Department of Accounting & Information Systems Faculty of Business Studies University of Dhaka Submitted to: Fatema Tuz Zohra Lecturer Department of Accounting and Information Systems. Submitted by: The Gladiator Serial No Name ID No 01 Md.Akter Hossain ( Group Leader ) 14021 02 Md. Din Islam 14031 03 Md. Al-amin 14032 04 Farhana Yasmin 14024 05 Md. Akhtar Hossain 14025 06 Moniruzzaman 14035 07 Md. Kowser Bhuiyan 14083 08 Farhana Sultana Jhumi 14050
Transcript
Department of Accounting & Information SystemsFaculty of Business Studies
University of Dhaka
Submitted to:
Fatema Tuz ZohraLecturer
Department of Accounting and Information Systems.
Submitted by:The Gladiator
Serial No Name ID No
01 Md.Akter Hossain
( Group Leader )
14021
02 Md. Din Islam 14031
03 Md. Al-amin 14032
04 Farhana Yasmin 14024
05 Md. Akhtar Hossain 14025
06 Moniruzzaman 14035
07 Md. Kowser Bhuiyan 14083
08 Farhana Sultana Jhumi 14050
Date of submission: 23 December, 2010
Acknowledgement
At the very beginning we acknowledge our gratitude to Almighty Allah who has given us the strength to prepare this report. Then we would pay our gratitude to honourable Fatema Tuz Zohra, lecturer, Department of Accounting and Information Systems for her valuable guidance and support throughout the preparation of this report. Without her direct co-operation it would not be possible to conceptualize and carry out this sort of analytical work. We have uses different secondary sources of data from different print medias, magazines, web sites, researches etc. We express highly gratitude among the authors, publishers, technical assistants, coordinators and related other parties of these publishes.
23 December, 2010
Fatema Tuz Zohra
Lecturer
Department Of Accounting and Information Systems
University Of Dhaka
Subject: Submission of the term paper
Dear Madam,
Here is the report that we have prepared as per your guidelines. You will observe this report focuses on the present situation, practice and the prospect of the Life Insurance Business of Bangladesh.This study has greatly helped us understanding how the life insurance companies are conducting their business, functions of the companies and making a link with our bookish knowledge and real picture of insurance business.
We would like to thank you for your great support and help in doing the tough task easily.
We hope you will appreciate the sincere effort.
Sincerely yours,
The Gladiator
Executive Summary:
Life insurance' is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in lump sums).This paper is a combination of both theoretical and practical aspects regarding life insurance and life insurance business. In this paper we have tried to find out the overall position of Life insurance companies of Bangladesh. We have also focused on the products and services offered by different life insurance companies as well compliance with rules and regulations regarding paid up capital, statutory deposit, life insurance fund etc.
Table of contents
SL. No. Topics Pages
1. Introduction
2. History of Life Insurance in Bangladesh
3. Definitions and Types of life Insurance
4. Review of Literature
5. Issues and Questions
6. Life Insurance companies of Bangladesh
7. Problems of life Insurance Business in Bangladesh
8.Limitations
9.Recommendation
10.Conclusion
1. Introduction:
\
1.1 Background of the Report:
'Life insurance' is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in lump sums). There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. Insurance began as a way of reducing the risk of traders, as early as 2000 BC in China and 1750 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders : merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London.
1.2 Objectives and scope of the report:
The research objectives regarding my term paper are –
To fulfill the requirement of the course curriculum.
To find out some major problems of insurance in Bangladesh as follows:
Social
Political
Economical
Legal
Miscellaneous
To identify the major prospective area of insurance in Bangladesh as follows
Social
Economical
The preparation of the report will enable to gather concept of the insurance business.
To suggest or recommend some necessary steps to solve the existing problems.
To suggest necessary steps to develop this business in a developing country
Like Bangladesh.
The term paper will enhance our overall knowledge about insurance and help usfurther to prepare any documents regarding insurance. We think this term paper will alsobe beneficial for those people who need information about insurance.
1.3 Methodology:
Secondary sources of data have been used for data requirements of the report.Secondary Sources are:
Textbooks on insurance
Insurance Journals.
Different Articles.
Web sites.
Research Papers, etc.
1.4 Limitations
Preparing the term paper we have faced some obstructions which are:
Lack of proper information in the websites of the insurance companies.
Lack of necessary information in the journals and official publications of insurance companies.
Inexperience and time constraint is the limitation restricting this report from being more detailed.
Secondary data has been collected from the hand books, magazines, which may biased to the insurance business.
2. History of Life Insurance in Bangladesh
A prominent foreign life insurance company which earned great fame in this subcontinent was the Sun life of Canada. Sir Phiroze Sethna a Persi from Bombay (who was born and brought up in Calcutta) was known as "Insurance man of Churchgate Street". He contributed to the company for long 35 years. The popularity of Sunlife of Canada in India was mostly due to Sir Phiroze's connection with the Company. From an ordinary salesman he became the head of the organization in India. Phiroze Sethna was also one of the founders of Industrial and Prudential Insurance Company.
Insurance, especially life insurance, had encountered a stiff resistance from the Muslim in the subcontinent. They had a deep-rooted dislike for insurance. They considered insurance was based on anti Islamic principles. But with the Muslim Renaissance Movement led by Sir Syed Ahmed Khan and other Muslim leaders, they began to show interest in insurance business. Dr. Mohammed lqbal was the one of founders of Muslim India Insurance Co. which was established in 1934. Mr. Abdur Rahman Siddique (Ex. Governor of East Pakistan) and Khandoker Fejle Haider were the founders of Eastern Federal Insurance which started its operation in Calcutta in 1932. Mirza Ahmmad Ispahani was once Chairman of E.F.U. A few years later after liberation of India E.F.U. and Habib Insurance based in Calcutta and Bombay respectively were transferred to Karachi.
