Insurance

History Of Insurance Business In Bangladesh:
History Of Insurance In Bangladesh:

The origin of insurance is lost in antiquity. However, there is no evidence that
insurance in its present form was practice prior to the twelfth century. A brief
chronological historical development of the various branches of insurance is given
below:
*Marine Insurance:
Marine is the oldest form of insurance and came first in the list. This type of
insurance probably began in northern Italy sometime during the 12th& 13thcentury
and gradually the concept was rather transferred to or taken over by the United
Kingdom. During the 13th/ 14thcentury the Italian merchants went to UK and along
with the merchandise carried with them the trading customs including the concept
of marine insurance. Marine insurance as such was not being practiced as a
separate specialized entity during that time since it were the merchants who used
to transact marine insurance business side by side with their general trading
activities
Fire insurance :
After marine insurance fire insurance developed in present form. It had been
observed in Anglo-section Guild form for the first time where the victims of the fire
hazards were given personal assistance by providing necessaries of life. It15 had
been originated in Germany in the beginning of sixteenth century. The fire insurance
got momentum in England after the great fire in 1666 when the fire losses were
tremendous.
Life insurance :
The third in the list of development is the life insurance business. The earliest policy
of which there is a record dates back to 1583. During this period only short term
polices were used be issued meaning that only at the death of the life assured
during the term period the money was to be paid. On survival nothing was
payable. In 1693 Halley introduced the mortality table giving a definite value to risk
of death. In 1974, the life Assurance Act was passed in the British parliament
requiring the presence of insurable interest before one could effect a life policy on
the life of another. All these gradually gave life assurance a sound, systematic and
scientific basis as we see in the present day.2.3 Development of Insurance in
Bangladesh Insurance is not a new idea or proposition to the people of Bangladesh
Current pattern of Insurance in Bangladesh:
After the emergence of the Peoples Republic of Bangladesh in 1971, the

government nationalized the insurance industry along with the banks in 1972 by
Presidential Order No. 95.By virtue of this order, all companies and organization
transacting all types of insurance business in Bangladesh came under this
nationalization order. This was followed by creation of five insurance companies in
the life and non-life sector. Further changes were brought on 14th May,1973.
Through the enactment of Insurance Corporation Act VI, 1973 which led to creation
of two corporations namely Sadharan Bima Corporation for general insurance and,
Jiban BimaCorporation for life insurance in Bangladesh. In other words Sadharan
Bima Corporation (SBC)emerged on 14th May, 1973 under the Insurance
Corporation Act (Act No. VI) Of 1973 as theonly state owned organization 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. Bangladesh Government allowed the private sector to conduct business in all
areas of insurance for the first time in 1984. The private sector availed the
opportunity promptly and came forward to establish private insurance companies
through promulgation of the Insurance Corporations (Amendment) Ordinance (LI of
1984) 1984.The Insurance Market in Bangladesh now consists of two state-owned
corporations, forty three and seventeen private sector general & life insurance
companies respectively, a total of 62insurance companies.
Thus the insurance sector in Bangladesh has grown up substantially and deepened
remarkably with number of companies in both life and general segments. With the
expansion of size of the insurance market, the volume of assets of the industry has
also increased substantially. SBC is entitled to 50% of public sector business.
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 companies equally under National Co-insurance Scheme. In respect of
reinsurance, the same act provides that fifty percent of a companys
reinsurance business must be placed with the Sadharan Bima Corporation and
remaining fifty percent may beer insured either with this Corporation or with any
insurer in Bangladesh or abroad. At present, nearly all the companys place 100% of
their reinsurance business with the SBC.
Role of private insurance companies in the economic development of

Bangladesh:
Formation of capital & increase of investment: Insurance companies

receive premiums from insured persons. These premiums increase national capitals.
By investing the se capitals, national productions increase.
Reduce of hindrance of risk: every sorts of business consists of risks. These
risks are more hazardous in Bangladesh. Insurance companies minimize these risks
by giving privileges on loss.
Maintenance of national wealth: insurance companies not only secure
financial facts, but also influence people to take necessary steps to avoid risks.
Distribution of risks: insurance companies deal with lots of insured people. So
risks are being distributed among them.
Extension of business: By taking all uncertain business risk insurance
companies extended the field of business in our country. Insurance gives the
assurance of indemnity and help to collect the capital to lunch a new business and
expand the existing business.
Increase of awareness: As the maximum people of our country are illiterate so
they have not much knowledge about the future life and what will do to enhance
the living standard. Different types of advertisement, publicity and others
awareness activities of insurance company which helps to increase the awareness
of general people
v Problems And Prospects Of Insurance In Bangladesh are:

PROSPECTS :
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 any danger
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.
New businesss individual insurance:
There are so many new businesses starting every day and manufacturing sector
is booming with global demand. Every business is insured under an insurance
company to protect its company from any kind of accident.
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
problem regarding taking insurance policy.
Problems
1. LOW PER CAPITAL 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 capital 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.
2. 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. Such agents cannot play efficient role in
convincing a prospective policyholder.
3 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.
4. 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.
5. LOW AWARENESS: Insurance awareness is poor. Agents are not skilled enough.
These agents cannot perform their job properly to make the people aware of life
insurance.
6.. LOW SAVINGS :People of Bangladesh have a very small saving potentially and
thus have less or no disposable income. Almost the whole of the income is
exhausted in the process of maintaining the day-to-day life. Thus they are left with
little amount, which may not deemed to sufficient for the payment of premiums.
This factor discourages many to buy life insurance policy.
8. SHORTAGE OF FUND : Most of the policyholders cannot continue their policies
owing to price spiral and shortage of fund.
Thoughts on Economics
Vol. 23, No.
04
Insurance Industry in Bangladesh: Opportunities and Challenges

Dr. Mohammed Shamim Uddin Khan*
Mohammad Nazim Uddin**
[Abstract: Bangladesh economy holds huge risk in every sector because the
country often faces natural disasters like flood, cyclone, draught, and hurricane.
There are also other factors like political strikes, and economic issues like inflation,
high interest rate, tax policy, deregulation, etc. that deepen the risks for the
economy. However, Bangladeshs, insurance market is not very large compared to
the degree of risk. For a better functioning of the insurance industry and to attain
good growth of this sector, it is worthwhile to know the factors which are
responsible for low growth of the insurance industry in Bangladesh. This paper
presents the results of an empirical survey highlighting the present scenario of
insurance industry in Bangladesh. In this study, many problems have been
identified such as lack of trust, illiteracy, improper claim settlement, lack of product
diversification, lack of information, poor risk management, absence of research and
development (R&D) cell, reinsurance problems etc. The study offers
recommendations to make the insurance market in Bangladesh vibrant and useful

