Problems and Prospects of General Insurance in Bangladesh

The vital objective of this report is to analysis Problems and Prospects of General Insurance in Bangladesh . Another objectives of this reports are to generate some suggestions to overcome the problems identified so as to ensure smooth functioning and growth of insurance. To know about the best practices of insurance of Bangladesh is also another objective of this study. Finally this report make swot analysis Problems and Prospects of General Insurance in Bangladesh.

Introduction

Insurance is essentially a collective endeavor under which a large number of individualsagree to share the loss which a few of them would incur in future. This means insuranceprotects those unfortunates who suffer heavy financial impact of anticipated misfortunesby distributing the loss among many who are exposed to the risk of similar misfortunes.

General insurance is a type of insurance in which one person makes regular payments so that he receives a sum of money different types of accidental loss.  The process insurance has been evolved to safeguard the interests of people from uncertainty by providing certainty of payment at a given contingency. The insurance principle comes to be more and more used and useful in modern affairs. Not only does it serve the loss / damage of  any losses it also provide financial benefits to the individual for death or  at the end of a time period .

Objective of the study

The key objectives of the studies are to identify the problems and prospects of the General insurance in Bangladesh. The other objectives of this study are to generate some suggestions to overcome the problems identified so as to ensure smooth functioning and growth of insurance. To know about the best practices of insurance of Bangladesh is also another objective of this study.

Methodology of the Study

To prepare the thesis both primary and secondary methods are use.

Secondary sources of data have been used for data requirement of the thesis. To collect the secondary sources of data, internet and different articles published in the journals and magazines have been used

Secondary sources are:

• Text book s on insurance
• Insurance journals
• Reference books on insurance
• Annual report of insurance
• Internet books
• Annual report of insurance

Primary Sources:

Theprimary data were collected through interview with aid of an interview schedule. A totalnumber of 10 respondents randomly selected were interviewed. The sample respondentscomprised of 2 insurers from life insurance, 5 policyholders and 3 non-policyholders.

All the data have been analyzed and compared based on Eastland Insurance Company Ltd.

General Concept of Insurance and History  of insurance

Concepts of insurance in brief

Insurance is a co-operative device to spread the risk over a number of persons who are insured against the risk to share the loss of each member of the society on the basis of the society on the basis of probability of loss to their risk.

Insurance is a contract whereby a certain sum of the money as a premium is paid inconsideration of the insurers incurring the risk of paying a large sum upon a given contingency.

Principles of insurance

Insurance is based upon the two following principles:

Principles of co-operation

In insurance the loss is shared by a group of people who are willing to co-operate.

Principles of probability

The loss in the shape of premium can be distributed only on the basis of theory of probability. The probability tells what the chances of losses are and what will be the amount of losses.

History of Insurance

History of insurance refers to the development of a modern laws and market ininsurance against risks. In some sense we can say that insurance appears simultaneouslywith the appearance of human society. We know of two types of economies in humansocieties: money economies (with markets, money, financial instruments and so on) andnon-money or natural economies (without money, markets, financial instruments and soon). The second type is a more ancient form than the first. In such an economy andcommunity, we can see insurance in the form of people helping each other. For example,if a house burns down, the members of the community help build a new one. Should thesame thing happen to one’s neighbor, the other neighbors must help, otherwise,neighbors will not receive help in the future.

Separate insurance contracts (i.e., insurance policies not bundled with loans or otherkinds of contracts) were invented in Genoa in the 14th century, as were insurance poolsbacked by pledges of landed estates. These new insurance contracts allowed insurance tobe separated from investment, a separation of roles that first proved useful in marineinsurance. Insurance became far more sophisticated in post-Renaissance Europe, andspecialized varieties developed.

Toward the end of the seventeenth century, London’s growing importance as acentre for trade increased demand for marine insurance. In the late 1680s, Mr. EdwardLloyd opened a coffee house that became a popular haunt of ship owners, merchants, andships’ captains, and thereby a reliable source of the latest shipping news. It became themeeting place for parties wishing to insure cargoes and ships, and those willing tounderwrite such ventures. Today, Lloyd’s of London remains the leading market (notethat it is not an insurance company) for marine and other specialist types of insurance, butit works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon openedan office to insure buildings. In 1680, he established England’s first fire insurancecompany, “The Fire Office,” to insure brick and frame homes.