After the birth of Pakistan, the insurance industry in Pakistan faced a great depression and disaster. The whole industry was on the verge of extinction. Before the partition of India, as many as 190 Indian insurance Companies were operating. With the birth of Pakistan, majority of these Companies closed their business in the then East & West Pakistan. In 1948, out of total 76 insurance Companies operating in Pakistan, only eight were under the management of the Muslims. In 1952, the Government of Pakistan promulgated Pakistan Insurance Corporation Act and Pakistan Insurance Corporation was established to provide with reinsurance services to local insurance Companies.
Mr. Khuda Baksh, a veteran life insurance salesman was known as a wizard of life insurance in the then East-Pakistan. He started his career as an agent of Oriental Government Security Life Insurance Company in 1935. After a selling experience of 17 years, he joined with the Eastern Federal Union Insurance Company Limited (EFU) and became its General Manager. He also acted as Chairman of Dhaka Insurance Institute. After liberation of Bangladesh Mr. Khuda Baksh was appointed as the first Managing Director of Jiban Bima Corporation.
At the time of liberation of Bangladesh, the number of insurance companies operating in Bangladesh was 67. Of these, 15 were Bangladeshi Companies, 29 absentee companies and 23 were foreign companies other than the Pakistani-owned ones. Of the 15 Bangladeshi companies, 10 were composite insurance companies, one general insurance company and 2 life insurance companies and two provident societies. Of the 29 absentee companies, 20 were composite insurance companies, 5 general insurance companies and 4 life insurance companies. Of the 23 foreign companies, 20 were composite insurance companies and 3 life insurance companies.
The nationalisation of insurance business in Bangladesh was given effect from 8th August, 1972 under the Bangladesh Insurance (Nationalisation) Order, 1972. In order to provide for the management of the nationalised insurance business, a holding Corporation with 4 subsidiary Corporations was created. Out of the 4 subsidiaries, 2 were exclusively for life insurance business and 2 exclusively for general insurance business. The life insurance Corporations were named Surma Jiban Bima Corporation and Rupsa Jiban Bima Corporation.
In the meantime, the Bangladesh Insurance Corporation (Dissolution) order, 1972 was promulgated on 30th December, 1972 and the Bangladesh Insurance Corporation was dissolved with its assets and liabilities including the employees vested in the Teesta Bima Corporation. On 14th of May, 1973 the Insurance Corporation Ordinance No. VII of 1973 was promulgated and subsequently enacted as Act VI of 1973 providing for the establishment of a Jiban Bima Corporation for the purpose of taking over the undertaking of the Surma Jiban Bima Corporation and the Rupsa Jiban Bima Corporation; and a Sadharan Bima Corporation for the purpose of taking over the undertakings of the Karnaphuli Bima Corporation and Teesta Bima Corporation and for the dissolution of the Jatiya Bima Corporation.
As the nationalisation order was not made applicable in respect of Postal Life Insurance and on any insurer being a Company incorporated under the law of any foreign country other than Pakistan carrying on life insurance business in Bangladesh, the Postal Life Insurance was carrying on life insurance business as before and American Life Insurance Company was granted registration under the Insurance Act, 1938 for transacting life insurance business in the country. The other two foreign life insurance companies operating in Bangladesh prior to nationalisation namely, Norwhich Union Life Insurance Society and Prudential Assurance Company did not apply for registration and were only servicing the policies held by the citizens of Bangladesh. Now there are 18 life insurance companies in Bangladesh.
3. Definitions and Types of life Insurance:
Life insurance may be divided into two basic classes – temporary and permanent or following subclasses - term, universal, whole life and endowment life insurance.
Term Insurance:
Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.
Permanent Life Insurance:
Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.
Whole life coverage:
Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives
Endowment policy:
An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on earlier death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.
4. Review of Literature
Theoretical Studies
Studies on life insurance consumption dates back to Heubner (1942) who postulated that human life value has certain qualitative aspects that gives rise to its economic value. But his idea was normative in nature as it suggested ‘how much’ of life insurance to be purchased and not ‘what’ will be purchased. There were no guidelines regarding the kind of life policies to be selected depending upon the consumers capacity and the amount of risk to be carried in the product.
Economic value judgments are made on both the normative as well as positive issues. Later studies1 on insurance gradually incorporated these issues via assimilating developments in the field of risk and uncertainty following works by von Neumann and Morgenstern (1947), Arrow (1953), Debreu (1953) and others. The economics on insurance demand became more focused on evaluating the amount of risk to be shared between the insured and the insurer rather than evaluation of life or property values. This emerged because it was risk associated with individual life or property that called for an economic valuation of the cost of providing insurance.
1
Life insurance is essentially a form of saving, competing with other forms of saving in the market. The theory of life insurance demand thus developed through the life-cycle model(s) of saving. Let a person’s income rate and his consumption plan are
represented by a continuous function of time and respectively. Thus, net saving (positive or negative) at time t is given by2
--- (1)
where, δ is the rate of interest.
Even though all individuals want to consume as much possible, this does not happen in reality and the above expression of saving is constrained by number of
possibilities. For example, the person has no debt [ ], solvent at time of his
death at time T [ ] and leaves a bequest of amount B [ ].
Uncertainty associated with time of death is represented by a random variable with
density , where is the probability that a person at age x shall still be alive after a time t. Taking expectation of (1) and discontinuing, we get
--- (2)
--- (3)
If the individual takes pure endowment insurance, single premium being
,
2
Thus, net saving equals .
This shows that saving through life insurance takes place at a higher rate of interest than conventional saving. In the determination of optimal insurance consumption, the conventional utilitarian theory is adopted which reflects individuals preferences over different consumption patterns. Let us consider the utility function of the form
--- (4)
where, β is the ‘impatience’ to consume.