for the economy.
Key words: Risk, Insurance problems, Insurance prospects, Bangladesh.
1. Statement of the Problem:
Insurance represents an important tool to lessen risks borne by individuals and
businesses in modern economies. It is nothing but a mechanism of spreading the
risk of one to the shoulders of many. It is a contract whereby the insurer, on receipt
of a consideration known as premium, agrees to indemnify the insured against
losses arising out of certain specified unforeseen contingencies or perils insured
against. Thus, insurance is a process which distributes the burden of the loss on a
number of persons within the group formed for this particular purpose (Chaudhury,
2008). The insurance services can be described as a product in the form of a written
legal contract plus a bundle of services associated with it. (Khondkar and Rahman,
1993). The primary objective of insurance companies is to protect individuals and
corporations (policyholders) from adverse events. Insurance mitigates the risk
involved in human life and trade and commerce. The insurance businesses are of
two types, namely, life insurance and property-casualty (general) insurance. Life
insurance provides protection against the possibility of untimely death, illness, and
retirement. Property insurance protects against personal injury and liability such as
accidents, theft and fire.
A well-planned, well-organized, efficient and viable insurance industry is a
necessary condition for the economic and financial infrastructural development in a
country. Insurance is one of the most important financial institutions in the sense
that besides covering losses of individual policy holders for death and accidents or
damages of properties, it serves as an important national purpose of channeling the
savings of the general mass or special group of people to investment. Bangladesh
economy is beset with pressure of over population, frequency of natural calamities,
low per capita income and lack of technical know-how. Insurance has the potential
to make a significant overall impact on the economy of Bangladesh where capital is
relatively in short supply, the rate of savings is very low, investment opportunities
are few and far between, inflation is the norm, and provisions of social security for
the people are almost non-existent (Roy, 2008, Mandal, 1988). This (insurance)
action would be conducive to raise per capita income and play a positive role in the
economy. Consequently, the per capita insurance premium is also found very low
and the market did not grow much, compared to the other Asian countries. For this
reason the industry is under-capitalized; hence most insurance companies found it
extremely difficult to retain a reasonable percentage of large risk undertaken by
them. It is true that people must live with hazards and to some extent insurance can
free people from those hazards. But the people of Bangladesh still do not prefer to
insure themselves as their low purchasing power does not permit them to avail
insurance policy. The main constraint in the development of insurance industry in
Bangladesh is the lack of risk awareness, financial inability etc. In Bangladesh, there
is a greater degree of risk but the insurance market is not so large as compared to
the degree of risk. The insurance products are not sold spontaneously but sold just
for meeting legal obligations.
For better functioning of insurance industry and for a suitable growth of this sector
there is a paramount importance to know the factors which are responsible for less
than the desired growth of insurance industry in Bangladesh. It is high time to
assess the industry and how the insurance market in Bangladesh can be made more
efficient and sound to prepare it for intense global competition in the upcoming
year. The fact is that many important aspects of Bangladesh insurance industry with
respect to different dimensions are yet to be understood. All these aspects of
Bangladesh insurance industry deserve to be studied comprehensively. Literature in
this area is scanty in numbers and partial in content. Existing literatures indicate
that a few partial studies have been conducted, but the problems, prospects and
policy implications for developing this industry are not studied as a whole. This
study is, therefore, a humble attempt to identify the factors that are responsible for
not developing the industry to the expected level.
2. Insurance Industry Scenario of Bangladesh:
In Bangladesh, during the 1970s, government-owned JBC and SBC were the only
provider of life and general insurance coverage for individual and business
properties. During that time insurance products were very few in number and the
industry did not take innovative efforts for product development. In the country the
first private insurance company was set up in 1985. Since then non-government
insurers have shown rapid growth in terms of institutional set-up, policy design and
business expansion. When non-government insurers gradually have gained the
foothold in the country, real competition in the sector has begun. However, the
insurance industry in Bangladesh is very small compared to its economy and the
number of insurance policyholders is still not increasing satisfactorily (Islam &
Mamun, 2005). At present, there are 43 general (non-life) insurance and 17 life
insurance companies are operating in Bangladesh which are inadequate to provide
insurance services to about 150 million people (BIA, 2000; Ahmed, 1977; Siddiqui,
Islam and Chowdhury, 1995).
The insurance companies of our country perform a wide range of activities such as
service designing, preparing contract and policy, marketing and selling,
underwriting, rating, reinsurance and other services and claim settlement. The two
government owned insurance companies i.e. the Shadharan Bima Corporation and
Jiban Bima Corporation get all the government insurance business by virtue of the
Insurance Act of Bangladesh. According to the rule, all insurance in the government
sector is done through these two nationalized insurance companies, so they enjoy a
monopoly. None of the private insurance companies is allowed to offer insurance
services to government organizations. Furthermore, these two corporations are also
allowed to underwrite private businesses, and people feel confident about their
reliability. So they have not yet felt any strong need to practice marketing properly.
Insurance is a form of risk management, used to hedge against the risk of a
contingent loss. It involves the transfer of the risk of potential loss from one entity
to another, in exchange for a risk premium. Given this role, the insurance sector
fosters financial stability by enabling economic agents to undertake various
transactions with the facility of transfer and dispersion of risks. As a crucial
component of the financial system, life insurance plans are an important source of
savings and long-term institutional investments essential for the development and
growth of bond markets. The role of insurance as a financial intermediary is
particularly important in countries like Bangladesh with low levels of financial
penetration. Overall insurance penetration itself is also just 0.9 percent in the
country; much lower than the regional average of 2 percent (Table-1).
At present, the world is facing Financial Tsunami originating in the developed
countries, which started as a subprime mortgage crisis in the USA and spread out
quickly all over the globe. The damage to economic growth, income and jobs are
already being felt sharply in every corner of the world. Many economists believe
that the financial crisis has plunged the world economy into its worst crisis since the
great depression of the 1930s. In this global financial circumstance, global
insurance premiums amounted to approximately US$4270 billion in 2008. The life
business accounted for US$2490 billion, non-life insurance accounted for US$1779
billion. The industrys paid-up capital shrank by 15-20 percent in non-life and 30-40
percent in life. Life premiums declined by 3.5 percent, largely in the second half of
the year as a direct consequence of the financial crisis. Non-life premiums declined
marginally by 0.8 percent in 2008 due to lower demand for insurance cover and
softening premium rates. However, emerging markets grew at an impressive rate of
13.1% for life and 10.2% for non-life insurance. The Chinese market registered a
growth of 30.3% for life and 31.5% for non-life. The Indian life and non-life insurance
markets accelerated with an unprecedented growth rate of 36% and 26%
respectively.
Table-1: Comparison of Asian Countries
Insurance Penetration: Premiums as
% of GDP
2008
Premium Volume
Share of World
(million US$)
Market (%)
Countr
y
Ran
k
Total
Business
Life
Gene
ral
Ra
nk
India
31
4.6
4.0
0.6
14
2008
2007
2008
1.32
56,19
57,7
Malaysi
a
33
China
43
Sri
Lanka
71
Philippi
nes
73
Indone
sia
75
Iran
78
4.3
3.3
1.4
1.4
1.3
2.8
2.2
0.6
0.9
0.9
1.5
1.1
0.8
0.5
0.4
82
9,335
8,63
3
34
6
140,8
18
0.1
1.0
0.01
623
469
2,299
2,10
5
54
39
80
Pakista
n
83
Saudi
Arabia
85
0.9
0.8
0.6
0.7
0.3
0.0
0.2
0.5
0.6
0.05
0.16
47
4,243
Bangla
desh
3.30
92,4
83
78
6,903
1.1
0.22
6,98
3
3,64
5
75
0.10
0.02
717
617
0.03
1,133
1,09
4
0.07
3,070
2,29
0
63
50
Source: Sigma 03/2009, World Insurance in 2008.

Reflecting the rapid growth of the national economy, Bangladesh insurance (both
life and general) market continues to make steady growth both in depth and
dimension despite reduction in business activities due to global recession coupled
with drastic fall in commodity prices. The premium income of all types of insurance
companies in 1999 was Tk.9492.60 million and went up to Tk.51635.60 million in
2008 (Table-2). 43 general private insurance companies and one state owned
corporation earned premium around Tk.12583 million in 2008, an increase of
18.12% from Tk.10653 million in 2007. The 17 private life insurers and one state
owned life corporation earned premium amounting to Tk.39053 million in 2008, an
increase of 22% from Tk.31815 million in 2007. Table-2 also shows that during the
last decade the average net premium of Bangladesh insurance companies was
about Tk.24811.49 million. Of this figure life insurance premiums constituted
Tk.17685.12 million and general insurance constituted Tk.7126.37 million (Table -3).
Table-2: Total Asset, Total Investment, and Gross Premium of Insurance Companies
and National GDP of Bangladesh (in Million TK.)
Year
Total
Asset
Total Premium
Income
Total
Investment
1999
28059.1
1
9492.60
14433.57
237090
0
2000
27949.2
7
11222.61
15454.01
253550
0
2001
37596.4
4
13260.73
22839.57
273200
0
2002
42999.6
3
15391.73
26861.83
300580
0
2003
50095.1
3
18406.35
29444.63
332970
0
2004
59896.2
8
21918.96
40913.73
370710
0
2005
73411.2
7
28462.49
47836.28
415730
0
2006
89053.6
3
35825.78
58894.63
472480
0
2007
115237.
22
42498.07
65093.86
545820
0
2008
142205.
64
51635.60
90412.92
614940
0
Mean
66650.3
6
24811.49
41218.50
381707
0
GDP
Source: Economic Survey of Bangladesh and Bangladesh Insurance Association

Table-3: Premium Income by Different Types of Insurance Companies in Bangladesh
(in Million)
Year
Private
Genera
l
SBC
Total
Genera
l
Private
life
Total
life
JBC
Gross
Premiu
m
199
9
3239.0
7
616.8
7
3855.9
4
4017.1
7
1619.
49
5636.6
6
9492.6
0
200
0
3645.5
0
617.4
0
4262.9
5109.9
0
1849.
81
6959.7
1
11222.
61
200
1
4101.9
7
759.1
0
4861.0
7
6435.5
9
1964.
07
8399.6
6
13260.
73
200
2
4506.8
6
818.6
3
5325.4
9
8274.2
7
1791.
97
10066.
24
15391.
73
200
3
5111.5
7
766.6
1
5878.1
8
10589.
55
1938.
62
12528.
17
18406.
35
200
4
6003.7
2
778.6
5
6782.3
7
13358.
76
1777.
83
15136.
59
21918.
96
200
5
7129.4
0
886.1
3
8015.5
3
18410.
45
2036.
51
20446.
96
28462.
49
200
6
7971.6
1
1044.
54
9016.1
5
24576.
11
2233.
52
26809.
63
35825.
78
200
7
9417.3
2
1265.
82
10683.
14
29165.
1
2649.
83
31814.
93
42498.
07
200
8
11163.
93
1418.
99
12582.
92
35974.
52
3078.
16
39052.
68
51635.
60
Mea
n
6229.1
0
897.2
7
7126.3
7
15591.
14
2093.
98
17685.
12
24811.
49
Source: Bangladesh Insurance Association

