University Of Dhaka

Faculty of business studies

Department of International Business

Course name: Insurance & risk management (IB-304)
Assignment on

Submitted to:
Asmina Akter

Lecturer

Department of International Business

University Of Dhaka

Submitted by:
Name ID
Supti Rani Roy SN-030-070

Bishu Kumar Biswas JN-030-081

Anindya Saha JN-030-099

Sourov Mondal JN-030-101

Submission Date: 24/04/19

Table of content
Executive summary
Chapter 1
1.1 Introduction

Insurance is a tool to spread losses among many insurers. According to Investopedia, Insurance is-
- “A contract (policy) in which an individual or entity receives financial protection or
reimbursement against losses from an insurance company. The company pools client’s risks to
make payments more affordable for the insured.” This is basically a contract between an insurer
and an insured to pay a certain amount of money called premium by the insured for which the
insurer will compensate the stated amount of money after the loss has been occurred or will pay a
certain sum of money after the expiration of certain time or after the death of the insured (in case
of life insurance). The insurance for human life is called “Life Insurance” (Insurance Act 2010,
Section 5(2)), and property and other financial losses are called “Non-life Insurance” (Insurance
Act 2010, Section 5(3)).

In business and human life lots of risks and uncertainty exists. For deducing the risks of business
insurance gives the monetary compensation for the insured risk and for human life it gives
assurance to pay certain amount of money for certain conditions. At present, insurance is being
used widely and becoming more and more popular both in personal life and in the business sector
as a significant risk management tool which is primarily used to hedge against the risk of a
contingent, uncertain loss. Insurance works on the basic principle and concept of risk-sharing.
When a company insures an individual entity (the insured), there legal requirements to share the
risks associated with the insured by the insurer, breaking of which contract creates legal bindings.
A great advantage of insurance is that it spreads the risk of a few people over a large group of
people exposed to risk of similar type and the re-insurance system makes the total risk at zero level
in the long run. On the one hand, insurance can increase fraud; on the other it can help societies
and individuals in preparing catastrophes and in mitigating the effects of catastrophes on
households, business operations and societies.

Every industry needs to be regulated and maintained properly to ensure the conflict free operation
in any country. Several amendments were made in the Insurance Law since 1984. In 2010, a New
Insurance Act passed by Parliament called Insurance Act, 2010 to replace the old Act of 1973. As
soon as the new insurance act has been passed, the old one has become inactive and from now on
the entire insurance industry will be regulated by the new Insurance Act 2010.
1.2 History

Almost a century back, insurance as a business began. Insurance business gained momentum in
East Pakistan during 1947-1971. Contemporarily 49 insurance companies transacted insurance
schemes. These companies were originated in British, Australian, Indian, West Pakistani and local.
Some insurance companies had their head offices in East Pakistan, some in West Pakistan, and the
rest elsewhere in the world. In 1972, the government of Bangladesh nationalized insurance
industry by the Bangladesh Insurance (Nationalization) Order 1972. By virtue of this order, save
and except postal life insurance and foreign life insurance companies, all 49 insurance companies
and organizations’ transacting insurance business in the country were placed in the public sector
under five corporations. These were: the Jatiya Bima Corporation, Tista Bima Corporation,
Karnafuli Bima Corporation, Rupsa Jiban Bima Corporation, and Surma Jiban Bima Corporation.

But the burden of administrative expenses incurred in maintaining these five corporations became
extensive and no competitive environment was there. 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. The Insurance Corporations Amendment Act 1984 allowed floating of insurance companies,
both life and general, in the private sector subject to certain restrictions regarding business
operations and reinsurance. 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, more than 60
private sector general & life insurance companies respectively.

The Insurance Corporations Act 1973 was amended in 1984 to allow insurance companies in the
private sector to operate side by side with Sadharan Bima Corporation and Jiban Bima Corporation
(Banglapedia 2012). After this point of time the private insurance companies started their
businesses in full pace.
Chapter 2
2.1 Insurance Act 2010
Chapter 3