Assuming the person had no debt at time T i.e., , the problem is to
maximize its utility (4). The solution gives us, . Within this framework, various forms of life insurance are introduced; the probability associated with death or number of maximum life years is considered; and then the expected utility of consumption is maximized subject to any one of the three restrictions on the net savings as described above.
The role of insurance in the above model has been predominantly to smoothen out consumption over time, make bequests, and repay debts or to insure a constant income stream after retirement. The ongoing discussion also reveals that individuals’ current income and future anticipated consumption expenditure plays a crucial role in determining the amount of insurance purchased (we are, for a while ignoring the form in which insurance is purchased). The importance of rate of interest (δ) or the impatience factor (β) is also worth considering. Preferences over different consumption pattern vary from person to person and there are ‘qualitative’ factors which affects such preferences.
Using the expected utility framework in a continuous time model, Yaari (1965) studied the problem of uncertain lifetime and life insurance. Including the risk of dying in the life cycle model, he showed conceptually that an individual increases expected lifetime utility by purchasing fair life insurance and fair annuities. Simple models of insurance demand were proposed by Pratt (1964), Mossin (1969), Smith (1968) and others; considering a risk averse decision maker with an initial wealth W. The results indicate that demand for life insurance varies inversely with the wealth of the individuals. Hakansson (1969) used a discrete-time model of demand for financial assets and life insurance purchase in particular to examine bequest motive in considerable detail. Pissarides (1980) further extending Yaari’s work proved that life insurance was theoretically capable of absorbing all fluctuations in lifetime income. Lewis (1989) found out that the number of dependents as an influence on the demand for life insurance.
To sum up, the theoretical review yields macroeconomic variables like income, rate of interest, and accumulated savings in wealth form; along with a set of demographic or social variables having potential impact on an individuals’ decision to opt for or not to demand life insurance. Life insurance consumption increases with the breadwinner’s probability of death, the present level of family’s consumption and the degree of risk aversion.
5. Issues and Questions
The major issue to start with would be to re-examine the significant variables that can best fit as determinants of life insurance demand. Recently, there are number of studies on single economies: Hwang and Gao (2003) study were on the Chinese economy; Lim and Haberman (2004) focuses on Malayasia; and Hwang and Greenford (2005) on Mainland China, Hong Kong and Taiwan. Lenten and Rulli (2006) explored the time series properties of the demand for life insurance in Australia using a novel statistical procedure that allows unobservable components to be extracted.
Zietz (2003) and Hussels et al. (2005) has reviewed the efforts of researchers to explain consumer behaviour concerning the purchase of life insurance for almost 50 years. The review of earlier studies concludes that bulk of the empirical studies undertaken finds a positive association between increase in savings behaviour, financial services industry and demand for life insurance. Taking this forward, our first issue is to see whether or not per capita gross domestic savings and financial depth influences life insurance consumption. GDP and Per-capita GDP are often highly correlated with the proxy variables measuring insurance demand- density and penetration. We therefore ignore these two variables and assume that as income grows, it will add to insurance demand via rise in the savings component i.e., GDS.
The demographic factors dependency ratios, adult literate population, life expectancy and adult literate population are considered and in line with earlier studies we expect these to be significant in explaining life insurance demand. It is expected that young dependency will be negatively related and the rest three demographic variables are expected to have a positive relation. We have assumed first that consumer price index (CPI) will be the best proxy for inflation although we have considered log difference of CPI as an alternative measure for inflation. Lastly we have the real interest rate, which is in our case the deposit interest rate minus inflation. In Table 1, we present our identified ‘potential’ determinants of life insurance consumption with the expected signs for the cross-sectional analysis.
Table 1: Determinants, Research Questions and Expected Relationship
Determinants Questions Expected Sign
GDP per-capita
Is income a significant factor in explaining life insurance consumption?
+
GDS per-capita
Is level of saving a significant factor in explaining life insurance consumption?
+
Financial Depth
Does the level of financial sector development have any spill-over effect on enhancing insurance consumption?
+
Urbanization What relation exists between the rate of urbanization and insurance consumption?
+
Total Dependency Ratio
The impact of rising “dependent population” on insurance consumption
+
Young Dependency Ratio
The impact of rising population in the 0-14 years age group on insurance consumption
_
Old Dependency Ratio
The impact of rising population above 65 years of age on insurance consumption
+
Adult Literate Population
Whether or not level of education, as an indicator of awareness, affect insurance consumption?
+
Life Expectancy at Birth
The effect of life expectancy on insurance consumption
+
Crude Death Rate
The effect on number of deaths on insurance consumption
+
Inflation Do price fluctuations affect insurance consumption?
_
Real Interest Rate
What is the effect of changes in interest rate on insurance consumption?
_
Price Does insurance price determine the demand for insurance?
_
Table 2: Life Insurance Premiums and Penetration Figures for several Economies
In comparison with Bangladesh
1994 1999 2004
Premiums*
Density#
Premiums*
Density#
Premiums*
Density#
Bangladesh 0.011 0.0001 103.71 0.81 231.48 1.66
China 2027.41 1.71 10752.17 8.58 30584.31 23.60
Hong Kong 2536.44 422.88 4973.26 752.73 14643.54 2122.25
India 3652.70 3.99 6306.50 6.31 14716.36 13.63
Indonesia 625.08 3.30 780.79 3.83 1496.19 6.88
Malaysia 1222.39 60.81 1892.14 83.32 3798.01 152.53
# Life Premiums as percentage of total mid-year population
1Figures are extrapolated
Insurance penetration in 12 Asian Economies
0
2
4
6
8
1994 1999 2004Year
Pre
miu
ms a
s %
of
GD
P
Bangladesh China Hong Kong IndiaIndonesia Malaysia Pakistan PhillipinesSingapore SriLanka Thailand Vietnam
Table : 5 Development of Life Insurance Industry*
Regulatory Authority
Pre-Regulatory Regime
Regulatory Change
Foreign Ownership
No. of life Insurers
Insurance Development and Regulatory Authority.
