. |
08. | National Life Insurance Company Ltd. |
09. | Padma Islami Life Insurance Company Ltd. |
10. | Popular Life Insurance Company Ltd. |
11. | Pragati Life Insurance Ltd. |
12. | Prime Islami Life Insurance Company Ltd. |
13. | Progressive Life Insurance Company Ltd. |
14. | Rupali Life Insurance Company Ltd. |
15. | Sandhani Life Insurance Company Ltd |
16. | Sunflower Life Insurance Company Ltd. |
17. | Sunlife Insurance Company Ltd. |
LIST OF NON-LIFE INSURANCE COMPANIES |
Sl. No | Name of the Company |
01 | Agrani Insurance Company Ltd. |
02 | Asia Insurance Ltd. |
03 | Asia Pacific Gen Insurance Co. Ltd. |
04 | Bangladesh Co-operatives Ins. Ltd. |
05 | Bangladesh General Insurance Co. Ltd. |
06 | Bangladesh National Insurance Co.Ltd |
07 | Central Insurance Company Ltd. |
08 | City Gen. Insurance Company Ltd. |
09 | Continental Insurance Ltd. |
10 | Crystal Insurance Company Ltd. |
11 | Desh Gen. Insurance Company Ltd. |
12 | Sonar Bangla Insurance Company Ltd. |
13 | South Asia Insurance Company Ltd. |
14 | Standard Insurance Ltd. |
15 | Dhaka Insurance Ltd. |
16 | Union Insurance Company Ltd. |
17 | Takaful Islami Insurance Ltd. |
18 | Nitol Insurance Company Ltd. |
19 | Northern Gen.Insurance Company Ltd. |
20 | Pragati Insurance Ltd. |

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21 | Pramount Insurance Company Ltd. |
22 | Prime Insurance Company Ltd. |
23 | Provati Insurance Company Ltd. |
24 | Purabi Gen Insurance Company Ltd. |
25 | Reliance Insurance Ltd. |
26 | Republic Insurance Company Ltd. |
27 | Rupali Insurance Company Ltd. |
28 | Phonix Insurance Company Ltd. |
29 | Peoples Insurance Company Ltd. |
30 | Mercantile Insurance Company Ltd. |
31 | Meghna Insurance Company Ltd. |
32 | Karnaphuli Insurance Company Ltd. |
33 | Janata Insurance Company Ltd. |
34 | Pioneer Insurance Company Ltd. |
35 | Islami Insurance Bangladesh Ltd. |
36 | Islami Commercial Insurance Co. Ltd. |
37 | Green Delta Insurance Co. Ltd. |
38 | Global Insurance Ltd. |
39 | Federal Insurance Company Ltd. |
40 | Express Insurance Ltd. |
41 | Eastland Insurance Company Ltd. |
42 | Eastern Insurance Company Ltd. |
43 | United Insurance Company Ltd. |
2.10The policies of all insurance companies declared:
1. Fire Insurance Policy.
2. Marine Hull Insurance Policy.
3. Marine Cargo Insurance Policy.
4. Motor Insurance Policy.
5. House Holder‟s Comprehensive Insurance Policy.
6. Product Liability Insurance Policy.
7. Burglary insurance Policy.
8. Contractors All Risk Policy.
9. Engineering Insurance Policy.
10. Public Liability Insurance Policy.
11. Aviation Insurance Policy.

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12. Workmen‟s Compensation Policy.
13. Cash In Safe Insurance Policy.
14. Cash In Transit Insurance Policy.
15. Cash In Counter Insurance Policy.
16. Personal accident Insurance policy.
17. Peoples Personal Insurance Policy.
18. Dread Disease Insurance Policy.
19. Overseas Medi-Clam (Business and Holiday).
20. Overseas Medi-Clam (Employment and Student).
21. Export Credit Guarantee Insurance.
22. Livestock Insurance Policy.
23. All Risk Insurance Policies.
24. Fidelity Guarantee Policy.
2.11 Description About Public Insurance Company
On 14th May, 1973 the Insurance Corporation Act VI, 1973 was enacted under which the
previous five corporations were abolished and the following two corporations emerged:
1. Sadharan Bima Corporation for General Insurance and,
2. Jiban Bima Corporation for Life Insurance in Bangladesh.
2.11.1 Profile of Sadharan Bima Corporation
Sadharan Bima Corporation is only state-owned General Insurance Corporation operating
under the direct control and supervision of the Ministry of Finance, Government of the
People‟s Republic of Bangladesh. It emerged on 14th May, 1973 under the Insurance
Corporation Act (Act No. VI) of 1973 to deal with all classes of general insurance & re-
insurance business emanating in Bangladesh. Thereafter, SBC was acting as the sole
insurer of general Insurance till 1984. In the year 1984 Bangladesh Government allowed
insurance Companies in the private sector and to that effect promulgated the insurance
Corporations (Amendment) Ordinance 1984. Sadharan Bima Corporation has a very
strong financial base. It has a market share of over 20 % of the total premium income of
the insurance market of Bangladesh. SBC, the largest insurance enterprise in the country,
has a net worth of Tk.605 crore an authorized capital of Tk.20 crore, paid up capital of
Tk. 10 crore and the anticipated revenue during the current financial year is
approximately Tk. 417 crore.
Following characteristics of SBC proves its financial soundness :-

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Government owned enterprise - Financial Soundness due to huge assets owned by SBC
Only reinsure in Bangladesh - Wide net-work of offices - Public trust - Huge trained &
skilled manpower - Large invest able fund - Huge Real Estate Assets in Dhaka,
Chittagong, Khulna, Rajshahi, Bogra & Sylhet.
SBC TOWER – the only multistoried car parking building in the heart of the capital city
of Bangladesh SBC is the sponsor shareholder of Investment Corporation of Bangladesh,
Industrial Development and Leasing Company, National Tea Company Limited, National
Housing Finance and Investment Ltd, Aramit Ltd, Central Depository BD Ltd.etc.
Sadharan Bima Corporation has emerged as one of the country‟s few largest taxpayers in
the corporate sector. SBC has met all prudential norms in further its financial strength.
Not only that, SBC is entitled to 50% of public sector business in Bangladesh. Insurance
Corporation (Amendment) Act 1990 provides that fifty percent of all insurance business
relating to any public property or to any risk or liability appertaining to any SBC has met
all prudential norms in further its financial strength. Not only that, SBC has met all
prudential norms in further its financial strength. Not only that, SBC is entitled to 50% of
public sector business in Bangladesh. Insurance Corporation (Amendment) Act 1990
provides that fifty percent of all insurance business relating to any public property or to
any risk or liability appertaining to any public property shall be placed with the SBC and
the remaining fifty percent of such
business may be placed with this Corporation or with any other insurers in Bangladesh.
But for practical reason and in agreement with the Insurance
Association of Bangladesh SBC underwrites all the public sector business and 50% of
that business is distributed among the existing 43 private general insurance reinsurance
business must be placed with the SBC and remaining fifty percent may be reinsured
either with this Corporation or with any insurer in Bangladesh or abroad.
The main pillar of the SBC is insurance as well as reinsurance business. SBC is the
largest non-life insurance underwriter in Bangladesh in terms of gross premium, network
of offices & trained manpower. On the other hand, SBC reinsures the risks of private
insurance companies operating in Bangladesh.
2.11.2 Policy implication for the Development of General Insurance Sector in
Bangladesh:
The following policy recommendations are suggested for overcoming the existing
problems in the SBC:
1. The Insurance Acts and Rules should be reformed, up-dated and reshuffled to meet the
growing needs and challenges of the insurance market in the changing socio-economic
environment of the country.
2. There should be Human Resource Development Division or Department (HRDD) in
the SBC and the
activities of HRDD needs to be geared up.