The total asset of insurance companies in 1999 was Tk.28059.1 million and went up
to Tk.142205.64 million in 2008 (Table-2). Table-2 also shows that during the last
decade the average total asset of Bangladesh insurance companies about
Tk.66650.36 million. Of this figure life insurance assets constituted Tk.47324.10
million and general insurance constituted Tk.19326.26 million (Table-4). The
aggregate total assets at the end of 2008 were about 5 times those in 1999.
Table-4: Assets by Different Types of Insurance Companies in Bangladesh (in Million
TK.)
Year
199
Private
Genera
l
SBC
7848.5
5353.20
Total
Genera
l
Private
13201.
9935.3
JBC
Total life
Total
Asset
4921.9
14857.3
28059.1
life
79
200
0
9178.1
1
526.81
9704.9
2
12629.
27
5615.0
8
18244.3
5
27949.2
7
200
1
9868.3
4
5671.88
15540.
22
15868.
87
6187.3
5
22056.2
2
37596.4
4
200
2
10326.
73
5663.33
15990.
06
20318.
93
6690.6
4
27009.5
7
42999.6
3
200
3
11145.
68
5942.04
17087.
72
25599.
95
7407.4
6
33007.4
1
50095.1
3
200
4
12666.
70
6359.72
19026.
42
32821.
21
8048.6
5
40869.8
6
59896.2
8
200
5
14199.
72
6051.90
20251.
62
44248.
51
8911.1
4
53159.6
5
73411.2
7
200
6
15815.
53
6666.18
22481.
71
56888.
88
9683.0
4
66571.9
2
89053.6
3
200
7
19829.
68
7768.14
27597.
82
71651.
40
15988.
00
87639.4
115237.
22
200
8
22756.
46
9623.84
32380.
3
91367.
73
18457.
61
109825.
34
142205.
64
Mea
n
13363.
55
5962.70
19326.
26
38133.
01
9191.0
9
47324.1
0
66650.3
6

Table-5: Investment Made by Different Types of Insurance Companies in Bangladesh
(in Million TK.)
Year
Private
Gener
al
SBC
Total
Gener
al
Private
199
9
2239.2
3
200
0
200
JB C
Total
life
Total
Investm
ent
2776.
50
5015.7
3
5868.1
3
3549.
71
9417.8
4
14433.5
7
3194.8
4
330.4
9
3525.3
3
7935.3
0
3993.
38
11928.
68
15454.0
1
3655.2
3376.
7031.9
11233.
4574.
15807.
22839.5
life
69
09
54
63
200
2
4488.3
3
3067.
32
7555.6
5
14288.
95
5017.
23
19306.
18
26861.8
3
200
3
5100.1
4
1199.
14
6299.2
8
18300.
78
4844.
57
23145.
35
29444.6
3
200
4
5667.7
9
5667.
79
11335.
58
24088.
95
5489.
20
29578.
15
40913.7
3
200
5
6611.1
1
3819.
59
10430.
7
30568.
74
6836.
84
37405.
58
47836.2
8
200
6
7220.8
9
4008.
05
11228.
94
40078.
89
7586.
80
47665.
69
58894.6
3
200
7
8571.4
0
4141.
07
12712.
47
43997.
75
8383.
64
52381.
39
65093.8
6
200
8
11132.
41
4331.
71
15464.
12
67151.
19
7797.
61
74948.
8
90412.9
2
Mea
n
5788.1
4
3271.
84
9059.9
7
26351.
18
5807.
35
32158.
53
41218.5
0

Total investment of the insurance companies in 1999 was Tk.14433.57 million and
that figure rose to Tk.90412.92 million in the year 2008. The GDP share of insurance
sector is increasing over the years. Table-2 also shows that during the last decade
the average total investment of Bangladesh insurance companies about
Tk.41218.50. million. Of this figure life insurance investment constituted
Tk.32158.53 million and general insurance constituted Tk.9059.97 million (Table-5).
Insurance companies are major investors in shares, bonds, and loans and real
estate in the country. Thus relating total investment by the insurance sector to GDP
growth should be a major avenue for analyzing the insurance-growth nexus. Directly
and indirectly insurers provide funds for investment and add to demand for the
respective financial market instruments. By providing liquidity and to the respective
markets, they improve the overall performance of the respective markets. Due to
higher liquidity it is much easier for private and institutional investors to access
diversified investment portfolios and to invest in high risk, high productivity
projects. On the other hand, this intensifies the pressure on the economy to limit
the waste of resources due to the increased competition in the market and on the
other hand aids economic growth by smoothening the flow of funds to capitalintensive projects.
3. Objectives of the Study:

The specific objectives of the study are as follows:
a
To focus the present insurance sector scenario of Bangladesh.
To identify the problems that are hindering the development of insurance

industry of Bangladesh.
To examine the scope and opportunities of insurance industry of Bangladesh.
To suggest some measures for improving the insurance industry of

Bangladesh.
4. Sources of Data and Methodology of the Study:

Both primary and secondary data are used in the study. In order to collect primary
data three sets of questionnaires are developed, which are prepared in the light of
the objectives of the study. The first set is used for interviewing the executives of
the sample insurance companies (both life and general) to gather information
regarding insurance policies and this subject matters, companys business position
and its attitude towards the development of insurance industry in the country. The
second set is used for interviewing the entrepreneurs (or customers) to gather
information regarding the insurance practices in Bangladesh. The third set is used
for interviewing the academicians, policy-makers, insurance-expert to gather
information regarding the countrys insurance academic curricula, existing
insurance rules and regulations, the actual problems and prospects of insurance
industry in Bangladesh. Before preparing the final questionnaire, a pilot survey was
also conducted in order to test the validity and relevance of the questions.
There are 43 general insurance and 17 life insurance companies operating in
Bangladesh, of which 6 life and 14 non-life insurance companies have been selected
as sample for collecting primary data in terms of their operational experience,
number of employees, premium income and total asset etc. It was decided to
allocate a sample of 2 branches to each of the insurance companies. Branches have
been chosen as large, medium and small sizes in terms of their employees,
customers, premium income etc. From each branch, branch manager, and an
executive officer have been selected for the purpose. So, 2 insurance officers from
each branch of the sample insurance companies have been interviewed. The total
number of 80 insurance officials taking 4 from each selected insurance companies
has been considered for collecting data. Again, 5 policyholders have been selected
from each branch. To this end, first of all, a list of customers has been collected from
all selected branches. Simple random sampling method has been used for selecting
respondents. Thus, a total number of 200 respondents have been selected for
collecting primary data. Our selected study areas are concentrated in Dhaka and
Chittagong purposively. 20 academicians, policy-makers and insurance experts are
also selected purposively from Dhaka and Chittagong for collecting information
related to primary data.
Secondary data relevant to this study have been collected from available
publications including different text books, journals, magazines, websites etc. Data
relating to the insurance of Bangladesh Insurance Association (BIA), Ministry of
Finance, Bangladesh Planning Commission, IMF Reports, World Bank Reports,
Economic Survey of Bangladesh, Statistical Pocket Book, Annual Reports of the
sample insurance companies under study period etc. have been consulted for the
theoretical development of the study.
The data and information thus collected have been processed manually as well as
through personal computer. Statistical tools, namely, average; percentage, 5-point
Likert- type-scale, rank etc. have been used in the study. The data and results of the
study have been analyzed critically in order to make the study more informative,
useful and acceptable to the readers, academicians, policymakers, and those people
who are devoted to the development of insurance industry in Bangladesh.
5. Findings and Analysis:
The major findings of the study and their analyses have been summarized below:
5.1. Demographic Profile and Insurance Types Preference
In the questionnaire, there was a section concerning respondents profile to get
a general idea about the respondents age, education, designation, as various
factors might also influence their perception. A profile of respondents is presented
in Table 6.
Table 6: Demographic Information and Preferred Insurance Companies by of the
Respondent
N = 300
Gender
Age
Marital Status
Working Status
Frequency
Percentage
Male
285
95%
Female
15
5%
Below -30
21
7%
30-45
168
56%
45-60
111
37%
Single
39
13%
Married
261
87%
Business
60
20%
Education
Types of
Insurance
Company
Jobholders
240
80%
Graduation
33
11%
Post
graduation
267
89%
Public
10%
Private:
(a) Local
18
90%
17
85%
5%
(b) Foreign
Source: Field investigation
Table-6 indicates that 95 percent of the respondents were male and 5 percent were
female. Out of the total respondents, 7 percent of the respondents were below 30,
56 percent of respondents were between 30 and 45, and 37 percent of respondents
were between 45 and 60 years range. 13 percent of respondents were single, while
the married accounted for 87 percent. A large number of respondents (80%) were
jobholders. The table also revealed that a significant number of respondents (89%)
was highly educated. Respondents were also asked to indicate what type of
insurance company they prefer. Three types of insurance companies were given for
their choice and the choice preferences are shown in Table-6. Some 85% of
respondents preferred private local companies.
5.2. Factors in Selecting Insurance Companies and Policies
Respondents were asked to indicate factors that influence their selection of
particular types of insurance company. Ten major reasons influenced their choices
as shown in Table-7.
Table-7: Factors in Selecting Particular Types of Insurance Company and Factors
Influencing Buying Policies
Factors Influencing Buying
Policies
Factors in Selecting Particular