How insurance works

The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.

Background of insurance business in Bangladesh   

Resistance against colonial or autocratic regimes in the third world has often been ledby educated intelligentsia inspired by western ideas of nationalism and democracy hasplayed a dominant role. Most victorious nationalist movements have been in lateryears reneged from their earlier commitments and few developing countries to day arenationalist, socialist or democratic. But that is a different story.

When the Awami League cane to power in Bangladesh and the peoples party inPakistan in 1972.It was inevitable that nationalization a wide scale would take place,for both parties had flaunted socialism as part of their political rhetoric. In Pakistanthe administrative mechanism for nationalization of banking, insurance and someindustries was carefully worked out by the bureaucracy under political leadership, andthe takeover in a feel swoop passed of smoothly. Heads of insurance companies, forinstance, where invited to tea at a Karachi Hotel. Where they told that while they were having teas the head offices of their companies were being sealed and Governmentappointed administrators were being put in charge. This was done to ensure that theassets of the companies remained intact and no tempering with accounts, records anddocuments was possible.

In Bangladesh an effective government machinery did no exist in the chaotic conditions obtaining an independence following a bitter and brutal war industries was taken over without any inventory, and erstwhile owners ,who were being dispossessed, were allowed to administer their mills and factories till statutory corporations were established

Insurance in Bangladesh

Insurance is not a new business in Bangladesh. Almost a century back, duringBritish rule in India, some insurance companies started transacting business, both life andgeneral, in Bengal. Insurance business gained momentum in East Pakistan during 1947-1971, when 49 insurance companies transacted both life and general insurance schemes.These companies were of various origins British, Australian, Indian, West Pakistani andlocal. Ten insurance companies had their head offices in East Pakistan, 27 in West Pakistan, and the rest elsewhere in the world. These were mostly limited liabilitycompanies. Some of these companies were specialized in dealing in a particular class ofbusiness, while others were composite companies that dealt in more than one class ofbusiness. The government of Bangladesh nationalized insurance industry in 1972 by the

Bangladesh Insurance (Nationalization) Order 1972. By virtue of this order, save andexcept postal life insurance and foreign life insurance companies, all 49 insurancecompanies and organizations transacting insurance business in the country were placed inthe public sector under five corporations. These corporations were: the Jatiya BimaCorporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban BimaCorporation, and Surma Jiban Bima Corporation. The Jatiya Bima Corporation was anapex corporation only to supervise and control the activities of the other insurancecorporations, which were responsible for underwriting. Tista and Karnafuli BimaCorporations were for general insurance and Rupsa and Surma for life insurance. Thespecialist life companies or the life portion of a composite company joined the Rupsa andSurma corporations while specialist general insurance companies or the general portionof a composite company joined the Tista and Karnafuli corporations.

After independence of Bangladesh, insurance industry was nationalized. Subsequentlythrough the enactment of Insurance Corporation Act VI, 1973, two corporations namelySadharan Bima Corporation (SBC) for general insurance and, Jiban Bima Corporation forlife insurance were established in Bangladesh. SBC was acting as the sole insurer ofgeneral insurance till 1984. Between 1985 to 1988 first generation of private generalinsurance companies were emerged as Bangladesh Government allowed the privatesector to conduct business in all areas of insurance for the first time in 1984. A total of 16private general insurance companies were registered in that phase. In 1996 another 8private general insurance companies were registered. The third generation of privategeneral insurance companies, which included 18 companies, came into operation between1999 and 2001. The general insurance market in Bangladesh now consists of 43 privatesector insurance companies and 1 state owned insurance company. Insurance Corporation(amendment) Act 1990 provides that 50% of all insurance business relating to any publicproperty or to any risk or liability appertaining to any public property shall be placed withthe SBC and the remaining 50% of such business may be placed with this corporation orwith any other insurers in Bangladesh. But for practical reason and in agreement with theInsurance 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.