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3. Insurance companies need to modify their recruitment strategies with increased focus
on the marketing and sales training because insurance being a service marketing industry,
it requires special attention.
4. The Government should reintroduce commission system in general insurance business
to stop unhealthy competition among fellow companies.
5. The pricing rules should be relaxed and made less rigid so that the companies can
exercise some autonomy. The Government should allow the insurance companies to
quote different premium rates within a specialized span.
6. SBC should control their management expenses.
7. To ensure maximum profitability, appropriate cost accounting system should be set up
in SBC.
8. To improve the productivity performance the SBC should raise their income
generating avenues.
9. The corporate tax rate for publicly traded insurance companies should be made in
equally like other listed
companies to enable them to maintain a stable dividend policy to encourage small
investors and wide qualitative customer services in insurance, industry early legal reform
is highly wanted investment participation.
10. In order to ensure healthy claim settlement procedures attributed by factors like
simple and shortest procedure, transparency in the mode of accounts adjustment, well
behavior of the insurances marketers.
2.11.3 Life insurance or jivan bima corporation
Many new categories of life insurance are slowly developing in Bangladesh. These
include education insurance, health insurance, micro insurance and Islamic insurance
(Table 13). Micro insurance has the highest prospect for growth (5.96). Many insurance
experts believe that micro-insurance will help the insurance business to reach out to the
rural villages. Insurance companies are already crowded in city based markets for which
they plan to expand in rural markets as well. Micro insurance acts as a service
diversification as well as help the established companies to move into newer, profitable
and untapped target base. Many new insurance companies may find it cost inefficient to
operate in rural markets whereas bigger companies can operate cost effectively in asking
little insurance premiums from small rural business owners with easy terms. This will
allow rural people to afford to minimize their risks and after a certain period they will
become used to it thus ensuring a promising future for micro insurance.
Education insurance (5.37) and health insurance (5.56) also looks promising enough but
the growth is hampered due to ineffective structure and weak guidelines as to how
education and health insurance should be followed. Islamic insurance is a point of
contention of the employees (4.67). Majority believe that it is just a scam to manipulate
the people’s religious sentiments and this manipulation will continue to increase over the

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23
next few years. Almost all of the interviewees agree that there is no such thing as Islamic
insurance but Islamic insurance companies have already gained popularity amongst the
general population. A p-value of 0.01642 concluded that there is significant (α=0.05)
difference in mean score of Life Insurance variables.
Mean score of different categories of Life Insurance
Insurance
Category
Growth of education
insurance in the next
five years
Growth of health
insurance in the
next five years
Growth of micro
insurance in the next
five years
Growth of Islamic
Insurance in the next
five years
Life Mean 5.37 5.56 5.96 4.67
N 27 27 27 27
For both Life and General Insurance business types, there is no significant difference in
the extent of benefits from economic, operational and new entrant prospects. The rising
GDP will be affecting the demand of both kinds of insurance as economic growth results
in higher sense of personal and familial security as well as in increased level of industrial
activities. So both business categories will be benefited. The escalated demand will cause
both the types’ underwriting capacities to rise resulting in higher operational efficiency.
Finally, the industry overall is moving towards saturation with a few more new
companies of both types opening during each political tenure.
2.11.4 Comparisons of Problems and Prospects of Different Forms of Life
Insurance Business
Problems
In Bangladesh, three types of life insurance companies are in operation: i) State owned
company (Jibon Bima), ii) Local private companies and iii) Multinational company
(MetLife Alico). The mean responses of the executives regarding problems in the three
categories of life insurance companies compared by ANOVA (one-way) noted that there
are significant differences in responses to all the parameters (p-value of HRM: 0.03,
Operations: 0.001, Marketing: 0.046, Ethical: 0.008) among the three categories of life
insurance companies at a level of significance of 5%.
Overall, all the groups maintained that HRM is a major problem and the issue in state-
owned company received higher degree of severity compared to other categories. The
variables creating marketing problems found to be a major problem in state owned
company, while it is considered as a moderate and minor problem in foreign and local
private companies respectively. Also there is significant difference in responses regarding
the various issues creating operational problems in life insurance companies. The state
owned company regards operational problems as major problems while the local private
ones regard them as minor problems and foreign company respondents regard them as
moderate problems. Regarding ethical misdemeanors the state owned companies regard
this as major problems while the local private ones regard it as minor problems and
foreign company respondents regard them as moderate problem.