Types of Insurance Company
Factors
Motivated by family
friends relatives
Mea
n
Ran
k
3.10
Factors
Providing financial
benefits to
Mea
n
Ran
k
3.83
dependents
Regulation of the
government
2.74
Reputation of the
company
3.73
Pension benefits and

retirement Capital
3.60
Future savings for

uncertainty in future
3.58
2.43
Meeting expenditure
of marriage
ceremonial program
2.67
Low service
processing cost
5
6
Influence of the sales

people
3.93
Meeting the
expenditure of
children education
2.28
10
No other options
available
2.62
For execution of
future plan
2.80
Higher return on
investment
2.79
High return on
investment
3.15
Reference by
workplace
3.31
Life security and

accidental loss
coverage
3.67
Political and legal

situations
2.17
Buying policy for

legal requirements
3.92
Risk coverage and

future savings
3.99
Risk coverage and

future savings
4.33
10
1
Source: Field Survey.

5. 3: Managing and Measuring Risk by Insurance Companies
Table-8: Risk Faced, Managing Techniques and Measuring Risk by Sample
Companies
Risk Faced by Insurance
Company
Techniques for
Managing
Measuring of risk
Pattern of Risk
No of
Respon
dents
(in
percent)
Techni
ques
No of
Respon
dents
(in
Percent)
Tools of
Measure
ment
No of
Respon
dents
(in
Percent)
Credit risk
58%
Risk
Avoida
18%
Credit
30%
nce
Rating
Liquidity risk
61%
Risk
Transfe
r
100%
Gap
Analysis
3%
Interest risk
12%
Risk
Reduct
ion
27%
Duration
Analysis
3%
Commercial risk
67%
Risk
Retenti
on
76%
Maturity
Matching
3%
Legal risk
12%
Hedgin
g
9%
Earning
at Risk
27%
Insolvency risk
6%
Others
0%
Value at
Risk
73%
Political risk
79%
Simulati
on
Country risk
3%
Estimate
s of
Worst
Case
3%
Technological/op
erational risk
55%
Risk
Adjusted
Return
on
Capital
9%
Foreign
exchange risk
21%
Off balance
sheet risk
Others
0%
3%
Source: Field investigation.

(Note: Percentage exceeds 100 because respondents mentioned more than one
factor)
Table- 8 indicates that the Sample companies were typically facing some common
risk presented as political, commercial, liquidity, credit risk. Out of total
respondents, 79%, 67%, 61% and 58 % of the Sample companies faced political,
commercial, liquidity and credit risk respectively. 55% of Sample companies faced
technological risk.
It is noted that there were two sections in the Questionnaire about Management and
Measurement of risk to get an idea about how insurance companies managed risk
and what techniques were used. The risk Management factors and Measurement
tools used by Sample companies are presented in Table 8.
5.4: R& D Scenario and Training Arrangement by the Insurance Companies
To create an environment of growth, a sound policy of training and manpower
development is essential in any insurance company. An insurance company needs
to formulate policies of recruitment, remuneration, compensation, and grievance
handling mechanism. In the questionnaire, there was a section concerning
respondents Arrangement of Training program to have an idea about the
respondents working skill, efficiency, adaptation with the working environment, as
various factors might also influence their perception. Various training programs of
respondents are presented in Table 9.
Any improvement and innovation can be possible only with proper research and
development practices. Research helps any product maintain and improve the
quality of the existing one. It brings out the weakness of the existing product, if any.
At the same time, new products can also be developed with the help of research.
The Japanese have embraced research and achieved success. The success of the
Japanese lies in the principle Be Better, Not Behind. If not better, be different.
Being better means having better or at least equivalent products. Being different
means finding a niche that is out of the main stream of competition
Table- 9: Arrangement of Training for Employees and R&D Scenario in Insurance
Companies in Bangladesh
Arrangement of Training for
Employees
R&D Scenario in Insurance

Companies
Programs
Queries
No of
Respondents
(in percent)
Case Method
0%
Response
Yes
No
Seminar
76%
R &D exists
15%
85%
Special
Course
73%
Investment
18%
82%
Workshop
85%
Having any
Marketing
15%
85%
Research
Job
orientation
24%
Job rotation
6%
Understudy
method
0%
Others
0%
Product
Innovation
18%
82%
Source: Field investigation.

Note: Percentage exceeds 100 because respondents mentioned more than one
factor.
Every respondent was asked to respond to the questions related to the existence of
R&D cell, the investment made (i.e. non-recurring expenditure for R&D cell) in the
last five years, availability of computer facility etc. Results are reported in Table-9.
The Table shows 85% of the companies do not have proper research or R & D
facilities, and 82% of the companies did not invest in R & D and did not witness any
product innovation.
5.5. Reasons of Non-popularity of Insurance in Bangladesh
Table 10: Reasons for not popularizing the Insurance in Bangladesh (Rank Analysis)
Reasons
Mean
Ran
k
Lack of government patronizing
4.04
Lack of strong legal frame work
4.00
Lack of separate regulatory body
3.10
11
Lack of trustworthiness
4.74
Lack of awareness
4.68
Low income of the people
4.62
Lack of attractive offerings
4.62
Lack of sufficient information
3.12
10
Delaying in claim settlement
4.74
High service/processing cost
3.18
Lack of marketing Research
3.44
Lack of product diversification
4.62
Lack of efficient workforce
4.08
Lack of updated system and

technology
3.16
Source: Field Survey.

Table-10 shows reasons of non-popularity of the insurance sector in Bangladesh.
The responses from the respondents have been ranked with the help of Likert scale.
The study reveals that Lack of trustworthiness and Lack of awareness have the
highest same mean and ranked 1st followed by Delaying in claim settlement as
ranked 2nd. The study reveals that the insurance industry should take proper action
to create awareness development and enhancing faith among the people. These
two initiative actions are the crying need to expand the development of insurance
products in Bangladesh. It also indicates that complexity, lengthy procedure and
delaying in claim settlement are responsible for not popularizing the insurance
industry in Bangladesh. Lack of product diversification, Low income of the people,
and Lack of attractive offerings are considered as ranked third. This implies that
insurance industry is way behind the expected level in terms of innovation of new
products. Low savings rate and unattractive offerings are also responsible for not
purchasing insurance policies by the respondents.
Among other reasons for not popularizing the insurance are Lack of efficient
workforce, Lack of government patronizing, Lack of strong legal frame work,
Lack of marketing research and High service/processing cost, which are ranked
as 4th, 5th, 6th, 7th and 8th respectively.
6. Problems of Insurance Industry in Bangladesh:
The following problems of the insurance industry in Bangladesh are identified in the
present study:
Lack of Public Faith: Insurance agents are responsible for creating negative
image of insurance to the public. It shrinks the scope of insurance business. Poor
public image is mainly responsible for not expanding the sector. This opinion is held
by 94.80 percent respondents in the study.
Lack of Public Awareness: Mass illiteracy hinders the growth of the insurance
sector. A vast majority of people especially in rural areas are left outside the
insurance coverage. This mainly results from the look of awareness among the
people. This problem is supported by 93.60% in the study. Even a large portion of
people in the country have no minimum idea about insurance. People are not aware
of the benefits from the insurance policy and a good number of people believe that
insurance business is nothing but cheating and they assume that insurance policy is
quite unnecessary.
Centralization Policy: 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 opportunities for their business in cites because the economic condition
of the urban areas is better than in the rural areas. They forget that the large
number of our population reside in rural areas. Thus this centralization policy acts
as an obstruction to the growth of insurance business in our country.
Poor Economic Conditions: Bangladesh is one of the poorest countries in the
world and most of the people in this country live under extreme poverty. All of these
people fight hard to earn their livelihood. 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 premium and regarded as safety or precautionary
measure against any accident. This problem is mentioned by 74.80% people in the
study.
Excessive Management Expense: Growing cost of business is a problem that
insurance companies are facing now a days. Most of the second and third
generation insurance companies are facing the problem of excessive management
expense that is much higher than the prescribed limit. Currently there are ten or
more tiers in the field level. This is unsustainable in the long-run.
Political Instability: Sound and robust political environment is a pre-requisite for a
countrys development. Political instability is a serious problem for the insurance
business. Moreover, Bangladesh government formulates national policy, rules, and
regulations on political consideration that, too, restrict the normal growth of
insurance in the country.
Lack of Supervision from the Government: Lack of surveillance from controlling
agency of government encourages many insurance companies to follow some
unethical practices like delay in claim settlement, harassment to policy holders and
showing fake financial statement. This is not only destroying the reputation of the
insurance companies but also creates negative impact in the mind of the people
about insurance. This problem has been mentioned by 80.80% respondents of the
study.
Legal Complexity: The current Insurance Act is lacking in several aspects of
determining margins of solvency, investment of funds, accounting standard,
morality table and protection of the interest of the insured. This problem is
identified by 80% people of the study. To take an insurance policy there is a lengthy
procedure and so many complexities are faced by the insured person. 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 regular
activities.
Lack of Qualified Officials: Insurance companies perform their activities by