Present position of insurance business in Bangladesh

In Bangladesh, the Insurance business, after and early stage of dislocation, adventure and experimentation through half a century has now being established as a nascent industry distributed between the public and private sectors. Insurance business evolved in the Indian subcontinent late in nineteenth century when several business
companies started their business and a few Christian missionaries began to operate mutual funds to serve their own community members. From Bangladesh perspective insurance business was not a promising sector in its early age but it is getting it’s pace day by day with the growth of overall economic condition of the country.

The privatization policy adopted in the 1980s paved the way for a number of insurers to emerge in the private sector. This resulted in a substantial growth of premium incomes, competition, improvement in services, and introduction of newer types of business in wider fields hither to untapped.

Up to 2000, the government has given permission to 19 general insurance companies and 10 life insurance companies in the private sector. Insurers of the country now conduct almost all types of general and life insurance, except crop insurance and export credit guarantee insurance, which are available only with the Shadharan Bima
Corporation. Numerous institutions, associations and professional groups work to promote the development of insurance business in Bangladesh. Prominent among them is the Bangladesh Insurance Association (formed on 25 May 1988) having 30 members. It aims at promoting, supporting and protecting the interests and welfare of the member companies. Another example is Bangladesh insurance academy.

Surveyors and insurance agents occupy a prominent position in the insurance market of Bangladesh. The system of professional brokers has not yet developed in Bangladesh. A total of 60 insurance companies are operating in Bangladesh till date. Of these companies, 57 are private, two state-owned and one is foreign. Insurance Directorate, under the Ministry of Commerce, is the regulatory-body of the country’s insurance sector. At present there are 44 general insurance companies running in Bangladesh. Many other private companies are about to commence

Growth of Insurance in Bangladesh

The insurance industry in Bangladesh continued to achieved a moderate growth in 2009-2010 . per capita spending on insurance is still less than $3 while insurance penetration , measured on premium as a percentage of GDP, also below 1 percent.

The total premium income from private sector life insurance companies rose from TK 35794.53 million in 2008 to TK 45957 million in 2009 registering growth of 27.75%

The gross premium income of private sector non life insurance companies also increased from TK11163.03 million in 2008 to TK 12284.22 million in 2009 registering the growth of 10.93%.

The life fund of the private sector insurance companies increased to TK 105,153.96 million in 2009 from TK 80863.15 million in 2008 registering the growth of 30.04 %.

The total investment of the private sector life insurance companies rose from TK 67,151.19 million in 2008 to TK 87053.53 million in 2009 registering an increase of 29.64%. The total investment of private sector non life insurance companies stood at TK.12764.15 million in 2008 registering a growth of 13.21 %.

The total asset of the private sector life insurance companies stood at TK 118020.14 million in 2009 against the TK. 91,367.73 million in 2008 registering a growth of 29.17%.

The total asset of private sector non life insurance company stood at TK32, 376.63 million in 2009 against TK. 22756 million in 2008 registering a growth of 43.59 percent.

It is hoped that the newly established insurance Regulatory Authority will help to modernize and bring the insurance laws and rules of Bangladesh in line with international standards and also help bring more discipline in the sector.

The Bangladesh Insurance Association strongly feels that professionalism modern management and sales techniques and new products development are necessary for the growth and progress of the industry.

PROFILE OF EAST LAND INSURANCE COMPANY LTD.

Company Profile

Eastland Insurance Company Ltd:

Eastland Insurance Company Ltd. being sponsored by a group of entrepreneur exposed to various economic sectors including financial institutions, Trading, garments, Pharmaceuticals, Press, Construction, Cold Storage etc., started its journey as one of the first generation General Insurance Companies in the private sector from 5th November, 1986. Eastland was listed as a public limited company with Dhaka Stock Exchange (DSE) in 1994 and its Tk.30 million shares with 40% premium were over-subscribed by more than 12 times! Ever since, its performance remained steady with average annual growth rate of 20% over the last 5 years.