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HRM problems have different degrees of severity among the three categories of life
insurance business. State owned company is facing more trouble in its human resource
development section due to the bureaucratic work in implementing effective recruitment
and selection process as well as the financial deficiency to provide proper training. Local
private companies are realizing the need to develop their workforce and are using funds
available to them to arrange for training and even insurance courses for prospective
employees. Multinational company has entered the market with its own training and
recruitment policies which is aloof of the traditional practices in the market. Therefore
HRM problems for it are fairly moderate.
Marketing problems have major impact on state owned company. Foreign and local
private companies advertise their offerings and policies to their target customers.
Although the overall marketing package may not be very effective, still these categories
of life insurance try to be competent in communicating with the public. Their efforts
reduce the level of misconceptions to certain degrees for which they are attracting new
clients. Whereas nationalized company advertise itself and its policies sparsely and also
shows low level of innovations and competence in its offerings. As a result a large
portion of new potential consumer base remains untapped.
There is a significant difference in mean score for Operational problems among the three
categories. Local private companies are already operating far beyond the expense ceiling
and are offering commission percentage excessively above the percentage set by
government. Most of the local private companies have political immunity which has
strengthened the rat race competition of attracting policy holders. Nationalized company,
2.12 Top 12 Private Insurance Companies in Bangladesh
Insurance service in Bangladesh are developing as local people have got more conscious
about the security of what they belong. Promising service of some companies has
established the trust and people of Bangladesh turn to them on and on with optimism.
These are the 12 top insurance companies in Bangladesh.
1. American Life Insurance Co
This is one of the earliest insurance companies in Bangladesh, working from 1952. Even
though the concept as well as the company comes from America, they have successfully
adopted it to suit the needs and expectations of Bangladeshi people and have reached the
top position in the country.
More than a million Bangladeshis depend on American Life Insurance Company (Alico)
with thousands of agents working for them, which has also created local jobs. All sorts of
insurance plans are available to suit everybody’s need in the society.
2. Jiban Bima Corporation
The words Jiban and Bima mean Life Insurance in Bengali (official language of
Bangladesh). This is a state owned insurance company, providing life and other kinds of
insurance services to citizens.

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25
Located in Dhaka, Jiban Bima Corporation has branches all over Bangladesh and touches
millions of people every day. It has created a wide range of plans to suit people in all
economic groups, which has proved to be a big success.
3. Delta Life Insurance Co Ltd
In 1984, Bangladesh Government allowed private sectors in insurance industry, which
led to the creation of Delta Life Insurance Co Ltd, started by number of Bangladeshi
citizens then working abroad. They started this because they wanted their fellow citizens
to get the top class insurance services which are common in western countries.
From their first day, Delta life insurance has been working with the same goal in mind,
growing to a large organization today. They have designed plans keeping the
expectations of the society in mind, which is the primary reason for their success.
4. Popular Life Insurance Co Ltd
This unique organization started its journey with the goal of reaching every insurable
citizen in Bangladesh. There were many companies, but they didn’t have means to reach
out to all of them. Popular Life Insurance Co Ltd achieved this by designing unique
schemes and campaigns to bring everyone under their protection.
They achieved this by providing number of schemes which focused on the direct benefits.
They indirectly provided the protection which is the essential reason for doing insurance.
Hundreds of agents are working with public directly to ensure the movement is
constantly moving forward.
5. Shandhani Life Insurance Co Ltd
This organization is operating for 25 years, creating a change in the society by their
‘micro insurance’ segment. People or the general consumers may not buy insurance
mainly due to cost. Shandhani life insurance approached them with smaller policies
which are a good start, and would bring them to the regular fold, as they grow socially
and economically.
With this focus, Shandhani Life Insurance Co Ltd reached out to hundreds of thousands
of poor people, while keeping the focus on big customers as well. This approach has
helped this company to reach the top position with a great impact on the society.
6. Meghna Life Insurance Co Ltd
This company was started by many Bangladeshis who wondered if they can participate in
the growth of the nation. They decided a life insurance company would be the ideal start
and with their dream, Meghna Life Insurance Co Ltd was born in 1996. They focused on
providing services at the right price, with modern facilities.
Their efforts, in the next decade, brought this company to a great reputation in the
country. They work with people from all backgrounds and provide services to all kinds of
individuals and corporate organizations.
7. Takaful Islami Insurance Ltd
Being an Islamic country, Bangladesh’s needs with respect to any investment may be
guided by their religious principles too. Hence, most insurance companies provide

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26
policies keeping this in mind and Takaful Islamic Insurance Ltd specializes in providing
unique schemes, which are Islamic in nature.
This company operates in both life and nonlife sectors. It has established a very effective
network to work with the entire nation via its officers. This works particularly well in the
individual insurance policies.
8. Pragati Insurance Co Ltd
This is a leading non-life insurance company in Bangladesh. It provides schemes such as
Mediclaim Insurance, Accident Insurance, Building Insurance, Factory Based Insurance,
Aviation Insurance, Home Insurance etc. Based on the type of the insurance and the way
Bangladesh culture sees it, they have designed their policies so that it is accepted well.
Their success journey is a proof to this.
Today, the company has reached a top position by getting a credible rating by number of
financial analysis companies. They invest in the right areas to improve their value to
investors. As a result, it has grown to a top position in the country.
9. Padma Life Insurance Co Ltd
This is another Islamic insurance company in Bangladesh with a great track record and
success. It focuses on Life insurance segment, earning the confidence of Bangladeshi
public from all walks.
Their plans are designed keeping the security as well as growth aspects in mind.
Depending on the need of the customer, they will be able to choose the best one that suits
them and get maximum returns.
10. Sunlife Insurance Co Ltd
Started by businessmen from various fields, this company focuses on customer security
and benefits from 2000. They went public in 2012 and today, operating as one the top
insurance companies in Bangladesh.
Specialty of this company is its focus on even the smallest member of the society. Their
officers work with all kinds of people to ensure they are sufficiently protected. This has
brought a social change, as well as a successful company.
11. Golden Life Insurance Co Ltd
This company splits its services into two parts, macro insurance and micro insurance.
Based on the needs of its customers, it selects the right scheme. This approach has given
them great many opportunities to grow with full support of public.
Headquartered in Dhaka, Golden Life Insurance Co Ltd has branches all over the country
and the officers of the company work directly with public to educate them about their
insurance needs. This direct approach is the primary reason for Golden Life Insurance Co
Ltd growing to the top position in Bangladesh.
12. Rupali Life Insurance Co Ltd
Established in year 2000, this company has grown from a small position to a large
success, mainly due to its strong backbone support from investors and the passionate
work from agent officers. Their schemes are designed to suit the segments they work on,
which has connected well with the customers.