recruiting marketing agents. They try to convince the people to take a policy. Most
of the agents are not properly trained and they do not know the right process to
catch potential policy holders. 68% of people opined in the study that the insurance
companies lack in efficient workforce. Therefore, these field level agents are unable
to fulfill their target.
Lack of Training for the Employees: Spread of insurance business in
Bangladesh failed for lack of proper training of the employees, especially the field
employees of insurance companies. Still there is not enough training centers to
provide proper training regarding insurance activities for the officials of insurance
company. This problem is cited by 81% respondents of the study.
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 segment of the population is completely unaware about the insurance
policy. Another problem is that the insurance company does not provide adequate
information in the companys websites which can meet the queries of their potential
customers and encourage them to buy insurance policy.
Absence of Business Ethics: In a competitive market, some insurance companies
use some business tactics that violate the business standard and the provision of
insurance acts. Some insurance companies create harassment to the policy holders
when they want back their money after death or maturity. The insurance companies
show different causes for not settling the claim timely. Besides this, some field
officials also often try to give false information to the people for buying a policy.
Such kinds of illegal acts create bad reputation to the insurance companies and
hinder the development of the overall insurance business in the country. Those
customers that are harassed by the insurance companies normally try to discourage
other people to buy any insurance policy.
Lack of Motivational Program towards Public: According to our survey, the
people of the country are not much motivated by the company to take insurance
policy for safeguarding themselves against any kind of risk. They fail to understand
that insurance policy makes their life risk free. For lack of motivation among the
people, insurance companies are always lagging behind their expected target.
Lack of Information Technology: Automation facilities prompt service and paves
the way of cost and time savings but the insurance sector in Bangladesh is still
conducting its operations manually (or on conventional method). They do not use
any web address, which is essential for an insurance company. They can provide
more information to its client by using web site. But still the operations of insurance
companies are not automated. The clients of insurance sector are deprived of the
convenient use of e-insurance, online business, internet, Web and computerized
system. This problem is cited by 78.40% people of the study.
Insufficient Service: Insurance people failed to provide better services to the

mass people of the country. Thats why the people who want to take the insurance
policy they lose their interest from insurance. This problem is mentioned by 66.60%
people of the study. As can be seen in a foreign country, insurance workers go to
customers house and offices regularly to influence them to take insurance policy,
but in Bangladesh insurance people seldom provide this service.
Lack of Marketing Policy: One of the major problems in an insurance company of
this country is the lack of proper marketing policy. Management is not taking
initiative to increase their marketing expansion. They spend tiny amount in
advertisement, which is not sufficient for increasing business development.
Lack of Information: Lack of information about the insurance policies to the
potential insured is a problem for making decision to buy insurance policies. They
are not aware of the benefits of insurance policies. The insurance companies do not
have adequate arrangement to make the people understand about different
policies, opportunities, benefits etc. This opinion is shared by 78.4% respondents of
the study. The accurate and sufficient information does not reach the public doors.
The government, too, did not still constitute any institutional information cell to
educate the people or provide prompt information in this regard.
Delaying in Claim Settlement: Insurance companies suffer from the poor public
image due to their failure to properly settle customers claims in time. There is an
uncertainty about getting insurance claims after the maturity of the policy. 83.40%
customer of insurance industry had opined that insurance companies made delay in
claim settlement. This problem makes insurance business unpopular to the people.
Customs of Commission: Practice of commission is the main motivational factor
used to make sales of insurance product. It is being badly practiced in the insurance
market for which insurance companies are involved in unhealthy competition. They
are offering very high commission rate even 55 to 60 percent of premium received
to procure the business even if that violates the Insurance Act. It erodes the
potential profitability and risk coverage.
Absence of Research and Development Cell: A systematic organization
requires an effective research and development cell. It is very conducive to
diagnose industry sickness and analyze the problems. It is a process of creating,
building, improving, adopting and bettering, but the present study finds that
88.80% of insurance companies have no research activity.
Poor Risk Management: Most of the sample insurance companies have used
traditional methods in evaluating comprehensive risk. The shortage of skilled and
experienced professionals in the insurance companies has the consequence that
most of sample enterprises are unable to underwrite and manage their risks on a
scientific basis. They underwrite and retain risks indiscriminately without
considering what results they may subsequently face. Lack of professional
knowledge misguides these companies with regard to risk assessing, claim

handling, and risk managing, consequently weakening their financial strengths.
Constrained Investment: Zonal and local branches of insurance company do only
premium collection activity and have no authority to invest the fund as per their
choice. As a result, the insurance industry in the unit level is not becoming a
potential and ideal sector as the banking sector. A part of the funds of the insurance
sector is kept in the form of Fixed Deposit Receipt (FDR) in different banks, which is
mandatory. If these funds were invested in tangible assets of land, building,
machinery and manufacturing projects, that would make the investment more
profitable.
Lack of Product Diversifications: Insurance companies usually offer some
common and traditional products. Generally, customers always demand innovative
products. The study finds that the insurance market was not exploring product
diversification. The problem is observed by 69.40 % of the respondents. The pattern
of risk is always changing and ever-increasing. The insurance market demands new
products to cover the risk arising from changing and growing needs of society.
Tax Constraints: Insurance officials say that the high corporate tax restricts the
growth of the insurance sector. Now the insurance companies pay a corporate tax
rate of 42.5 percent which is higher than in other countries.
Reinsurance: At present the insurance law requires that all general insurance
companies must compulsorily place 50% of their reinsurance with SBC and the
balance 50% is optional, which can be placed either with SBC or other re-insurers at
home or abroad. It is on record that most of the private general insurance
companies obtain their reinsurance from SBC. Historically, due to its monopolistic
position SBC was a direct insurer under writing both public and private sector
insurance business. However, after 1985 the position gradually changed, and, as it
stands now, SBC has become by and large a reinsurance company. An analysis of
SBCs Annual Account reveals that 75% of their premium income is derived by way
of reinsurance cession from private insurance companies, 20% from public sector
business, and 5% from private sector insurance business directly (Roy, 2008). It is
found that there is an inherent clash of interest between the role of an insurer and a
re-insurer. A reinsurance company cannot and should not compete with its own
reinsuring clients in respect of direct insurance business. Though SBC has come to
play the role of a re-insurer in Bangladesh, its services have continuously
deteriorated over the years, which has adversely affected the operation of the
private sector insurance companies.
7. Prospects of Insurance Business in Bangladesh:
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.
Large Population: There is a big opportunity for the insurance companies as the
population of our country is increasing day by day. The growth of population opens
greater scope for every kind of insurance business.
Higher GDP: The GDP of our country is increasing which results in the increase of
per capita income. With the growth in the income more, people are now willing to
take an insurance policy for safeguarding themselves against any danger.
Micro Insurance for Poor and Rural People: Insurance services need to be
redesigned to meet the needs of different classes of people. We should have
consistent product development to meet emerging needs of the poorer class and
the rural class. Distinctive product innovation relevant to indigenous conditions of
the poor and especially for the borrowers of micro-credit is the need of the time.
Micro insurance can be a great prospective area for the insurance business in
Bangladesh. Most of the people of the country are unable to have costly and long
term insurance policies. Micro insurance can be provided to individual persons or to
small business owners against low insurance premiums and with easy terms and
conditions. When people will afford to minimize their risks at a lower price, more
and more people will take that opportunity. A huge portion of the society can thus
be a prospective target market for this business.
Investment Scope: Bangladesh has large scope of investment in trade, commerce
and industry. The insurance fund is now invested in government bonds, ICB
projects, marketable securities, and FDR which are not much profitable. The private
insurance companies are realizing this fact. There are opportunities to enhance
profit through effective and efficient money management by employing capable and
experienced personnel. There is scope of investment expansion in the areas leasing,
housing, health and money market.
New Businesss Individual Insurance: There are so many new businesses
starting every day with a booming global demand. Every business is insured under
an insurance company to protect itself from any kind of accident. Therefore the
growth of industry, mills, and factories is creating better scope for the insurance
companies to flourish their business.
Extent of Market: There is a great scope of facility to explore the insurance
market. The market is big but a large part of it is still unexplored. The insurance
sector should take step to introduce innovative and diversified products to cover
risk in the unexplored areas of the economy.
Government Aid: Government is the key player of all development. In order to
boost the growth of the insurance sector, the government should frame a liberal tax
policy, reform the legal structure and set up a strong regulatory body. Since the
government is liable to ensure the safety and security of people, it can obligate the
people to take policy in some cases and also attract investors in this sector.
Developing Mass Awareness: People are now much more conscious about their
safety and security. Government and the industry can easily draw their attention
regarding the significance of insurance in their life so that they can be encouraged
to take an insurance policy for making their life free from any unexpected situation.
The increase in literacy rate is also helping to create awareness among the people
regarding taking insurance policy. Besides, insurance companies are also trying to
alter the negative attitude of people towards insurance by organizing various
programs such as seminars, programs including social responsibilities etc.
Furnish Modern Services: The technology should be used in operating system to
reach services promptly to the customer. These comfortable and soft services
attract the customers and enhance the volume of sales. The insurance sector till
now does not use modern tools providing services. So the insurance sector should
introduce e-insurance, online insurance, e-mail, Web and ATM booth that facilitate
transactions in withdrawing their claim, depositing their premium and knowing the
balance sheet etc.
Strict Application of Rules and Regulations: Due to strict application of rules
and regulations, anarchy is prevailing in this sector. The regulations should be
aimed to reduce, not increase, the problems of the insured and to protect them from
any kind of deception. The Controller of Insurance should closely monitor the
insurance companys functions and obligate them to follow the current Insurance
Act 2010. By enforcing law, this sector can come back in a systematic manner.
Developing New Insurance Products: In course of time, there is a great change
in climate and atmosphere over the world that adds new pattern of risk in trade and
commerce. The insurance should add new products to cover the additional risk and
to meet the new tastes of entrepreneur. There is considerable scope of developing
new product and service in insurance sector to cover all sectors of our economy. In
our study, some insurance companies are being advancing in product modification
and attempt to introduce new products. This action of generating new product and
service will considerably expand the demand for insurance products.
Service Diversification: Insurance is not just a tool of risk coverage. It is also an
attractive instrument of savings. The combination of risk coverage with savings
gives the opportunity for innovative product designing which means service
diversification. So far very little efforts have been taken to innovate and introduce
need oriented insurance services in response to existing threats. The prospect of
the insurance business in agriculture and business sectors appears bright, as
described blow:
Agriculture Sector: The economy of Bangladesh is predominantly agrarian, with
most people engaged in farming and fishing. The uncertainty of agriculture due to
crop failure is caused by climate variation, drought, cyclone, and flood and pests,
which affect farmer income as well as government revenue. Furthermore, in the last
few years commercialization has occurred in some sections of the agricultural

