Problem of Insurance Business in Bangladesh
In a developing country like Bangladesh, insurance companies are playing a very important role in the economy. Though insurance industry has very prospect in the economy but for some reasons it’s totally failed to achieve its goal. If we want to know the reasons behind this hen we should look forward the following according to Bangladesh General Insurance Company Ltd.In this report the major problems in performing insurance business has been classified into some major criteria which are social, economic, political, legal and other reasons.The actual problems are discussed in detail within these criterion’s
Social Problems
Less Public awareness
A vast majority of people especially in rural areas are left outside the insurance coverage. This mainly results from the unawareness among the people. Even a large portion of people don’t have the minimum idea of insurance. People are not aware of the benefits from the insurance policy and a great number of people believe that insurance business is nothing but cheating and assume that insurance policy is quite unnecessary. This negative attitude from the people is lessening the importance of absorbing insurance policy in a large extent.
Centralization
Most of the insurance companies in our country are located in urban areas and there are few branches in rural areas. They think that they might have better scope for performing their business as the economic condition of the urban is better than the rural areas. They don’t think that the large number of our population reside in rural areas and if branches are expanded in rural areas then the business can thrive if proper motivation policy is taken to aware the mass people of the rural areas. Thus this centralization policy acts as an obstruction for the growth of insurance business in our country.
Economic Problems
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 level. All of these people fight hard to earn their livelihood and are marginal in relation to the expenditure with the income. It is quite impossible for them to save some money for future need. Therefore they are quite unable to give the amount to the insurer which is called as premium and regarded as safety or precautionary measures against any accident. The number of people who can bear the premium to the insurance company is very few in regard to those mentioned above. Therefore the overall poor economic condition is creating obstacle to flourish the insurance business in Bangladesh
Poor financial position of the insurance companies
Most of the insurance companies of our country are facing financial problems. Recently government is trying to take initiative to close some of the insurance companies because they are not maintaining the minimum standards. They are investing their money in poor securities and business which is vulnerable regarding getting back the money with profit. As a result most of the insurance companies are suffering from loss years after years and for poor financial condition the insurance companies are also unable to expand their branch which is a barrier for the growth of insurance business in Bangladesh.
Higher cost of business
Growing cost of business is another problem that insurance companies are facing now a day. They urge that government tax, house rent, utility, commission fee, stationeries are growing day by day. But their businesses are not growing so fast with that rate.Besides this the policy holders are not willing to pay too much premium with growing cost that is hampering the strategies of insurance companies. So they are facing difficulties in running their business efficiently.
Problems of economic bases and effective principle
Before independence insurance business was control by private company. But after independence maximum insurance company take over by the government. For that reason government changed the company management, policy and applies new rules and regulations which system was very tricky and uncomfortable for the mass people.
Political problems
Political instability
Political instability is a major problem in Bangladesh. For the instability in politics,many disruptive situations are often created which are bad for any businesses. The people who operate various businesses in our country often experience various types of inconvenience in running their business. Insurance business is not an exception of this. Political instability and inconsistency of political courses are a serious problem for the insurance business.
Lack of supervision from the government
Lack of surveillance from government ministry encourages many insurance companies to follow some unethical practices like make harassment to policy holder and showing less in the financial statement. This not only destroying the reputation of the well known insurance companies but also creates negative impact in the mind of the people about insurance. Besides this government sometimes impose some conflicting rules and regulation without discussing with insurance companies governing body. It creates conflict among insurance companies with government and act as one of the main hindrances of growing insurance business.
Problem of planning and administration
After the change of the government, the whole planning and administrative measures are changed which is the main constraint for long term plans. Without long term planning any permanent development or solution of existing problems are impossible
Legal Problems
Too much complexity
To take an insurance policy there are great number of rules and regulations which must be compelled by the insured person. And into those rules a vast number of complexities is present there. Therefore the people are discouraged to take insurance policy because they think that the complexities will create extra pressure on their mind which may hamper other jobs.
Other problems
Lack of qualified officials
Insurance companies perform their activities by recruiting marketing agent and they try to convince the people to take a policy. Most of the cases the agents are not properly trained and they don’t know the right process to catch potential people to make their policy holders. Therefore these field level agents are unable to fulfill their target and act as a constraint in the insurance business.
Traditional method
Still Bangladesh insurance company using or follows traditional methods on insurance policy. Where as foreign companies are using modern systems like computerized system. Our local company does not want to change themselves.