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27
They focus on promoting local talent. This ensures that the representatives of Rupali Life
Insurance Co Ltd will never be a stranger to the potential prospects. This approach has
created jobs for the country and helped many people stay protected helping the society.
2.13 The relationship of Consumer And Insurer
Service Quality Gap Model
Managers in the service sector are under increasing pressure to demonstrate that their
services are customer-focused and that continuous performance improvement is being
delivered. Given the financial and resource constraints under which service organizations
must manage it is essential that customer expectations are properly understood and
measured and that, from the customers ’ perspective, any gaps in service quality are
identified. This information then assists a manager in identifying cost-effective ways of
closing service quality gaps and of prioritizing which gaps to focus on – a critical
decision given scarce resources (SERVQUAL and Model of Service Quality Gaps: A
Framework for Determining and Prioritizing Critical Factors in Delivering Quality
Services by Dr. Arash Shahin, Department of Management, University of Isfahan, Iran).
There are seven major gaps in the service quality concept, which are shown in Figure-1.
The model is an extension of Parasuraman et al. (1985). According to the following
explanation (ASI Quality Systems, 1992; Curry, 1999; Luk and Layton, 2002), the three
important gaps, which are more associated with the external customers are Gap1, Gap5
and Gap6; since they have a direct relationsh ip with customers. Gaps 1 through 6widen
or close, so does Gap 7. The authors’ conceptual model of service quality follows: “The
key to delivering high quality service is to continually monitor customer perceptions of
service quality, identify causes of service quality shortfalls, and take appropriate action to
improve the quality of service (close the service gaps).”
• Gap 1. Not Knowing What Customers Expect:
Based on interviews, the authors found that executives’ perceptions of superior

28
28
quality service are largely congruent with customers’ expectations. Customers’
expectations versus management perceptions are the result of the lack of a marketing
research orientation, inadequate upward communication and too many layers of
management.
• Gap 2. The Wrong Service-Quality Standards: Gap 2 arises when there is a
discrepancy between what managers perceive that customers expect and the actual
standards that they (the managers) set for service delivery. This gap may occur when
management is aware of customers’ expectations but may not be willing or able to
put systems in place that meet or exceed those expectations.
• Gap 3. The Service-Performance Gap: Organizational policies and standards for
service levels may be in place, but is front line staff following them? A very common gap
in the service industry, Gap 3 is the difference between organizational service
specifications and actual levels of service delivery. Service specifications versus service
delivery is the result of role ambiguity and conflict, poor employee-job fit and poor
technology-job fit, inappropriate supervisory control systems, lack of perceived control
and lack of teamwork.
• Gap 4. When Promises Do Not Match
Customers perceive that organizations are delivering low-quality
service when a gap appears between promised levels of service and the service that is
actually delivered. This gap is created when advertising, personal selling or public
relations over-promise or misrepresent service levels. Service delivery versus external
communication may occur as a result of inadequate horizontal communications and
propensity to over-promise.
• Gap5: The discrepancy between customer expectations and their perceptions of
the service delivered:
As a result of the influences exerted from the customer side and the
shortfalls (gaps) on the part of the service. In this case, customer expectations are
influenced by the extent of personal needs word of mouth recommendation and past
service experiences.
• Gap6: The discrepancy between customer expectations and employees’
perceptions:
As a result of the differences in the understanding of customer expectations
by front-line service providers.
• Gap7: The discrepancy between employee’s perceptions and management
perceptions:

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29
As a result of the differences in the understanding of customer expectations
between managers and service providers.
Figure1: Model of service quality gaps (Parasuraman et
al., 1985; Curry, 1999; Luk and Layton, 2002)

30
30
Independent Sample t-tests for difference between Life and General insurance Problems
of different parameters
Independent Samples Test
Levene’s Test for Equality of
Variances
t-test for Equality of Means
F Sig. t df Sig.(2-
tailed)
Mean
Difference
Std. Error
Difference
Human
Resource
Management
Problems
σ1
2
= σ2
2
assumed
.081 .777 -3.522 94 .001 -.68438 .19429
σ1
2
≠ σ2
2
assumed
-3.305 42.089 .002 -.68438 .20705
Operational
Problems
σ1
2
= σ2
2
assumed
8.389 .005 -2.363 94 .020 -.47067 .19917
σ1
2
≠ σ2
2
assumed
-1.942 34.263 .060 -.47067 .24239
Marketing
Problems
σ1
2
= σ2
2
assumed
.605 .439 -1.112 94 .269 -.25845 .23246
σ1
2
≠ σ2
2
assumed
-1.047 42.391 .301 -.25845 .24675
Ethical Problems σ1
2
= σ2
2
assumed
21.392 .000 -2.213 94 .029 -.41224 .18626
σ1
2
≠ σ2
2
assumed
-1.784 33.407 .084 -.41224 .23112
Insurance Industry Prospects Independent Samples Test
Levene’s Test for Equality of
Variances
t-test for Equality of Means
F Sig. t df Sig.(2-
tailed)
Mean
Difference
Std. Error
Difference
Economic
Prospects
σ1
2
= σ2
2
assumed
.839 .362 -1.391 94 .168 -.31691 .22790
σ1
2
≠ σ2
2
assumed
-1.422 49.798 .161 -.31691 .22790
Operational
Prospects
σ1
2
= σ2
2
assumed
23.181 .000 1.071 92 .287 .21550 .20125
σ1
2
≠ σ2
2
assumed
.844 31.298 .405 .21550 .25537
New Entrant
Prospects
σ1
2
= σ2
2
assumed
1.535 .218 -.336 93 .738 -.09513 .28338
σ1
2
≠ σ2
2
assumed
-.309 40.877 .759 -.09513 .30760
σ1
2
= σ2
2
assumed
σ1
2
≠ σ2
2
assumed

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31
Independent Sample tests for difference between Life and General insurance Problems of
different parameters

32
32
Chapter three

33
33
3.1 Problems of Insurance Business in Bangladesh
For the development of economic infrastructure of a developing country like Bangladesh,
there is a great role of insurance. But the insurance business in our country is not
satisfactory. Though insurance industry has very prospect in the economy but for some
reasons it’s totally failed to achieve its goal. If we want to know the reasons behind this
hen we should look forward the following according to Bangladesh General Insurance
Company Ltd. In this report the major problems in performing insurance business has
been classified into some major criteria which are social, economic, political, legal and
other reasons. The actual problems are discussed in detail within these criterions. Mainly
these reasons are:
3.1.1 Social Problems
Less Public awareness:
A vast majority of people especially in rural areas are left outside the insurance coverage.
This mainly results from the unawareness among the people. Even a large portion of
people don’t have the minimum idea of insurance. People are not aware of the benefits
from the insurance policy and a great number of people believe that insurance business is
nothing but cheating and assume that insurance policy is quite unnecessary. This negative
attitude from the people is lessening the importance of absorbing insurance policy in a
large extent.
Centralization:
Most of the insurance companies in our country are located in urban areas and there are
few branches in rural areas. They think that they might have better scope for performing
their business as the economic condition of the urban is better than the rural areas. They
don’t think that the large number of our population reside in rural areas and if branches
are expanded in rural areas then the business can thrive if proper motivation policy is
taken to aware the mass people of the rural areas. Thus this centralization policy acts as
an obstruction for the growth of insurance business in our country.
3.1.2 Economic Problems
Weak Economy:
The development of insurance business depends to the development of economy of
deferent sectors. But in Bangladesh there are many lacking to the development of
economy. Our export income in limited and 78%income come from cloths and nightwear
sector. So the types of economy are not suitable for insurance business. Bangladesh is
one of the poorest countries in the world and most of the people in this country live under
extreme poverty level. All of these people fight hard to earn their livelihood and are
marginal in relation to the expenditure with the income. It is quite impossible for them to
save some money for future need. Therefore they are quite unable to give the amount to
the insurer which is called as premium and regarded as safety or precautionary measures
against any accident. The number of people who can bear the premium to the insurance
company is very few in regard to those mentioned above. Therefore the overall poor
economic condition is creating obstacle to flourish the insurance business in Bangladesh.