sector. Increasing investment in the agricultural sector is creating a new opportunity
for the 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 a
large amount. If insurance business focuses this service in Bangladesh they will able
to contribute more in the economy. Thus, insurance business has a bright prospect
in business sector in Bangladesh.
8. Suggestions for Policy Implications:
The concerned policy makers of insurance sector should adopt the following
measures in order to make the best use of the opportunities and to tackle the
threats for ensuring the growth and development of the insurance industry in
Bangladesh.
Regain Popularity with Appropriate Marketing Strategy: To regain and
maintain a positive public image, the insurance companies should practice
appropriate marketing strategy and provide better service to its customers. To
create people awareness, insurance companies should also arrange on regular basis
seminar, symposium, road show etc in different parts of the country.
Product Innovation: Insurance Companies should diversify their product. They
should introduce new products to satisfy customers needs.
Developing Professional Code of Ethics: Insurance companies should try to
develop professional ethics among its personnel. Government should have a
regulatory body for the surveillance on insurance companies so that they must
perform their business maintaining the ethical issues properly
Establishment of R&D Cell: In response to the opportunities of growing market,
the insurance companies should expand their market by identifying and providing
responsive services. In order to do so each company should establish an effective
research and development cell.
Arrangement of Training Programs: Relevant authorities in collaboration with
supportive agencies should provide training to the insurance related personnel for
improving the insurance business in the country. Bangladesh Insurance Academy
(BIA) should arrange training programme on regular basis. The syllabus, curriculum
and training programs of the academy need to be modified to meet the future
challenges of the insurance industry.
Investment: The collected premium should be invested in large and beneficial
sectors so that insurance companies can return their clients the expected gain
timely. In this respect, they should progressively come forward to invest heavily in
profitable earning sectors such as real estate, health, education, leasing, share
market and other money markets.
Pricing Policy: The pricing policy should be flexible so that the companies can
exercise some autonomy. The government should allow the insurance companies to
quote different premium rates according to their requirement that will help to
increase the profitability of the insurance companies.
Monitoring: The office of the Controller of Insurance should be strengthened with
expert professional people aiming at efficient handling of the affairs of the
insurance companies.
Legal Reforms: Existing insurance laws should be improved incorporating
upcoming challenges of the insurance industry. The existing provisions allow the
only two public sector insurance companies to do all government insurance
business. Also, according to current insurance rules only these two public sector
insurance companies can do reinsurance business. This restriction need to be
withdrawn so that the private insurance companies can do reinsurance business.
This would help to save foreign exchange outflows, create new technical job
opportunities, open up scope for innovations which are important to build
confidence in the market.
Recruitment Strategies: Insurance companies need to modify their recruitment
strategies with increased focus on the marketing and sales training because
insurance being a service industry it requires a special attention. Insurance
companies should recruit youths who are trainable and developable.
Claim Settlement: Claim settlement procedure should be made easy, transparent
and improved by the insurance companies.
Removing Multi-tier Fake Agents: Unnecessary multi-tier organizational set up
should be replaced by one tier. This is essential for reducing the management
expenses. Fake agents or dummy agents who indulge in malpractices should be
eliminated and selection of agents should be unbiased. Appointment of too many
agents in particular area should be stopped. Full time agency should be encouraged
and part-time agency should be discouraged.
Reducing Excessive Management Expense: Management should take remedial
measures to reduce expenses to a more acceptable and controllable level. An
insurance company having high expense ratio should not allow the present high
management expense and should do possible everything to reduce it to about 20%
to 30% of total premium income within the shortest span of time. Management
expense growth over the future years should be at least 10% lower to premium
growth rate. This can be ensured by reducing the present supervisory tiers.
Reinsurance: A reinsurance company cannot and should not compete with its own
reinsuring clients in respect of direct insurance business. In both India and Pakistan,
the state-owned reinsurance companies, namely, General Insurance Corporation of
India and Pakistan Re-insurance Company Ltd., operate strictly as a re-insurer and
they do not underwrite direct insurance business. Therefore, it is most desirable
that SBC should restrict its activities to either as a direct insurer or a re-insurer but
not both simultaneously.
9. Conclusion:
Insurance sector in Bangladesh is contributing to the growth and development
process of the business and property by protecting all variety of assets from all
types of hazards. However, the size of the insurance industry in Bangladesh is small
but over-institutionalized. Only by achieving competitiveness, this sector can
contribute more to the development of the economy of the country. In spite of all
constraints both at macro and micro environment, good growth rate and
tremendous growth potential reconfirm the brightest prospects of the insurance
sector in Bangladesh. If insurance sector can be developed at optimum level by
eliminating the problems identified in the study, it is expected that it will continue to
march forward at an accelerated speed and bring economic benefits to the
economy.
References
Ahmed, S.U. (1977): Insurance Business in Bangladesh: A Study of the Pattern,
Problems & Prospects, Bureau of Business Research, University of Dhaka.
BIA (Bangladesh Insurance Association) (2000): Bangladesh Insurance Academy,
Insurance Journal, Vol.51.
Chaudhuri, A.H. (2008): Risk and Insurance, Rainbow Book Mall, Dhaka, Bangladesh.
Habibullah, M. (1999): On Developing Quality Service in Insurance Industry
Insurance Journal, Bangladesh Insurance Academy, pp.7-11.
Habibullah, M. and Ghosh, S.N. (1989): General Insurance Business in Bangladesh:
An Appraisal of the Performance of Sadharan Bima Corporation Bureau of Business
Research, University of Dhaka, Dhaka, Bangladesh.
Hye, M.A. and Rahman, M.A. (1997): Performance of Selected Private Sector
General Insurance Companies in Bangladesh Chittagong University Studies
(Commerce Volume), Vol.13, pp.137-160.
Islam, N. and Mamun, M.Z. (2005): Factors for Not Buying Life Insurance Policies in
a Developing Country- A Case of Bangladesh, Journal of Business Administration,
University of Dhaka, Bangladesh, pp.1-22.
Khnodkar, M. and Rahman, M (1993): "Trends of Financial Indicators of Insurance