After separation from Pakistan in 1972, state-owned monopoly life insurer Jiban Bima Corp. was established in 1973
*1984
Allowed 50% private underwriting in 1990
*2010: Bangladesh Insurance Act 2010
Allowed upto a certain limit
18
1 Public
6. Life Insurance companies of Bangladesh:
Meghna Life Insurance Co. Ltd.
Company profile:
Meghna Life Insurance Co. Ltd. was accorded formal approval by the Govt. on 5th May, 1996. It was emerged as the 4th Private Sector indigenous Life Insurance after a prolonged complicated process of preparatory work under the guidance and leadership of Mr. Nizam Uddin Ahmed, the current and founder Chairman of the Company. It started carrying on the Life Insurance business since 1st June, 1996. Meghna Life has now consolidated its position on strong footing. A transparent and accountable management is here who are working relentlessly to boost up its position on a prestigious level. The authorised capital of the company is Tk. 30 crore and paid up capital at present stands at Tk. 9.375 crore. In 1996 Premium income, Life Fund & Investment was Tk. 3.30 crore, Tk. 0.04 crore & Tk. 2.59 crore respectively and in 2006 such Premium income, Life Fund & Investment increased to Tk. 231.27 crore, Tk. 415.91 crore & Tk. 130.71 crore respectively. From 1996 to 2008 Meghna Life paid 33.47 crore taka as death claim, taka 47.03 crore as survival benefit Tk. 4.78 crore as maturity claims and Tk. 2.42 crore as bonus to the policy holders. This success has been possible due to constant guidance supervision and ceaseless efforts of the Honb’le Chairman and Directors and the present competent management. It soon made a mark in the Life Insurance arena by not only being the top listed among the Private sector indigenous companies, but by undertaking and successfully implementing innovative and welfare oriented Life Insurance schemes. It introduced an array of conventional Life and other Insurance products of Loko Bima, Islami Bima (Takaful) Swanirvor Bima and Islami Khudra Bima (Takaful) many of which were the first in Bangladesh. For the first time Hospitalization benefit Insurance product was also introduced by Meghna Life. Meghna Life has earned reputation in every corner of the insurance Industry. It can take pride of its prestigious achievements which are moulded with transparency, accountability, impeccable working capacity, sincerity, honesty and sagacity. The company has diversified its products to match customer’s needs and satisfaction. Currently it provides multifarious Life Insurance products to cater to the aspirations & needs as well as religious beliefs to the clients. There is no iota of doubt that Meghna life will go forward with its new missions and visions in the days to come.
Claims :: Settlement of Claims
Claim Under Policies (Including Provision For Claims Due orIntimated) Less Re-Insurance by Death/Survival : Tk. 425,872,132
ParticularsOrdinary Life
Loko Bima
Islami Bima
Islami Khudra
Group Total
By Death 13,122,509 6,529,930 3,525,4581,530,986
1,370,299
26,060,283
By Survival223,070,064
-64,728,200
- -287,798,264
By Surrender 2,716,662 - 165,893 - - 2,882,555
Bouns in Cash 27,491,285 6,699,736 86,482 18,899 - 34,296,402
Claim by Maturity
45,731,20829,103,420
- - - 74,834,628
Total 2008312,131,728
42,333,086
68,506,033
1,530,986
1,370,299
425,872,132
Total 2007256,784,789
6,541,04745,040,485
902,555 970,00310,238,876
During the year 2008 the company has settled and adjusted TK. 358,017,708 including last year outstanding claim worth TK. 181,717,952 as death claim, maturity claims survival benefit. The amount of TK. 259,577,955 was outstanding as on December 31, 2008. Out of outstanding amount, the company has settled TK. 234,799,947 as of the date of audit.
National Life Insurance Company Limited
National Life Insurance Company Limited the first private sector life insurance company in Bangladesh, incorporated on 12 February 1985 as a public limited company under the Companies Act 1913 to engage in life insurance business according to the provisions of the Insurance Act 1938 and Rules 1958 and other applicable laws and rules. The company commenced business on 23 April of 1985 with an authorised capital of Tk 200 million divided into 2 million ordinary shares of Tk 100 each. Its paid up capital on 31 December 2000 was Tk 30 million fully paid by four types of shareholders namely, sponsors (50%), companies, financial institutions, and general public. The company is listed with the Dhaka and Chittagong Stock Exchanges.
Premium incomes of the company in 2000 were Tk 845.48 million comprising first year premiums, renewal premiums, and premiums of group insurance and Jana Bima, a special insurance scheme to provide the yield and the benefits of life insurance to very low income group people of the country. Shares of the above components in premium incomes in 2000 were Tk 321.84 million, Tk 410.31 million, Tk 15.08 million, and Tk 98.25 million respectively. Life insurance claims paid by the company in 2000 were Tk 146.89 million. The company maintains a life fund to pay the unexpired risk in future and in 2000, the fund accumulated an amount of Tk 967.11 million. Types of life insurance services provided by the company are death claim-ordinary life, death claim-group life, death claim-Jana Bima, survival benefit-ordinary life, accident and FIR benefit, ex-gratia claim-ordinary life, ex-gratia claim-Jana Bima and group insurance.
The company has income from its investments in Pratirakkha Sanchaya Patra (defense savings certificates), shares and debentures of companies, National Investment Bond, T&T Treasury Bond, and Agrani Bank Shilpa Unnayan Bond. These incomes totalled Tk 71.26 million in 2000. As a part of further diversification of its investment portfolio, the company participated in the equity of a multi-national company named Industrial and Infrastructure Development Finance Company Ltd. It sponsored that company in association with 7 banks and few other insurance companies.