The total Asset of the Company is over Tk. 1104 million having Reserve base of about Tk. 554 million and investment portfolio Tk. 825 million. The company has so far settled claims amounting to Tk. 997.44 million and has been paying ‘double digit’ Dividends to its shareholders ever since its inception plus stock Bonus in recent times.

The fundamental principle followed by the company from the very inception was to maintain dynamism in its business policy as well as competitive edge in the market through service innovation and obtaining best bargain from the global market of reinsurance. Eastland is equally alive to its Corporate Social Responsibility (CSR). The company stepped into 25 years of its successful operation on the 5th of November, 2010 and it has by now attained the height of sound financial strength and enviable goodwill, thus being categorized among the Top-Ten’ in the general insurance sector. The Management of the company is a combination of astute executives with wealth of experience of the Industry as well as young and dynamic leaders of to day; to meet the challenges of to-morrow;

Eastland has been offering comprehensive range of insurance packages from its 23 branches throughout Bangladesh, which include: Fire, Marine, Hull, Motor, Industrial All Risks, Engineering, Aviation, Personal Accident, Medi-claim and Miscellaneous risks. Eastland is a proud insurer of host of clients ranging from distinguished individuals to big trading firms, Banks & Financial Institutions as well as large national & multi­national companies.

The company is living up to its promised slogan: The name you have learnt to Trust by upholding its personalized services in both Sunny & Rainy days! As such, Eastland’s name has been embedded in the hearts of thousands of its clients.

Eastland is the proud sponsor of 02 (two) reputed Non-Banking Financial Institutions namely Industrial & Infrastructure Development Finance Company Ltd. (IIDFC) and National Housing Finance & Investment Ltd. led by prominent Banks, Insurance Companies and the renowned Business houses of the country as follows:

Industrial & Infrastructure Development Finance Company Ltd(IIDFC), a public limited company was incorporated on 19 December, 2000 as a non-banking development financial institution under companies Act 1994 and the financial institution Act 1993 to boost investment specially in the spectrum of industrial and infrastructure development with its registered office at Chamber Building (6th Floor), 122-124, Motijheel C/A, Dhaka-1000.

Products and Services

Eastland Insurance Company Limited carries out all types of general insurance business as per the Insurance Act, which includes Fire, Marine, Motor, Miscellaneous and Engineering business. Existing product lines of the Company are as follows:

Fire Insurance

• Riot and Strike (R&SD) Damage
• Earthquake Damage
• Flood Damage
• Cyclone, Hurricane, Typhoon &Tornado Damage
• Air Craft Damage
• Explosion Damage
• Burning of forest, bush, jungle & the clearing of lands by fire Dam

We are also providing the following coverage’s:

• Fire Special Package Insurance
• Industrial All Risk Insurance (IAR)
• Comprehensive Machinery Insurance (CMI)
• Property All Risk (PAR)

Marine Insurances

Marine Cargo Insurance- Export & Import

According to recommendations of the United Nations Conference on Trade and Development (UNCTAD), we are providing following coverage:

• ICC-A (All Risks)
• ICC-B
• ICC-C
• War & SRCC as additional coverage

We also provide Theft & Pilferage (TP) and Non-delivery coverage with ICC-B & Coverage. ICC-A covers all risks with some exceptions. Moreover, we are providing Inland Transit coverage by Truck/Lorry/Rail/Burge/Country Boat as required by the Insured.

Marine Hull Insurance:

• Comprehensive cover on Hull & Machinery as per ITC Hull clause.
• Total Loss only including Sue and Labor charge on Hull & Machinery.
• Marine Country Boat.

Motor Insurance

• Comprehensive coverage on:
• Private Vehicle
• Commercial Vehicle
• Motor Cycle
• Transit (Motor Trade
• Act Liability/ Third Party Liability.