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34
Poor financial position of the insurance companies:
Most of the insurance companies of our country are facing financial problems. Recently
government is trying to take initiative to close some of the insurance companies because
they are not maintaining the minimum standards. They are investing their money in poor
securities and business which is vulnerable regarding getting back the money with profit.
As a result most of the insurance companies are suffering from loss years after years and
for poor financial condition the insurance companies are also unable to expand their
branch which is a barrier for the growth of insurance business in Bangladesh.
Weakness in Industrial Sector:
BANGLADESH is an agricultural country; the industrial sector of their country is poor.
In our country 9.71% are industrial labor from the total labor force. In 2004-2005
industrial productivity was only 28.88%of the total national productivity. This focuses
the weakness of our industrial sector. So these types of weakness are one of the main
barriers of insurance business.
Higher cost of business:
Growing cost of business is another problem that insurance companies are facing now a
day. They urge that government tax, house rent, utility, commission fee, stationeries are
growing day by day. But their businesses are not growing so fast with that rate. Besides
this the policy holders are not willing to pay too much premium with growing cost that is
hampering the strategies of insurance companies. So they are facing difficulties in
running their business efficiently.
Problems of economic bases and effective principle:
Before independence insurance business was control by private company. But after
independence maximum insurance company take over by the government. For that reason
government changed the company management, policy and applies new rules and
regulations which system was very tricky and uncomfortable for the mass people.
3.1.3 Political problems
Political instability:
Political instability is a major problem in Bangladesh. For the instability in politics, many
disruptive situations are often created which are bad for any businesses. The people who
operate various businesses in our country often experience various types of
inconvenience in running their business. Insurance business is not an exception 0of this.
Political instability and inconsistency of political courses are a serious problem for the
insurance business.
Lack of supervision from the government:
Lack of surveillance from government ministry encourages many insurance companies to
follow some unethical practices like make harassment to policy holder and showing less
in the financial statement. This not only destroying the reputation of the well-known
insurance companies but also creates negative impact in the mind of the people about
insurance. Besides this government sometimes impose some conflicting rules and
regulation without discussing with insurance companies governing body. It creates

35
35
conflict among insurance companies with government and act as one of the main
hindrances of growing insurance business.
Problem of planning and administration:
Planning and administration structure are not suitable for public and private insurance
business in Bangladesh. After the change of the government, the whole planning and
administrative measures are changed which is the main constraint for long term plans.
Without long term planning any permanent development or solution of existing problems
are impossible.
3.1.4 Legal Problems
Too much complexity:
To take an insurance policy there are great number of rules and regulations which must
be compelled by the insured person. And into those rules a vast number of complexities
are present there. Therefore the people are discouraged to take insurance policy because
they think that the complexities will create extra pressure on their mind which may
hamper other jobs.
3.1.5 Other problems
Lack of capital:
The broadness of insurance business is helpful to survey. It needs to establish many
branches in different country. It requires lots of capital. But lack of capital in our country
creates the problem of insurance business.
Lack of skilled staff:
There needed a lot of educated and skilled staff for insurance business. But Insurance
companies perform their activities by recruiting marketing agent and they try to convince
the people to take a policy. Most of the cases the agents are not properly trained and they
don’t know the right process to catch potential people to make their policy holders.
Limitations of insurance knowledge:
The scope of education about insurance is so much little in our country. The education
about insurance is very limited in syllabus of our primary and higher education. It is a
hindrance in our insurance business.
Lack of training:
The people who are concerned with insurance business are not trained. There are no
sufficient institutions in our country to give training to employees and entrepreneur.
Spread of insurance business in Bangladesh failed for lack of proper training by the
employees specially the field employees of insurance companies.
Insufficient service:
The insurers or companies are not able to give the proper services to the insured people.
In Bangladesh insurance company people failed to provide better service to the mass
people that’s why the people who want to take the insurance policy they loss their interest
from insurance. At same time in foreign country insurance workers goes to customer’s
house and offices regularly to aware themselves and influence them to take insurance
policy. In that’s case Bangladesh insurance company people are not that much expert. So
the people are not interested to involve themselves and their properties with insurance
business.

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36
Lack of exposure:
Another main problem in the country is that the media is unconcerned to send the right
message regarding insurance to the people. As a result a large portion of population is
completely unaware about the insurance policy. Another problem is that the insurance
company does not provide adequate information in the company’s websites which can
fulfill the queries of their potential customers and satisfy themselves to buy an insurance
policy.
Absence of business ethics:
Some insurance companies create harassment on the policy holders or sometimes on the
dependents of the policy holders when they want back their money after death or
maturity. The insurance companies show different causes in order to make delay to return
back the money at expected time. Sometimes they are eager to pay less than the desired
amount by creating various circumstances such as they try to say that the disaster of the
subject matter of the policy is not responsible due to their activities. Besides this some
field officials also create some illegal acts. They often try to give false information to the
people for buying a policy. And these kind of illegal acts create bad reputation to the
insurance companies and hindrance the overall insurance business. Those who are
harassed by the insurance companies discourage other not to take an insurance policy.
Lack of motivation program towards public:
According to Green Delta Life Insurance Company the people of our country are not
much motivated by the company to take insurance policy for safeguarding themselves
against any kind of risk. Almost every time they failed to understand the people that
insurance policy makes their life risk free all time. For lack of motivation among the
mass people insurance companies are always lagging behind from their expected target.
Lack of information technology:
Another problem is they do not use any web address, which is essential for a large leasing
company. They can provide more information to its client by using web site.
Delay in payments of claims:
The insurance companies in our country are not fully able to pay the claim of insured as
when claimed. That is another problem of insurance in Bangladesh.
Traditional Method:
The modern and technological methods are not followed in insurance business in our
country. All most all insurance company ran their business in traditional way. It is a
hindrance of insurance business. Whereas foreign companies are using modern systems
like computerized system; our local company does not want to change themselves.
SHORTAGE OF FUND:
Most of the policyholders cannot continue their policies owing to price spiral and
shortage of fund.
Lower Rate of Savings:
People of Bangladesh have a very small saving potentially and thus have less or no
disposable income. Maximum people are live under poverty line. In 2004-2005 our
internal saving was only 20.16% of total GDP. Life insurance and other insurance are
mostly dependable on the saving of the people. Thus they are left with little amount,
which may not deemed to sufficient for the payment of premiums. So it creates the
Problems.