The assets of the company were valued at Tk 1,427.10 million on 31 December 2000. The company paid dividends at varied rates depending upon the volume of its profits and on the basis of valuation by the actuary and audited accounts. Dividend paid by the company in 2000 was 30% on its paid up capital.
In 2001, the company had 63 branches and 4 area offices of Jana Bima throughout the country. It had 1,138 personnel, including 34 executives headed by the managing director, who is also the member secretary of the company's 36-member board of directors
SUNFLOWER LIFE INSURANCE COMPANY LTD
OVERVIEW:
Sunflower Life Insurance Company Limited was incorporated on 29th December 1999
under the Companies Act, 1994 as Public Company limited by shares to provide an efficient and active insurance service in the insurance sector of our country. The Company commenced its operations on 1st June, 2000. The
Authorized capital is Tk. 10 Crore divided into 1,000,000 ordinary shares of Tk. 100
each sector It started its operation with a philosophy of maintaining competitive balance with prudent management and fairness to all our policyholders and with a belief of adhering to basic principles of insurance and financial management by balancing the scales between safety of principle and competitive rate of return to our policyholders. Its goal is to serve the humanity for its well being in the present and the world hereafter by providing financial and moral gains through utmost good faith, good conduct, mutual trust, sincerity, integrity and personalized services. And, finally its ultimate vision is to maintain utmost integrity responsibility and transparency, become the best private life insurance company in Bangladesh. & change beliefs, attitudes, values and practices in the life insurance industry. To achieve these purposes they are committed to their customers to provide with ethical and highest standard services. They will operate their business in all respects within the framework of insurance rules. As a result Credit Rating Agency of Bangladesh (CRAB) Limited has assigned BB3(Pronounced Double B Three) rating in the long term and ST-5 rating in the short-term to the Sunflower Life Insurance Company Limited (SLICL).They rated in the long term BB3 belong to ‘Average Safety’ cohort. They are adjudged to have average financials and moderate claimpaying ability. They are rated in short term ‘ST-5’ category which is considered to have capacity for timely repayment of obligations susceptible toadverse changes in business, economic, or financial conditions.
PRODUCTS THEY OFFER:
Ekok Bima
Surjamukhi Bima Project
Al- Arafah Islami Jiban Bima (Tarafah)
Sunflower Samajik Bima
Al- Arafah DPS Division
Surjamukhi Ekok Bima Division
Sunflower DPS Division
Al- Arafah Islami Ekok Bima Project
Al- Arafah Islami Bima Project
Sunflower Samajik Ekok Bima Division
Sunflower Samajik Bima Division
Islami Bima Division
FINANCIAL HIHLIGHT:
Particulars 2004 2005 2006
1st Year Premium 79.67 150.58 189.04
Renewal Premium 58.61 88.44 145.18
Total Life Fund 47.58 101.28 222.77
Total Asset 108.12 182.98 291.53
Net Surplus / (Deficit)* N/A (12.67) 0.82
Cumulative Lapse Ratio 52.83% 50.01% 60.81%
Investment Yield 7.66% 7.90% 12.66%
Paid-up Capital 30.00 30.00 30.00
Amount in BDT million
PRIME ISLAMI LIFE INSURANCE COMPANY LTD.
OVERVIEW:
Prime Islami Life Insurance Ltd (PILIL) was incorporated as Prime Life Insurance Co., Ltd in July 2000 with combined efforts of renowned business personalities, bankers and retired secretary, Govt. of Bangladesh.It has authorized capital of tk 250 million and paid up capital of tk 117 million. With a view to running the company as per ideology and principle of Shariah, it was converted into Prime Islami Life Insurance Ltd in April 2002. In a relatively very short span of time, Prime Islami Life Insurance Ltd has achieved an excellent progress in business and product development.As a result of its performance it has been assigned the credit rating grade ‘A+’
PRODUCTS & SERVICES THEY PROVIDE
:-Islamic Endowment Assurance Plan (Hajj Bima)-Assurance Cum Pension and Medical Benefit Plan-Three Payment Endowment Assurance Plan-Prime Islami Deposit Pension Scheme-Five Payment Endowment Assurance Plan-Group Term Life Assurance Plan-Group Endowment Assurance Plan-Multiple Benefits Life Assurance Plan-Child Protection Assurance Plan-Premium Back Term Assurance Plan-Single payment Endowment Assurance Plan-Couple/Dampati Assurance Plan
Rupali Life Insurance Company Limited.
Company Description
Rupali Life Insurance Company Limited engages in life insurance business in Bangladesh. Its principal products and services include Individual Life, Islami Bima (Takaful), Samajik Bima, Rupali DPS, Takaful DPS, Rupali Khudra Bima Takaful, Shariah Deposit Pension Scheme, and Al-Amanat Bima. The company distributes its services through agencies and organizational offices. Rupali Life Insurance Company was founded in 1999 and is headquartered in Dhaka, Bangladesh.
Crab rating
Credit Rating Agency of Bangladesh(CRAB)Ltd has assigned the long term rating of rupali life insurance co.ltd to BBB1based on audited financial statements of 31st December,2009 & other relevant information.Life insurance co.'s rated BBB1 in long term belong to “Good financial security”cohort through are more likely to be affected by adverse business condition than the insurers with higher rating.
Over the last 3 years,Rupali 's net premium grew at a consistent rate & reached BDT 1259.48 million 2009 from BDT902.29 million on an average 33%of total revenue came from ordinary life insurance.The contribution of Islamic life insurance increased significantly.Rupali' life managed to control its actual expense within the allowable expense of limit for last few years.In 2009 Rupali's actual expense was BDT 635.58 million against the expense limit of BDT 669.77 million.rupali life has management expertise,developed MIS system,branch network control& compliance systemto reach such BBB1 rating.