Miscellaneous insurance

• All Risk Insurance (AR)
• Air Travel Insurance (ATI)
• Business Interruption (BI)/Loss of Profit Insurance
• Contingency Liability Insurance (CLI
• Cash-in-Safe Insurance (CIS)
•  Cash-in-Transit Insurance (CIT)
•  Cash-on- Counter Insurance (COC)
•  Cash-on-Premises Insurance (COP)
• Commercial General Liability Insurance (CGL)
•  Employer’s Liability Insurance (EL)
•  Fidelity Guarantee Insurance (FG)
•  Overseas Mediclaim Insurance (OMI)
• Product Liability Insurance (PDL)
•  Public Liability Insurance (PL)
• Personal Accident Insurance (PA)
•  Workmen’s Compensation Insurance (WP)

Engineering Insurance

• Contractors All Risk Insurance (CAR)
• Erection All Risk Insurance (EAR)
• Machinery Break-down Insurance (MBD)
• Deterioration of Stock Insurance (DOS)
• Electrical Equipment Insurance (EEI)
• Boiler & Pressure Vessel Insurance (BPV)
• Contractors Plant & Machinery Insurance (CPM)

Specialized Product

We also provide the following specialized products:

• Professional Indemnity Insurance policy
• Household Comprehensive Insurance
• Shopkeepers Insurance
• Comprehensive General Liability Insurance
• Cancellation and Abandonment Insurance for Games
• Aviation

Government guidelines for formation of insurance company are:

(1) The intending sponsors must first submit an application in prescribed form to the Chief Controller of Insurance for prior permission.

(2) After necessary scrutiny the Chief Controller shall forward the application with his Recommendation to the Ministry of Commerce.

(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet   Committee constituted for this purpose.

(4) The decision of the Committee, if affirmative, should be sent back to the Ministry of Commerce which in turn should send it back to the Chief Controller of Insurance for communicating the same to the sponsors.

(5) The sponsors would then be required to apply in a prescribed form to the Registrar of Joint Stock Companies to get registration as a public liability company under the Companies Act. Memorandum and Articles of Association duly approved by the Controller of Insurance would have to be submitted with the application.

(6) Once the registration process was completed the sponsors would have to obtain permission of the Securities and Exchange Commission to issue share capital.

(7) Reinsurance arrangements would have to be made at this stage.

(8) After all the above requirements were fulfilled the license to commence business under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance. Application can only be made subject to government announcements in this regard.

PROBLEM AND PROSPECT OF GENERAL INSURANCE IN BANGLADESH

Problems of General insurance in Bangladesh

In a developing country like Bangladesh, insurance companies are playing a very important role in economy. Though insurance industry has a very prospect in the economy but for some reasons it is totally failed to achieve its goal. If we want to know the reasons behind this then we should look forward the following according to Eastland Insurance Company Ltd.

The problems have been categorized in different levels and they are; social, economical. political, legal and others problem

Social Problems :

Less Public awareness

A vast majority of people especially in rural areas are left outside the insurancecoverage. This mainly results from the unawareness among the people. Even a largeportion of people don’t have the minimum idea of insurance. People are not aware ofthe benefits from the insurance policy and a great number of people believe thatinsurance business is nothing but cheating and assume that insurance policy is quiteunnecessary. This negative attitude from the people is lessening the importance ofabsorbing insurance policy in a large extent.

Centralization

Most of the insurance companies in our country are located in urban areas and thereare few branches in rural areas. They think that they might have better scope forperforming their business as the economic condition of the urban is better than therural areas. They don’t think that the large number of our population reside in ruralareas and if branches are expanded in rural areas then the business can thrive if propermotivation policy is taken to aware the mass people of the rural areas. Thus thiscentralization policy acts as an obstruction for the growth of insurance business in ourcountry.

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.

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.

Economic Problems :

Poor economic conditions

Bangladesh is one of the poorest countries in the world and most of the people in thiscountry live under extreme poverty level. All of these people fight hard to earn theirlivelihood and are marginal in relation to the expenditure with the income. It is quiteimpossible for them to save some money for future need. Therefore they are quiteunable to give the amount to the insurer which is called as premium and regarded assafety or precautionary measures against any accident. The number of people who canbear the premium to the insurance company is very few in regard to those mentionedabove. Therefore the overall poor economic condition is creating obstacle to flourishthe 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 insurancecompanies because they are not maintaining the minimum standards. They areinvesting their money in poor securities and business which is vulnerable regardinggetting back the money with profit. As a result most of the insurance companies aresuffering from loss years after years and for poor financial condition the insurancecompanies are also unable to expand their branch which is a barrier for the growth ofinsurance business in Bangladesh.