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37
Not Knowing What Customers Expect:
Based on interviews, the authors found that executives’ perceptions of superior quality
service are largely congruent with customers’ expectations. Customers’ expectations
versus management perceptions are the result of the lack of a marketing research
orientation, inadequate upward communication and too many layers of Management.
The Wrong Service-Quality Standards:
Arises when there is a discrepancy between what managers perceive that customers
expect and the actual standards that they (the managers) set for service delivery. This gap
may occur when management is aware of customers’ expectations but may not be willing
or able to put systems in place that meet or exceed those expectations.
The Service-Performance Gap:
Organizational policies and standards for service levels may be in place, but is front line
staff following them? A very common gap in the service industry is the difference
between organizational service specifications and actual levels of service delivery.
Service specifications versus service delivery is the result of role ambiguity and conflict,
poor employee-job fit and poor technology-job fit, inappropriate supervisory control
systems, lack of perceived control and lack of teamwork.
When Promises Do Not Match Delivery:
Customers perceived that organizations are delivering low-quality service when a gap
appears between promised levels of service and the service that are actually delivered.
This gap is created when advertising, personal selling or public relations Over-promise or
misrepresent service levels. Service delivery versus external communication may occur
as a result of inadequate horizontal communications and propensity to over-promise.
The discrepancy between customer expectations and employees’ perceptions:
The discrepancy between customer expectations and employees’ perceptions rely as a
result of the differences in the understanding of customer expectations by front-line
service providers.
DEARTH OF UNDERWRITER:
In Bangladesh, there is a serious dearth of life insurance underwriters and for that
reason-underwriting decision is delayed to the detriment of the sales force and the
proposed policyholders.
LOW PER CAPITA INCOME:
Poor economic condition is considered to be the main reason for poor life insurance
penetration in Bangladesh. The country has a very low per capita income and over 50%
of our total population lives below the poverty line. Inability to save or negligible savings
by a vast majority of population kept them away from the horizon of life insurance.
RELIGIOUS SUPERSTITION:
Religious attitude of the people also stands against efficient insurance. The religious
people believe that the future is uncertain, it is in the hand of Allah and they do not think
it necessary to buy life insurance policy for them.
POOR KNOWLEDGE OF AGENTS:
The marketing of insurance is greatly hampered in the remote village of Bangladesh
where the agents are appointed from respected locality. This is because; educated young
people are seemed to be reluctant to become insurance agents. Therefore, persons finding
no job or persons having lesser knowledge become insurance agents whom cannot

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acquaint themselves fully with the whereabouts of insurance. Such agents cannot play
efficient role in convincing a prospective policyholder.
ILLETERACY:
Mass illiteracy is another factor that adversely affects the marketing of insurance. About
70% of the population is floating in the sea of ignorance. Illiteracy leads one to think that
the insurance is deception; it is no value in life. They cannot think rationality because
they do not know what is insurance and what its importance as security for future.
LACK OF REMAINDER:
Increase in liability, lack of reminder notice from the insurance company causes for
discontinuation of policy.
NEGLIGENCE OF POLICY HOLDERS:
Many of the policyholders have expressed that; their policies lapsed for their own
negligence to pay premium in time.
RESTRICTION:
Another important reason for discontinuation is restriction investment allowance by the
government relating to income tax.
IMAGE:
High lapses of life insurance policies do much to harm insurance image.
POOR SERVICES TO CONSUMERS:
An important reason for the dismal performance of insurance business in Bangladesh is
poor client services provided by the insurance companies. The public image of service
from life insurance institutions is very poor.
RED TAPISM TO OBTAIN COMPENSATION:
When an accident takes place, a claimant faces many difficulties to obtain money from
the insurance company. This also discourages people for being a policyholde LACK OF
CONTINUITY:
Discontinuation of insurance policy is found higher. This also adversely affects the
market efficiency of insurance business.
LACK OF NEW PRODUCT:
In a dynamic life insurance market, one can expect to see new product coming out every
now and then. But still today one can hardly see any new product in the insurance market
in Bangladesh.
LOW RETURN:
Partly for reasons of drastic fall in money value and partly for reason of nil or low bonus
addition resulting from a combination of high management expenses and low investment
return, life insurance has ceased to look as an attractive savings medium.
RESTRICTIVE INSURANCE ACT:
One would find it difficult not to admit that the Insurance Act is too restrictive in the
matter of investment. The inflexible rigid rules put obstacles in the way of earning high
profits for the life fund.
LOW ATTRACTIVENESS OF OFFERINGS:
The offerings of much of the insurance companies are not so much attractive that they
can allure people to buy a life policy.

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NATURE OF INTANGIBILITY:
The current practice is that every company tries to promote its own products, but the
benefits of insurance as such are not highlighted. In other words, the publicity is
itemized, not general.
LACK OF ADVERTISEMENT:
The lacking of proper advertisement and information about life insurance package are
also important factor for poor life insurance business.
INABILITY TO SOLVE PROBLEMS:
Many of the life insurance companies are unable to solve the problems of the
policyholders.
LACK OF RELIABILTY:
Peoples have lacking of reliability on the insurance company, because many insurance
companies do not make payment they agree to pay in time of selling policy to the people.
ADVNTAGES OF PSC:
Whatever may be in theory, in reality a public sector corporation (PSC) engaged in
insurance business is not accountable to anyone. The controller of insurance (CI) cannot
enforce its authority over the PSC, since the latter can easily disregard the CI without fear
and any positive action. This gives the PSC, compared to private companies, many
advantages. Of course, these so-called advantages are truly of an illusory nature since in
the long run they will do much harm not only to the PSC itself but also to the life
insurance industry as a whole.
DISCRIMINATORY ATTIRUDE:
The private insurance companies are noticing that in any dispute arising between the PSC
and the private companies, the authority, for some reasons is always found to take a
position against the companies in favor of the PSC. This kind of discriminatory attitude
does not indicate a sincere belief in free market concept.
LACK OF CONFIDENCE:
Lack of faith upon insurers is one of the fundamental reasons for which insurance
business cannot strong position in Bangladesh. Most of the respondents have said that
insurance in Bangladesh couldn’t achieve the fullest faith of people. At one side,
insurance business is not well known to the general people and on the other side; the
known people are dubious about its service. Public image about services of insurance
companies is very poor. Majority of the insurance concerns and almost all non-policy
holders confessed this very frankly and counted it as a burning constraint behind the
progression of insurance business in Bangladesh. This feeling of distrust is very intense
in the case of life insurance as life insurance contract is usually made for a longer period
of time. The non-policy holders argued that the motive of insurance companies is to be a
millionaire overnight.