Homeland Life Insurance Co. Ltd.
Homeland life insurance Company limited (HOLICO) was formed in 1996. Today Homeland Life, with its Head Office in Dhaka operates in whole over Bangladesh. Homeland Life Insurance Company Limited offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as insured person and Homeland life insurance Company limited, hat is providing the insurance if you die while the contract is in force, the Homeland Life Insurance Company Limited pay a specified sum of money free of income tax “Cash benefits” to the person or persons you name as beneficiaries or nominees. Our Life Insurance Plans do more those just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death funeral expenses, taxes, probate costs, the need for housekeepers, child care, and so on. And those cash benefits should provide for your families future needs as well, including education for your children and part of all of your spouse’s retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
Introducing Islami Life Insurance
Homeland life insurance Company limited is first time introduce Islami Life Insurance on basis of Quran&Sunnah in Bangladesh.
Homeland Life Insurance Company’s primary method of distribution around the country is the agency network. Homeland life insurance Company’s agency offices, servicing centers and affiliates market a board range of life insurance product through a network of some agents & development officers countrywide. We emphasize professional skill development through continuous education and field training
Homeland Life Insurance Company’s Products:
Homeland Life Insurance Company Limited provides its client with a variety of different types of Life Insurance services, which also provide money to cover the cost of death funeral expenses, taxes, childcare and so on. Keeping in mind the customer satisfaction HOLICO has the following product for its clients.
SUPPLIMENTARY ACCIDENT BENEFIT
This is a supplementary insurance. The Double Indemnity Accident benefit referred as DIAB by the company. According to this policy if the death of insured occurs as a result of bodily inquiry caused solely and independently of any other cause by accident, violent, external and visible means capable of direct proof and not aggravated by bodily defects or infirmities the company shall pay, in addition to any other benefit payable hereunder a sum equal to the basic sum assured under this policy.
This is also known as supplementary insurance. The permanent disability and accident benefit refereed as PDAB by the company. According to this policy if the death or disablement of the insured occurs as result of bodily inquiry caused solely and independently of any other cause by accident violent, external and visible means capable of direct proof and not aggravated by bodily defects or infirmities the company shall pay any one of the following indemnities.
ENDOWMENT INSURANCE WITH PROFITS
This plan is an insurance investment mix designed to provide growth and security. One maturity, and in the event of an insured person's untimely death, sum assured plus occurred are paid to the beneficiaries or nominees.
GUARANTEED BONUS ENDOWMENT INSURANCE
This plan provides guaranteed bonus at the rate of taka twenty for one thousand of sum assured. On maturity and in the event of abrupt death, sum assured along with above rate of guaranteed bonuses are paid to the nominees.
THREE PAYMENTS ANTICIPATED ENDOWMENT INSURANCE WITH PROFITS
This endowment plan designed to provide very high insurance coverage and attractive investment returns. The plan pays 25% of the sum assured at one third of the term and another 25% at two third of the term. The balance with occurred bonus are payable on maturity. The plan participates in the company profits though reversionary bonuses.
FOUR PAYMENTS ANTICIPATED ENDOWMENT INSURANCE WITH PROFITS
An endowment plan designed attractive insurance coverage and investment returns. This plan pays 25% of the sum assured at one-fourth of the term, rest 25% at two fourth of the term and another 25% at three fourth of the term. The plan also participate in company profits though reversionary bonuses. The balance with occurred bonus are payable on maturity.
PROGRESSIVE ENDOWMENT INSURANCE WITH PROFITS
It provides comparatively small premium for the first five years against greater sum assured. After five years insured person can decrease or increase the term with his or her own increasing or decreasing income.
PENSION INSURANCE POLICY WITHOUT PROFITS
A plan to provide person at any time after a period of maximum 10 years, besides covering the life to the extent up to 100 times the monthly person. Pension can be paid for life or to be nominee upon death or with guaranteed pension payments.
CHILD PROTECTION ENDOWMENT INSURANCE WITH PROFITS
This is a juvenile policy, provides coverage and maturity benefits over a wide range of terms on the life of the assured child, and at the same time, provides protection in case of the prayers death. On maturity and in case of child's survival, sum assured with occurred bonuses are paid. In the event of a child's untimely death sum assured plus occurred bonuses are paid to the prayer or nominees. In the event of the prayer's death before maturity, all future premiums will be waived and the policy will continue in force. Furthermore, a monthly income equal to 1% of the sum assured will be paid to the child till maturity. At maturity, child will receive all stated maturity benefits. This plan participates in company profits through reversionary bonuses.
SINGLE PAYMENT ENDOWMENT INSURANCE WITH PROFITS
According to this plan insured pays a single premium for the whole term. After maturity company use to pay sum assured with occurred bonuses. In case of death two times of the sum assured plus occurred bonuses are payable. The term of his plan is fixed at ten years.
BIENNIAL PAYMENT ENDOWMENT INSURANCE WITH PROFITS
This is an attractive endowment plan. After completion of four years of term the company pays the partial amount of sum assured to the insured. And then gradually after ever two years proportionate sum assured are payable. The balance are payable on maturity with occurred bonuses.
POPULAR LIFE INSURANCE COMPANY LIMITED
Popular Life “A great name in life insurance” started is journey on September 26, 2000. Today, with premium of 393.24 crore, life fund of 608.09 crore. It is now on the largest life insurance companies in Bangladesh. Their motto is to reach to the doors of every insurable person of the country. They, not only contribute to the economy through their business operations, but also contribute to the socio- economic development of the nation. Their works towards corporate social responsibility includes campaigns against drug abuse and human trafficking, tree plantation, ‘Vitamin A’ campaign etc.They have also extended theirhelp and stood besides the victims of floods, cyclones and landsides.