Higher cost of business

Growing cost of business is another problem that insurance companies are facing nowa day.They urge that government tax, house rent, utility, commission fee, stationeriesare 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 growing6

Lower 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.

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.

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.

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. Thepeople who operate various businesses in our country often experience various typesof inconvenience in running their business. Insurance business is not an exception 0ofthis. Political instability and inconsistency of political courses are a serious problemfor the insurance business.

Lack of supervision from the government

Lack of surveillance from government ministry encourages many insurancecompanies to follow some unethical practices like make harassment to policy holderand showing less in the financial statement. This not only destroying the reputation ofthe well known insurance companies but also creates negative impact in the mind ofthe people about insurance. Besides this government sometimes impose someconflicting rules and regulation without discussing with insurance companiesgoverning body. It creates conflict among insurance companies with government andact 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 measuresare changed which is the main constraint for long term plans. Without long termplanning 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.

Licensing Difficulties:

Almost all the insurers and policyholders criticized the licensing system for insurance companies. They identified it as a major constrain behind the commencement of new insurance business. Insurance companies opined that the government does not evaluate their documents of application with due consideration and unnecessarily delays of approval. In many cases the government in all regimes gives restriction to those applicants who have political relationship or maintain liaison. This dirty role of government not only encourages corruption but also hinders proper growth of insurance business.

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.

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 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 themselves against any kind of risk. Almost every time they failed to understand the people that insurance policy makes their life risk free all time. For lack of motivation among the mass people insurance companies are always lagging behind from their expected target.

Lack of information technology

Another problem is that most of the time many of them 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.

The discrepancy between customer expectations and employees’ perceptions

As a result of the differences in the under standing of customer expectations by front- line service providers.

The discrepancy between employee’s perceptions and management perceptions

As a result of the differences in the under standing of customer expectations between managers and service providers

Inadequate Training

In life insurance, for the sales personnel particularly, importance of training can not be overemphasized. But unfortunately the present facilities for training, despite what the Insurance academy is doing, are meager and not sufficient.

Low attractive offerings

The offerings of much of the insurance companies are not so much attractive that they can allure people to buy a life policy.

Lack of Advertisement

The lacking of proper advertisement and information about life insurance package are also important factor for poor life insurance business.

Lack of Confidence

Lack of faith upon insurers is one of the fundamental reasons for which insurance business cannot strong position in Bangladesh. Most of the respondents have said that insurance in Bangladesh couldn’t achieve the fullest faith of people. At one side, insurance business is not well known to the general people and on the other side; the known people are dubious about its service. Public image about services of insurance companies is very poor. Majority of the insurance concerns and almost all non policy-holders confessed this very frankly and counted it as a burning constraint behind the progression of insurance business in Bangladesh. This feeling of distrust is very intense in the case of life insurance as life insurance contract is usually made for a longer period of time. The non-policy holders argued that the motive of insurance companies is to be a millionaire over night.

Inadequate Government 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.

Ignorance about Claim Settlement Procedure

Ignorance about claim settlement procedure creates a drastic problem for the insurance companies. Insurers viewed that many policyholders don’t know the way of making the claim. The only abuse the insurer for instant claim settlement. They also don’t know the requirements to be submitted to the insurers. But the insurers have to comply with the formalities before settling the claim. The process usually delays due to the ignorance of policyholders even though the policyholders hold the insurance companies responsible for this delay.

Undue Promotion:

A very commonly noticed problem in every employment area of Bangladesh is the undue employment and promotion. Insurance sector is also not free from this infamy. A significant number of respondents answered in favor of undue practice with regard to promotion. Since majority of the insurance companies are in the hands of private owners, the promotions sometimes depend on their willful decision. The performance of the job holders is not properly appraise

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 year’s 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 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 income from general insurance business in Bangladesh is retained locally and the rest 30% goes to reinsures abroad. Permissions to private insurance companies to act as reinsures will open up new opportunities to them. This will initiate open competition between the SBC and the private reinsures within the country and will reduce the reinsurance cost and increase efficiency. This amendment of the existing rules can be another important policymaking that will facilitate the 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. 550million while the private sector insurance companies ownTk.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.