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3.2 Ways of overcoming the problems
In our country the problems that exist in insurance business cannot be overcome over
aright .It needs long term planning. Besides making the people aware the insurance
businessman should come forward with govt. to make this business famous. Coming
from the existing problems following steps should be taken to make this business famous.
1. Spread of insurance education:
To make the insurance business people should be made aware about the helpless
& necessity of insurance. For this purpose effective steps must be taken too
speared of insurance education.
2. Publicity & increase of awareness:
We know by proper publicity it is easy to market anything. Insurance is one type
of unsought goods. So, people are not so much aware of it. High publicity and
insurance knowledge can led the people to make insurance policy more and more.
Mass publicity activities are very essential to overcome from unwillingness wrong
idea, doubt & unbelief of the people this country. The people media can provide
an effective help regarding country interest.
3. Increase of training facilities:
To continue the insurance business effective standard training facilities must be
arranged for the manager & workers who are employed in this business. Insurance
business is very complex and technical. To perform this business properly,
obviously it needs vast knowledge regarding its performance. To achieve vast
knowledge training has no alternative. So training is very necessary to overcome
problem in insurance.
4. Formulation of effective Principles:
Long term formulation of effective principles is compulsory to continue the
insurance business successfully. To run the insurance smoothly, it is mandatory to
implement the principles strictly. If everyone follows principles and rules,
achieving goal is possible.
5. Uphold the interest of policy holder: Success of this type of business is depended
on the trust of insured persons. To gain the trust insurance companies should
come forward to compensate the real injured as soon as possible.
6. Importance to the economic development:
Insurance business is depended on the development of the different sector of
economic .So insurance business can never be developed by retaining the weak
situation of the sectors including industry commerce transportation.
7. Development of management:

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Like every sector insurance is affected by mismanagement in Bangladesh.
Management can play a vital role in the development of insurance business. When
there will be coming good managerial environment in insurance then a good
performance can be done easily.
8. Modernization of insurance business:
Modernization of insurance business means to make the business much more
modern and suitable for new generation. New policies can be introduced if it is
familiar to other world. Everyone try to improve the present condition and serve
clients more properly. More modern insurance business must attract the clients.
9. Govt. monitoring system:
The private insurance companies are not so much aware about the govt. rules and
regulations. For this reason, sometimes unreal competition created in the market.
So, proper govt. monitoring system should be introduced.
10. Modernized the insurance Acts and Ordinances:
Government should amend the insurance related acts and ordinances because this
is traditional acts that create problems for insurance business in our country. That
is very necessary for our economy.
11. Emphasize on other sectors development:
Insurance business development depends on the development of other sectors. So,
it is possible to develop insurance sector by developing other sectors like,
industry, mining, agriculture etc.
Now-a-days people of Bangladesh are so much aware of their future. They try their best
level to be insured themselves against any type of hazard. It is a good sign for insurance
market in Bangladesh. Every insurance company also tries to overcome the problems. So
we can hope that if the insurance company can overcome every problems regarding
insurance marketing in Bangladesh then the insurance marketing in Bangladesh will be
facilitated.
3.3 Prospects of Insurance Business in Bangladesh
As well as the problems mentioned above, there are many good signs for the insurance
business in Bangladesh. The factors that can facilitate the insurance business in our
country are discussed below. These facts can be measured as the prospective fields for
insurance business in Bangladesh.
Increased population:
There is a big opportunity lies ahead for the insurance companies as the population of our
country are increasing day by day. Although most of people of our country live under
extreme poverty level and want to avoid insurance policy number of potential policy
holders in Bangladesh is growing with growth of the population. There is somewhat
relationship between growing populations with the number of public vehicle. As we
know all public vehicle must have an insurance policy. So growing population also
increase the motor insurance too. That is growth in population opens greater scope for

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every kind of insurance business that results in growing prospect for insurance
companies.
Higher GDP:
The GDP of our country is increasing than the previous years which results in increase of
per capita income. So this growing GDP and income holds bright prospects for insurance
companies. The major problem is the incapability of our people to pay the premium
charged by the insurance companies. . With the growth in the income more and more
people are now willing to take an insurance policy for safeguarding themselves from any
danger.
New business’s individual insurance:
There are so many new businesses starting every day and manufacturing sector is
booming with global demand. Every business is insured under an insurance company to
protect its company from any kind of accident. Therefore growing industry, mill,
factories are creating better scope for the insurance companies to flourish their business.
Developing mass awareness about insurance:
People are now much more conscious about their safety. So they are encouraged to take
an insurance policy for making their life free from any unexpected occurrence. Increase
in literacy rate is helping predominantly to create awareness among the people regarding
taking insurance policy. Besides these insurance companies are also trying to eradicate
the negative attitude of people towards the insurance company by organizing various
programs such as seminars, programs including social responsibilities etc.
Micro insurance:
Micro insurance can be a great prospective area for the insurance business in our country.
Most of the people of our country are unable to have costly and long term insurance
policies. Micro insurance can be provided to individual personnel or to small business
owners against little insurance premiums and with easy terms and conditions. When they
will afford to minimize their risks at a lower price, they will take that opportunity and
they will become to get used to it. This can cover a huge portion of the society who can
be a prospective target market for this business.
Health Insurance:
The insurance companies of Bangladesh can be developed health insurance policy as
large scale like other developed and developing countries. That increases the scope of
insurance business in Bangladesh. Though there are some insurance companies created
this at small range but that not enough to meet the crying need of health insurance in
nearby decades.
Marriage Insurance:
Bangladesh is Muslim country. So marriage plays a vital role in our social life. Now a
day’s it become costly. Guardians of daughters as well as sons face this problem that is
why they want to overcome this problem. This situation creates a vast opportunity for
insurance business in Bangladesh.
Scope in non-traditional sector:
Nowadays, along with traditional insurance services, they can offer various non-
traditional insurance services to their customer. Target market of insurance company may