Industry: A Case Study", Journal of the Institute of Cost and Management
Accountants of Bangladesh, The Cost and Management, Vol. 21, No.6,
Mandal, M.G. (1988): Insurance Industry in Bangladesh- An Overview, Insurance
Journal, Bangladesh Insurance Academy, Vol.49, pp.22.
Mishra, M.N. (2009): Insurance: Principles and Practices Sultan Chand and
Company Ltd., New Delhi.
Rahman, M.M. ((2000): Insurance Industry in Bangladesh and its Future prospects
Journal of Business Administration, University of Dhaka, Bangladesh. pp.121-131.
Roy, P.K. (2008): Prospects and Problems of Insurance Sector in Bangladesh:
Challenges Ahead, Paper presented in a seminar at Dhaka.
Siddiqui, Hafiz G.A.; Islam, M.S. and Chowdhury, M.J.A. (1995): Life Insurance
Business in Bangladesh An Evaluation Insurance Journal, Bangladesh Insurance
Academy, Dhaka, Vol.47.
Sigma (2009): World Insurance in 2008, 03/2009, USA.
Solaiman, M. and Haque, M.A. (1999): Developing of Insurance Industry in
Bangladesh: An Innovative Approach, Insurance Journal, Bangladesh Insurance
Academy, pp.43-48.
Uddin, M.N. and Khan, M.S.U. (2005): Performance Evaluation of Some Private
Sector General Insurance Companies in Bangladesh, The Chittagong University
Journal of Business Administration, Vol.20, pp.349-366.
-------------------
Introduction:
In law and economics, insurance is a form of risk management primarily used to
hedge against the risk of a contingent, uncertain loss. Insurance is defined as the
equitable transfer of the risk of a loss, from one entity to another, in exchange for
payment. An insurer is a company selling the insurance; an insured or
policyholder is the person or entity buying the insurance policy. The insurance
rate is a factor used to determine the amount to be charged for a certain amount of
insurance coverage, called the premium. Risk management, the practice of

appraising and controlling risk, has evolved as a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively
small loss in the form of payment to the insurer in exchange for the insurer's
promise to compensate (indemnify) the insured in the case of a large, possibly
devastating loss. The insured receives a contract called the insurance policy which
details the conditions and circumstances under which the insured will be
compensated.
Backdrop of insurance in Bangladesh:
Insurance is not a new idea or proposition to the people of Bangladesh. About half a
century back, during the British regime in the then India, some insurance
companies started insurance business, particularly life, in this part of the world.
Since 1947 until 1971 insurance business gained momentum in this part of what
was then known as East Pakistan. There were about 49 companies transacting both
life and general insurance business. These companies were operating under a free
competitive economy.
government, in order to make available the fruit of liberation to the general mass,
nationalized the insurance industry along with the banks in 1972 by Presidential
Order No. 95. By virtue of this order, save and accept postal life insurance and
foreign life insurance companies (other than the Pakistani companies), all
companies and organization transacting all types of insurance business in
Bangladesh came under this nationalization order. At the same time, five insurance
corporations were initially established by the Government, viz1) Jatiya Bima Corporation (National Insurance Corporation),
2) Teesta Bima Corporation (Teesta Insurance Corporation),
3) Karnaphuli Bima Corporation (Karnaphuli Insurance Corporation),
4) Rupsa Jiban Bima Corporation (Rupsa Life Insurance Corporation),
5) Surma Jiban Bima Corporation (Surma Life Insurance Corporation).
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.
Current pattern of Insurance in Bangladesh:

government nationalized the insurance industry along with the banks in 1972 by
Presidential Order No. 95. By virtue of this order, all companies and organization
transacting all types of insurance business in Bangladesh came under this
nationalization order. This was followed by creation of five insurance companies in
the life and non-life sector. Further changes were brought on 14th May, 1973.
Through the enactment of Insurance Corporation Act VI, 1973 which led to creation
of two corporations namely Sadharan Bima Corporation for general insurance and,
Jiban Bima Corporation for life insurance in Bangladesh. In other words Sadharan
Bima Corporation (SBC) emerged on 14th May, 1973 under the Insurance
Corporation Act (Act No. VI) Of 1973 as the only state owned organization 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.
Bangladesh Government allowed the private sector to conduct business in all areas
of insurance for the first time in 1984. The private sector availed the opportunity
promptly and came forward to establish private insurance companies through
promulgation of the Insurance Corporations (Amendment) Ordinance (LI of 1984)
1984.
The Insurance Market in Bangladesh now consists of two state-owned corporations,
forty three and seventeen private sector general & life insurance companies
respectively, a total of 62 insurance companies. Thus the insurance sector in
Bangladesh has grown up substantially and deepened remarkably with number of
companies in both life and general segments. With the expansion of size of the
insurance market, the volume of assets of the industry has also increased
substantially.
SBC is entitled to 50% of public sector business. 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 companies equally
under National Co-insurance Scheme.
In respect of reinsurance, the same act provides that fifty percent of a companys
reinsurance business must be placed with the Sadharan Bima Corporation and
remaining fifty percent may be reinsured either with this Corporation or with any
insurer in Bangladesh or abroad. At present, nearly all the companys place 100% of
their reinsurance business with the SBC.
Role of private insurance companies in Bangladesh:
Formation of capital & increase of investment: Insurance companies
receive premiums from insured persons. These premiums increase national
capitals. By investing these capitals, national productions increase.
Reduce of hindrance of risk: every sorts of business consists of risks.
These risks are more hazardous in Bangladesh. Insurance companies
minimize these risks by giving privileges on loss.
Maintenance of national wealth: insurance companies not only secure
financial facts, but also influence people to take necessary steps to avoid
risks.
Distribution of risks: insurance companies deal with lots of insured people.
So risks are being distributed among them.
Extension of business: By taking all uncertain business risk insurance
companies extended the field of business in our country. Insurance gives the
assurance of indemnity and help to collect the capital to lunch a new
business and expand the existing business.
Increase of awareness: As the maximum people of our country are
illiterate so they have not much knowledge about the future life and what will
do to enhance the living standard. Different types of advertisement, publicity
and others awareness activities of insurance company which helps to
increase the awareness of general people.
Increase of employment facilities: Insurance companies help to expand
the business by providing capital and reducing risk. Thats why in this
business organization there are lot of employment opportunity are created.
Increasing national income: Insurance companies directly help to increase
national income by developing business sector and create employment
opportunities in our country.
Problems of Insurance in Bangladesh:

1. 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.

2. 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 acquaint themselves fully
with the whereabouts of insurance. Such agents cannot play efficient role in
convincing a prospective policyholder.
3. Illiteracy: 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.
4. Religious superstation: 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.
5. Low awareness: Insurance awareness is poor. Agents are not skilled enough.
These agents cannot perform their job properly to make the people aware of life
insurance.
6. Low savings: People of Bangladesh have a very small saving potentially and
thus have less or no disposable income. Almost the whole of the income is
exhausted in the process of maintaining the day-to-day life. Thus they are left with
little amount, which may not deemed to sufficient for the payment of premiums.
This factor discourages many to buy life insurance policy.
7. Lack of continuity: Discontinuation of insurance policy is found higher. This
also adversely affects the market efficiency of insurance business.
8. Shortage of fund: Most of the policyholders cannot continue their policies
owing to price spiral and shortage of fund.
9. Lack of remainder: Increase in liability, lack of reminder notice from the
insurance company causes for discontinuation of policy.
10. Negligence of policyholder: Many of the policyholders have expressed that;
their policies lapsed for their own negligence to pay premium in time.
11. Restriction: Another important reason for discontinuation is restriction
investment allowance by the government relating to income tax.