SUPPLEMENTARY INSURANCE BENEFIT
1 ACCIDENTAL DEATH BENEFIT (ADB)
2 PERMANENT DISABILITY AND ACCIDENT BENEFIT (PDAB)
CORPORATE INFORMATION
COMPANY NAME : POPULAR LIFE INSURANCE COMPANY LIMITED
1 Islamic Endowment Plan (Hajj Bima) with Profits (Takaful)
2 Islamic Endowment Plan (Moharana Bima) with Profits (Takaful)
3 Three Payment Endowment Assurance Plan - with Profits
4 Four Payment Endowment Assurance Plan - with Profits
5 Five Payment Endowment Assurance Plan - with Profits
6 Biennial Payment Assurance Plan - with Profits
7 Assurance-cam Pension and Medical Benefit Plan - with Profits
8 Child Protection Assurance Plan - with Profits
9 Single Payment Endowment Assurance Plan - with Profits
10 Endowment Assurance Plan - with Profits
11 Education Expense Assurance Plan - with Profits
12 Money-Back Term Assurance Plan - with Profits
13 Mohorana Bima Policy-With Profit
14 Hajj Bima Policy-With Profit
THEIR PROJECTS
SL DPS INDIVIDUAL LIFE
1 AL-AMIN BIMA EKOK BIMA
2 JANAPRIYA BIMA ISLAMI BIMA TAKAFUL
3 ISLAMI DPS AL-BARAKAH ISLAMI BIMA (EKOK)
4 AL-BARAKAH ISLAMI DPS JANAPRIYA EKOK BIMA
5 POPULAR DPS IDPS EKOK BIMA
AL-AMIN EKOK BIMA
LIMITATION
1.NON-COMPLIANCE OF SECURITIES LAWS: IN CONNECTION WITH THE SUBMISSION OF REVISED HALF YEARLY FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED ON JUNE 30, 2006.
Delta Life Insurance Company:
Since inception in 1986, Delta Life set before itself a high standard of all round performance coextensive with professional soundness and proficiency. It soon made a mark in the life insurance arena by not only being the leader among the private sector indigenous companies, but by undertaking and successfully implementing innovative and welfare oriented life insurance schemes. It introduced an array of conventional life and group insurance products - many of which were the first in Bangladesh. For the first time, health insurance products were also introduced by Delta Life. But more importantly, in fulfilment of the avowed commitment towards social development, Delta Life for the first time not only in Bangladesh but probably in the World, devised and introduced micro-life insurance-cum-savings products specially suited to the needs and pockets of poor people of the country who constitute more than 80% of the people of Bangladesh.
Delta Life’s initial products consisted primarily of endowment policies, which combined con¬tractual savings with life insurance, targeted at Bangladesh’s middle and upper classes. In 1988, inspired by the growing success of the Grameen Bank and other microcredit schemes in Bangladesh, Delta launched an experiment of its own, Grameen Bima or village insurance. Initially, the design for Grameen Bima called for collaboration with a microcredit NGO that provided the delivery structure for Delta’s endowment product. This partnership dissolved after a short time because of a difference in objectives.
Delta then developed its own delivery network and quickly realised the benefits of selling its own policies. Subsequently it developed and introduced an urban micro insurance project, Gono Bima, which offered a similar endowment product. In 1991, the company began introducing loans to complement the endowment policy. The loans were intended to stimulate additional income for policyholders, which would help to promote their economic development while making it easier for them to pay their premiums. This proved disastrous. Repayment fell to about fifty percent and Delta was left with a signifi¬cant loan loss.
Product Base:
1. Ordinary Life Insurance:
Endowment plan with and without profits
One-two-three endowment plan with profits
Installment payment plans with or without profit
Premium back term Insurance plan without profits
Pension Plan
Child Educational Protection Plan
Tri-dimensional Policy
Moving Term Plan
2. Micro Insurance
3. Group Life Insurance
4. Health Insurance
Some Drawbacks:
• Delta has shown that it is possible for an insurance company to create its own distribution network to sell voluntary, individual insurance policies directly to the low-income market, and to achieve profitability, without any donor support, though over a rather long period.
• By building up its Ordinary Life (or traditional insurance) business to a fairly significant scale, Delta cross-subsidised the start-up of the micro insurance activities. For direct micro insurance to be possible, it probably needs to be offered by a company that also services the upper market so the organisation can create administrative efficiencies, professionalize systems, and lower expense ratios.
• Insurers have to focus on their core competencies. Although Delta’s project loans were heralded as a tremendous accomplishment in the late 1990s, after a few years of reflection (and mounting bad debts), they are now seen as a major failure.
• Delta has not managed its tremendous growth very effectively. It recognises now that more authority needs to be closer to the clients.
• Microinsurers should not overlook the critical importance of management information systems, especially for large volumes of small policies. Effective management of an insurance business depends on timely and accurate information to: price products appropriately, pay claims expeditiously, manage staff effectively, monitor performance carefully, etc.
Delta Life can take pride in moulding the saving habits of the lower and middle class people and transforming them into prospective policyholders. The potential is now so strongly perceived that all life insurance companies - old and new alike - operating in the country have started their own micro insurance products.
Pragati Life Insurance Limited
Pragati Life Insurance Limited is a public limited company registered with the Registrar of Joint Stock Company and licensed by the Controller of Insurance, Govt. of Bangladesh to transact life insurance business in Bangladesh. The Board of Directors of Pragati Life is comprised of a group of dedicated and renowned business entrepreneurs of the country and have already proven their commitment and services in General Insurance through Pragati Insurance Limited. Now, they are committed to do the same with Life Insurance through Pragati Life Insurance Limited.Their attention is always focused on the individual client and his special needs. Furthermore,they are continuously developing IT aids and expert systems to carry on life insurance business efficiently.And as they have entered into a new millennium,They will inform about new trends and developments in the life insurance industry worldwide.