Lack of training for the employees
Spread of insurance business in Bangladesh failed for lack of proper training by the employees specially the field employees of insurance companies. Still there are not enough training center to provide proper training regarding insurance activities for the officials of insurance company. Though there is one insurance training center in Bangladesh it totally failed to achieve its target in insurance field.
Lack of exposure
Another main problem in the country is that the media is unconcerned to send the right message regarding insurance to the people. As a result a large portion of population is completely unaware about the insurance policy. Another problem is that the insurance company does not provide adequate information in the company’s websites which can fulfill the queries of their potential customers and satisfy themselves to buy an insurance policy.
Absence of business ethics
Some insurance companies create harassment on the policy holders or sometimes on the dependents of the policy holders when they want back their money after death or maturity. The insurance companies show different causes in order to make delay to return back the money at expected time. Sometimes they are eager to pay less than the desired amount by creating various circumstances such as they try to say that the disaster of the subject matter of the policy is not responsible due to their activities. Besides this some field officials also create some illegal acts. They often try to give false information to the people for buying a policy. And these kind of illegal acts create bad reputation to the insurance companies and hindrance the overall insurance business. Those who are harassed by the insurance companies discourage other not to take an insurance policy Lack of motivation program towards public
According to Green Delta Life Insurance Company the people of our country are not much motivated by the company to take insurance policy for safeguarding them selves against any kind of risk. Almost every time they failed to understand the people that insurance policy makes their life risk free all time. For lack of motivation among the mass people insurance companies are always lagging behind from their expected target.
Lack of information technology
Another problem is they do not use any web address, which is essential for a large leasing company. They can provide more information to its client by using web site.
Insufficient service
In Bangladesh insurance company people failed to provide better service to the mass people that’s why the people who want to take the insurance policy they loss their interest from insurance. At same time in foreign country insurance workers goes to customer’s house and offices regularly to aware themselves and influence them to take insurance policy. In that’s case Bangladesh insurance company people are not that much expert.
Lack of marketing policy
One of the major problems in insurance company is lack of marketing policy. Management is not taking initiative to increase their marketing expansion. They provide tiny amount advertisement, which is not sufficient for increasing business development.
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 capital 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 some what 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 business’s individual insurance
There are so many new businesses starting every day and manufacturing sector is booming with global demand. Every business is insured under an insurance company to protect its company from any kind of accident. Therefore growing industry, mill,factories are creating better scope for the insurance companies to flourish their business.
Developing mass awareness about insurance
People are now much more conscious about their safety. So they are encouraged to take an insurance policy for making their life free from any unexpected occurrence. Increase in literacy rate is helping predominantly to create awareness among the people regarding taking insurance policy. Besides 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 in come 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 favours of their capability to act as reinsures on the basis of the fact that the total capital belonging to the government owned general insurance company’s 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 non-traditional 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. Further more, 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 economicdevelopment. 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 morein the economy. Thus insurance business has a bright prospect in business sector in adeveloping country like Bangladesh
Education sector:
Insurance companies can provide different types of scheme to expand education planinsurance
Comments and suggestion
From the presiding discussions of the report, we can realize that the policy makerswithin the government and the insurance company should adopt effective measures inorder to make good use of the opportunities and to tackle the threats for ensuring ahealthy development of the insurance industry. The following actions are suggested
The insurance companies of Bangladesh should practice marketing throughthe use of promotional tools such as advertising, sales promotion, publicrelation and publicity, personal selling and direct marketing.11
In order to create the growth of insurance business in our country, insurancecompanies should expand their target market by providing responsive servicesand establish efficient departments to perform such task.
Government must minimize the restrictions on premium so that insurancecompanies can fix their premium according to their demand. This will increasethe profitability of the insurance companies.
One of the basic requirements for the insurance industry to have sustainedgrowth is to enhance training facilities. Bangladesh Insurance Academy is providing training facilities and professional education to those engaged ininsurance business in the country. The syllabus, curriculam and training programs of the academy need to be modified to meet the modern needs of theinsurance industry..
To regain and maintain a positive public image the insurance companiesshould overcome the dissatisfaction in regards to services and claimsettlements and should maintain a service standard.
The collected premium should be invested in large and beneficial sectors sothat insurance companies can return their clients expected return in timely.
Government should have a regulatory body for the surveillance on insurancecompanies so that they must perform their business maintaing the ethicalissues properly.
Insurance companies need to modify their recruitment strategies withincreased focus on the marketing and sales training because, insurance being aservice marketing industry it requires special attention.
In response to the opportunity of growing market the insurance companies canexpand their target market by identifying and providing responsive services. Inorder to do so each company should established and effectively operateresearch and development department.
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