12. 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.
13. Image: High lapses of life insurance policies do much to harm insurance
image.
14. 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 policyholder.
15. Lack of new products: 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.
16. 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.
17. Traditional marketing: Both as a medium of savings and as a provider of
financial security in the event of premature death of a bread winner and in old age,
life insurance has relatively greater appeal among the mid-income people having
steady income. For various reasons poor monetary benefit, poor services, no tax
incentive to government employees etc.-the traditional marketer of insurance have
drastically shrunk. So insurers force to sell policies among different classes, such as
business people, well-to-do farmers, traders etc. These peoples interest for life
insurance is rather lukewarm. Soliciting business from them is harder. Procurement
costs, as a result, have to be raised and at the same time quality of business falls.
18. Traditional Insurance act: The present insurance act was enacted more than
half a century back. Many amendments have been made though since then but the
basic character of the act has remained virtually unchanged. This act does not suit
the needs of life insurance in the present day in Bangladesh. The all pervasive
stringent regulatory functions carried and exercised by the office of the controller of
Insurance (CI) is not consisted with the market liberalization policy of the
government. In its present form, the act is obstructing, rather than helping, healthy
growth of life insurance in the company.
19. 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.
20. 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.
21. Inadequate training: In life insurance, for the sales personnel particularly,
importance of training cannot be overemphasized. But unfortunately the present
facilities for training, despite what the Insurance academy is doing, are meager.
22. Advantages 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.
23. Discriminatory attitudes: 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.
24. Lack of reliability: 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.
25. 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.
26. Lack of advertisement: The lacking of proper advertisement and information
about life insurance package are also important factor for poor life insurance
business.
27. Inability to solve problems: Many of the life insurance companies are unable
to solve the problems of the policyholders.
28. Ignorance about claim settlement procedure: Ignorance about claim
settlement procedure creates a drastic problem for the insurance companies.
Insurers viewed that many policyholders dont know the way of making the claim.
The only abuse the insurer for instant claim settlement. They also dont know the
requirements to be submitted to the insurers. But the insurers have to comply with
the formalities before settling the claim. The process
29. Fabricated information: A large number of agents act for different insurance
companies in the remote areas of the country. The agents usually perform on a
commission basis. The commission depends on the number of clients they can
secure. Therefore, a common belief is that the agents always have the intention to
increase their commission and sometimes furnish favorable information to sell a
policy. But this popular belief is not found in reality at the extreme rate.
30. Limited operational areas: Another clear problem of insurance business is
that insurance companies operate only in big cities for their operational benefits.
There was no single negative answer about this question. Majority of the companies
has their agencies in Dhaka, Chittagong and in other few big cities.
31. Inadequate govt. support: A good number of respondents held the

government responsible for its little support for the enrichment of insurance
industry. Since the majority of people is uneducated and is unaware about the
benefits of insurance, the government has to take the responsibility for wide
publicity. But the government hardly performs this responsibility.
Suggestion
From the presiding discussions, we can realize that the policy makers within the
government and the insurance company should adopt effective measures in order
to make good use of the opportunities and to tackle the threats for ensuring a
healthy development of the insurance industry. The following actions are suggested.
1. 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.
2. In order to create the growth of insurance business in our country, insurance
companies should expand their target market by providing responsive
services and establish efficient departments to perform such task.
3. Government must minimize the restrictions on premium so that insurance
companies can fix their premium according to their demand. This will
increase the profitability of the insurance companies.
4. 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.
5. 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.
6. The collected premium should be invested in large and beneficial sectors so
that insurance companies can return their clients expected return in timely.
7. Government should have a regulatory body for the surveillance on insurance
companies so that they must perform their business maintaining the ethical
issues properly.
8. 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.
9. In response to the opportunity of growing market the insurance companies
can expand their target market by identifying and providing responsive
services. In order to do so each company should established and effectively
operate research and development department.
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.
Higher GDP
The GDP of our country is increasing than the previous years which results in
increase of per capita income. So this growing GDP and income holds bright
prospects for insurance companies. The major problem is the incapability of our
people to pay the premium charged by the insurance companies. . With the growth
in
the income more and more people are now willing to take an insurance policy for
safeguarding themselves from any danger.
Increased population
There is a big opportunity lies ahead for the insurance companies as the population
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 every kind of insurance business that results in growing prospect
for
insurance companies.
New businesss individual insurance
There are so many new businesses starting every day and manufacturing sector is
booming with global demand. Every business is insured under an insurance
company
to protect its company from any kind of accident. Therefore growing industry, mill,
factories are creating better scope for the insurance companies to flourish their
business.
Developing mass awareness about insurance
People are now much more conscious about their safety. So they are encouraged to
take an insurance policy for making their life free from any unexpected occurrence.
Increase in literacy rate is helping predominantly to create awareness among the
people regarding taking insurance policy. Besides this insurance companies are also
trying to eradicate the negative attitude of people towards the insurance company
by
organizing various programs such as seminars, programs including social
responsibilities etc.
Micro insurance
Micro insurance can be a great prospective area for the insurance business in our
country. Most of the people of our country are unable to have costly and long term
insurance policies. Micro insurance can be provided to individual personnel or to
small business owners against little insurance premiums and with easy terms and
conditions. When they will afford to minimize their risks at a lower price, they will
take that opportunity and they will become to get used to it. This can cover a huge
portion of the society who can be a prospective target market for this business.
Development of new policy
SBC has long been the sole reinsures in Bangladesh and private insurance
companies were statutorily compelled to place 100% of their reinsurance business
with SBC. In 1990 the government amended the relevant provisions of the insurance
Act allowing 50% of all reinsurance of general insurance business to be placed
compulsorily with SBC and the rest to private reinsurance companies .About 70% of
premium income from general insurance business in Bangladesh is retained locally
and the rest 30% goes to reinsures abroad.
Permissions to private insurance companies to act as reinsures will open up new
opportunities to them. This will initiate open competition between the SBC and the
private reinsures within the country and will reduce the reinsurance cost and
increase
efficiency. This amendment of the existing rules can be another important policy
making that will facilitate the insurance business in Bangladesh. The private
insurance
companies can argue in favors of their capability to act as reinsures on the basis of
the fact that the total capital belonging to the government owned general insurance
companies is Tk. 550 million while the private sector insurance companies own
Tk.2500 million.
Scope in non-traditional sector
Nowadays, along with traditional insurance services, they can offer various nontraditional insurance services to their customer. Target market of insurance
company
may expand and they can offer different types of non-traditional insurance services
such as health insurance, 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 a important role in the economic
development. But they are deprived from taking loans from bank for large amount.
If insurance business focuses this section in Bangladesh they are able to contribute
more in the economy .Thus insurance business has a bright prospect in business
sector in a developing country like Bangladesh
Education sector:
Insurance companies can provide different types of scheme to expand education
plan insurance.
Conclusion
In present insurance is too much important to the business and individual sector.
Most of the companies provide more or less same services. For this reason the
competition is increasing day by day between the insurance companies. On the
other hand some new insurance companies are going to start businesses in the
competent market. BGIC need to develop their some productive sectors. In present,
a company cannot establish properly without developing information technology.
People search their desires requirement through Internet so, insurance companies
need to develop Web address to increase both foreign and local investors. So we
have discussed about both the problem and prospects of insurance business in
Bangladesh. The progress of insurance business depends on the progress of
economic condition .Insurance business also faces many problem. So if we develop

economic condition as well as overcome the problems, it will help a lot to flourish
this business in our country.

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History Of Insurance Business In Bangladesh:

History Of Insurance In Bangladesh:

After the emergence of the Peoples Republic of Bangladesh in 1971, the

Role of private insurance companies in the economic development of

Formation of capital & increase of investment: Insurance companies

v Problems And Prospects Of Insurance In Bangladesh are:

number of potential policy holders in Bangladesh is growing with growth of the

Insurance Industry in Bangladesh: Opportunities and Challenges

recommendations to make the insurance market in Bangladesh vibrant and useful

Source: Sigma 03/2009, World Insurance in 2008.

Source: Economic Survey of Bangladesh and Bangladesh Insurance Association

Source: Bangladesh Insurance Association

Source: Bangladesh Insurance Association

Source: Bangladesh Insurance Association

3. Objectives of the Study:

To focus the present insurance sector scenario of Bangladesh.

To identify the problems that are hindering the development of insurance

To examine the scope and opportunities of insurance industry of Bangladesh.

To suggest some measures for improving the insurance industry of

4. Sources of Data and Methodology of the Study:

Factors in Selecting Particular

Pension benefits and

Future savings for

Influence of the sales

Life security and

Political and legal

Buying policy for

Risk coverage and

Risk coverage and

Source: Field Survey.

Source: Field investigation.

R&D Scenario in Insurance

Source: Field investigation.

Lack of government patronizing

Lack of strong legal frame work

Lack of separate regulatory body

Low income of the people

Lack of attractive offerings

Lack of sufficient information

Delaying in claim settlement

High service/processing cost

Lack of marketing Research

Lack of product diversification

Lack of efficient workforce

Lack of updated system and

Source: Field Survey.

Lack of Qualified Officials: Insurance companies perform their activities by

Insufficient Service: Insurance people failed to provide better services to the

knowledge misguides these companies with regard to risk assessing, claim

few years commercialization has occurred in some sections of the agricultural

Khnodkar, M. and Rahman, M (1993): "Trends of Financial Indicators of Insurance

insurance coverage, called the premium. Risk management, the practice of

Current pattern of Insurance in Bangladesh:

Problems of Insurance in Bangladesh:

away from the horizon of life insurance.

investment allowance by the government relating to income tax.

31. Inadequate govt. support: A good number of respondents held the

1. The insurance companies of Bangladesh should practice marketing through

Prospects of insurance business in Bangladesh