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expand and they can offer different types of non-traditional insurance services such as,
personal accident insurance, travel insurance, burglary insurance and pension scheme.
Scope of investment:
Insurance companies can usually make more profit from investment activities than from
their regular insurance business. The private insurance companies are realizing this fact
and playing role in the financial market. Insurance companies are making large
investment in government bonds, ICB projects and in private sector business. There are
opportunities to enhance profit through effective and efficient money management by
employing capable and experienced personnel. Scope of investment expansion persists in
the areas leasing, housing, health and money market.
Service diversification:
Insurance is not just a tool of risk coverage. It is also an attractive instrument of savings.
The mixture of risk coverage with savings gives the opportunity for innovative product
designing which means service diversification. In a dynamic insurance market one can
expect to see new products being promoted at regular intervals. So far very little efforts
have been taken to innovative and introduce need oriented insurance services in response
to existing threats. The prospect of the insurance business in various sectors that affect
our economy can be differentiated in the following way.
Agriculture sector:
The economy of Bangladesh is predominantly an agrarian one, with most people engage
in farming and fishing. The uncertainty of agriculture due to crop failure caused by
climate variation, drought, cyclone, flood and pests affects farmer income as well as
government revenue. Furthermore, in the last few years commercialization has occurred
in some sections of the agricultural sector. Increase in investment in the agricultural
sector is creating a new opportunity for insurance industry. Various agricultural insurance
services are becoming common these days. Demand for insurance protection against crop
loans, livestock loans, fisheries loans and equipment loans are also increasing day by day.
Business sector:
Nowadays in Bangladesh the SME plays an important role in the economic development.
But they are deprived from taking loans from bank for large amount. If insurance
business focuses this section in Bangladesh they are able to contribute more in the
economy .Thus insurance business has a bright prospect in business sector in a
developing country like Bangladesh
Education sector:
Insurance companies can provide different types of scheme to expand education plan
insurance. In Bangladesh the higher educational facilities is not as rich as developed
countries. It is very costly except public sectors educational institutions. So, education
sector should create vast facilities for insurance business in future.

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3.4 Impact on our economy
Insurance companies contribute to develop economic condition of Bangladesh. As a
result,
1. Creating more savings
Insurance is encouraging people of our country to save more for their better future. As a
result it’s helping the total economy of Bangladesh by creating more saving every year.
2. Makes capital formation
Insurance companies help to form huge amount of capital by the premiums received from
their policyholders. From the premiums of policyholders insurance companies forms
capital and give to various banks or financial organizations for forming capital.
3. Creates more employment
Today in Bangladesh there are a lot of government and nongovernment insurance
companies which is creating more job opportunities for the people of this country
4. Social security
Insurance provides social security by indemnifying the people of the society. So, there is
complete peace of mind for the people. That’s how insurance companies help in social
security.
5. Develops trade and commerce
Insurance companies play a very big role in developing trade and commerce of
Bangladesh.

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Chapter Four

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4.1 Conclusion
At present insurance is too much important to the business and individual sector. Most of
the companies provide more or less same services. For this reason the competition is
increasing day by day between the insurance companies. On the other hand some new
insurance companies are going to start businesses in the competent market. In present, a
company cannot establish properly without developing information technology. People
search their desires requirement through Internet so, insurance companies need to
develop Web address to increase both foreign and local investors. So we have discussed
about both the problem and prospects of insurance business in Bangladesh. The progress
of insurance business depends on the progress of economic condition. Insurance business
also faces many problems. So if we develop economic condition as well as overcome the
problems, it will help a lot to flourish this business in our country.
4.2 Recommendations
In our country the problems that exist in insurance business cannot be overcome over a
night .It needs long term planning. Besides making the people aware the insurance
businessman should come forward with govt. to make this business famous. Coming
from the existing problems following steps should be taken to make this business famous.
1. To make the insurance business people should be
made aware about the helpless & necessity of insurance. For this purpose effective
steps must be taken to speared of insurance education.
2. Mass publicity activities are very essential to overcome from unwillingness wrong
idea, doubt & unbelief of the people this
country. The people media can provide an effective help regarding country
interest.
3. To continue the insurance business effective
standard training facilities must be arranged for the manager & workers who are
employed in this business.
4. Long term formulation of effective principles is compulsory to continue the insurance
business successfully.
5. Success of this type of business is depended on the trust of insured persons. To gain
the trust insurance companies should come forward to compensate the real injured as
soon as possible.
6. Insurance business is depend on the
development of the different sector of economic .So insurance business can never
be developed by retaining the weak situation of the sectors including industry
commerce transportation.
7. In this country for developing insurance business modernization of insurance business
and necessity new ideas must be added in this sector.

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8. The insurance companies of Bangladesh should practice marketing through the use of
promotional tools such as advertising, sales promotion, public relation and publicity,
personal selling and direct marketing.
9. To regain and maintain a positive public image the insurance companies should
overcome the dissatisfaction in regards to services and claim settlements and should
maintain a service standard.
10. One of the basic requirements for the insurance industry to have sustained growth is
to enhance training facilities. Bangladesh Insurance Academy is providing training
facilities and professional education to those engaged in insurance business in the
country. The syllabus, curriculum and training programs of the academy need to be
modified to meet the modern needs of the insurance industry.
11. The collected premium should be invested in large and beneficial sectors so that
insurance companies can return their clients expected return in time.

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4.3 Reference
1. Booms, Bernard H. and Marry J. Bitner and Jody Nyquist (1981), “Analyzing the
Customer/Firm Communication Component of the Service Marketing Mix” in Marketing
of Services, J. H. Donnelly and W. R . George, eds., Chicago: American Marketing, 172-
177.
2. Bangladesh Bureau of Statistics. 2004. “Report of Financial Service Providers in
Bangladesh”.
3. List of Insurance Companies in Bangladesh. Retrieved from
http://www.idra.org.bd/idra-org
4. ―Definition of Insurance‖. Retrieved from
http://www.investopedia.com/terms/i/insurance.asp#axzz1l6ZW5Hz3
5. History of Insurance & Insurance Law in Bangladesh. Retrieved from
Banglapedia. (2011).
6. The Insurance Act 2010
7. The Insurance Act 1938
8. The Insurance Corporation Act 1973
9. shadharon bima corporation's information
http://www.sbc.gov.bd
10. http://www.thedailystar.net/2005/06/27/d50627050150.htm
Mandal, G.M (1998), “Insurance Industry in Bangladesh-An overview”, Insurance
Journal, Bangladesh Insurance Academy, Vol-49, Dhaka, April, p38.

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