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 peopleengage in farming and fishing. The uncertainty of agriculture due to crop failurecaused by climate variation, drought, cyclone, flood and pests affects farmer incomeas well as government revenue. Furthermore, in the last few years commercializationhas occurred in some sections of the agricultural sector. Increase in investment in theagricultural sector is creating a new opportunity for insurance industry. Variousagricultural insurance services are becoming common these days. Demand forinsurance protection against crop loans, livestock loans, fisheries loans and equipmentloans 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. Ifinsurance 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 plan insurance.

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. That’s 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.

Recommendation for overcoming the problems:

In our country the problems that exist in insurance business can not be overcome over a right .It needs long term planning. Besides making the people aware the insurance businessman should come forward with govt. to make this business famous. Coming from the existing problems following steps should be taken to make this business famous.

• Spread of insurance education: To make the insurance business people should be made aware about the helpless & necessity of insurance. For this purpose effective steps must be taken to speared of insurance education.
• Publicity & increase of awareness: Mass publicity activities are very essential to overcome from unwillingness wrong idea, doubt & unbelief of the people this The people media can provide an effective help regarding country interest.
• Increase of training facilities: To continue the insurance business effective standard training facilities must be arranged for the manager & workers who are employed in this business.
• Formulation of effective Principles: Long term formulation of effective principles is compulsory to continue the insurance business successfully.
• Uphold the interest of policy holder: Success of this type of business is dependedon the trust of insured persons. To gain the trust insurance companies should comeforward to compensate the real injured as soon as possible.
• Importance to the economic development: Insurance business is depend on the development of the different sector of economic .So insurance business can never be developed by retaining the weak situation of the sectors including industry commerce transportation.
• Modernization of insurance Business: In this country for developing insurance business modernization of insurance business and necessity new ideas must beadded in this sector.
• 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.
• 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.
• One of the basic requirements for the insurance industry to have sustainedgrowth is to enhance training facilities. Bangladesh Insurance Academy isproviding training facilities and professional education to those engaged ininsurance business in the country. The syllabus, curriculum and trainingprograms of the academy need to be modified to meet the modern needs of theinsurance industry..
• The collected premium should be invested in large and beneficial sectors so that insurance companies can return their clients expected return in timely

Key steps for Insurance in Bangladesh

There should be vigorous campaign throughout the country to make the people aware of the utility and prospects of buying insurance. Bangladesh is a densely populated country and most of the people in our country are poor. They would definitively go for insurance for the security and the risks covered by the insurance. Therefore, the prospects of Insurance are very high in Bangladesh if the following measures can be adopted.

First of all, there is no alternative of quality service. Insurance being a service rendering entity must provide quick services. Policyholders are highly dissatisfied with service of JBC and SBC. Due to poor quality services, public corporations are losing market. In order to ensure their continuity, such corporation must pay adequate attention on their quality of service. Private companies also need put their all out efforts to improve quality of service so as to strengthen their position.

Secondly, the government should eliminate the difficulty in licensing procedure and should not delay in the approval of new companies if all the requirements are fulfilled. It will help not only to increase volume of business but also solve the problems of unemployment.

Finally, the policy holders are very much worried about the settlement of claims. Ordinary people also consider it main constraint. Therefore, instance companies should settle the claims as quickly as possible to create a healthy public image. For this purpose the claim settlement procedure can be simplified and the insurers can provide proper written guidelines of claim settlement to the policyholders.

If the above steps can be taken, more and more people in Bangladesh will be interested in buying insurance

Conclusion

At present insurance is too much important to the business and individual sector. Most of the companies provide more or less same services. For this reason the competition is increasing day by day between the insurance companies. On the other hand some new insurance companies are going to start businesses in the competent market. 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.