Vision
1.They shall be recognised as the leader among all life insurance companies in Bangladesh.2.They shall always apply high standards of integrity & responsibility in their activities.3.They shall be built their full dedication to the satisfaction of their policyholders.
Mission
1.Their mission is to produce & provide quality & innovative insurance products.2.Maintain stringently ethical standard in business operation.3.Ensuring benefit to the policyholders,shareholders & the society at a large.
PRODUCTS
Pragati Bima (Rural Insurance)
Pragati Bima is the innovative product offering from Pragati Life Insurance Limited. Feel free to contact us on any of the following.
Plan A - Shonchoi 3-in-1 Policy
Plan B - Shonchoi 3 payments Policy
Plan C - Shonchoi 4 payments Policy
Plan D - Sonchoi somahar policy
Plan E - Education Endowment Policy
Plan F - DPS (Pension Policy)
Plan G - Jibon Sanchay
HEALTH PRODUCT
Pragati Life Hospitalization Plan is designed to cover the expenses incurred for hospital treatment which in broad terms includes:
• Hospital accommodation in private room
• Consultation with physicians and/or surgeons
• Medical investigations and tests
• Major and intermediate surgical operations
• Use of operation theatre, anesthesia and other services
• Medicines
• Ancillary services like Labour room, Post-operative care and Intensive care facility, Blood transfusion, Oxygen therapy etc.
Pragati Life Sells two types of Hospitalization Insurance Plan
1. Individual Hospitalization Insurance Plan
2. Group Hospitalization Insurance Plan
PRODUCTS OF IPL
Plan 01 - JIBON SATHI (with Bonus)
Plan 02 - JIBON PROTTASHA (with Bonus)
Plan 03 - JIBON TORI (with Profit)
Plan 04 - JIBON SOMAHAR ( with Profit)
Plan 05 - JIBON ALO (with Bonus)
Plan 06 - JIBON BONDHU (with Bonus)
Plan 07 - JIBON ABOKASH (Pension)
Plan 08 - JIBON BIKASH (Child Education)
Plan 09 – CORPORATE PLAN
Plan 10 – JIBON UTTORON (Joint Life)
Plan 11 - JIBON PARASH (Health Insurance)
Plan 12 – JIBON SHONCHOI (Single Premium)
Plan 13 - Jibon Purnota (Hajj Bima)
Group insurance is a cost effective way of providing protection against the financial loses caused by death, disability or retirement to a group of individuals who are associated with the policyholder by some common relationship other than insurance.
Pragati Life offers group insurance schemes to various groups such as Employer-Employee, Professionals, Co-operatives, and NGOs etc. The main feature of the schemes are low premium, simple insurable conditions such as employee not being absent from
duty on grounds of ill health on the day of entry, and easy administration by way of issue of a single master policy covering all the employees/members. Group insurance is usually a service benefit provided by the employer to its employees.
How the Employer Benefits
Most employers provide group life/hospitalization insurance as a service benefit. By providing employees with a plan of group life/ hospitalization insurance coverage, an employer derives the following benefits:
• It contributes to employee morale and productivity.
• It helps to recruit and retain employees.
• Employer can obtain a Tax deduction for the cost of contributing to the plan.
• Employer’s public and employee relations image is enhanced.
DIVIDEND DECLARATION
Bangladesh's Pragati Life Insurance Limited Sunday declared 10 percent dividend for its shareholders for the year 2008.
Financial HighlightsAmount in thousand (BDT)
Year 2007 2006 2005 2004First Year Premium
201,008261,253158,221 86,590
Renewal Premium
268,891222,521135,145100,305
Group Insurance Premium
61,050 44,350 32,969 32,229
Health Insurance Premium
37,411 30,702 22,202 16,556
Gross Premium
568,359558,827348,537235,680
% Increase 1.71 60.33 47.89 25.8
over the previous yearOverall conservation ratio (%)
55.58 75.85 72.31 69.69
Investment Income
113,534 36,207 24,130 8,117
Investment Yield (Income realised to mean Life Fund)
Life Fund 794,664536,141290,392176,505% Increases over the previous year
48.22 84.63 64.52 73.35
Ratio of ----
Expenses of Management to Premium Income(%)
55.89 48.20 51.63 50.89
Claim to Premium(%)
17.94 13.31 22.13 19.27
Comparative Statement
INDIVIDUAL PRODUCT LINE Amount in million(BDT)New Business Business in forceYear Sum Assured No. of policies 1st Year PremiumSum AssuredNo. of policies2007 1,123.90 13,261 85.10 4,668.05 47,9852006 1,617.27 17,754 127.22 3,933.41 45,832
ISLAMI JIBON BIMA (TAKAFUL)New Business Business in forceYear Sum Assured No. of policies 1st Year PremiumSum AssuredNo. of policies2007 338.62 3,879 26.20 313.62 2,9212006 283.65 2,492 20.90 315.63 2,949
PRAGATI BIMANew Business Business in forceYear Sum Assured No. of policies 1st Year PremiumSum AssuredNo. of policies2007 659.26 26,057 44.99 1,786.39 73,9012006 778.34 33,780 84.98 1,501.27 64,595
PRAGATI ISLAMI BIMANew Business Business in forceYear Sum Assured No. of policies 1st Year PremiumSum AssuredNo. of policies2007 231.13 9,257 14.72 344.66 14,1072006 185.57 8,167 16.03 212.36 9,108
ISLAMI DEPOSIT PENSION SCHEMENew Business Business in forceYear Sum Assured No. of policies 1st Year PremiumSum AssuredNo. of policies2007 245.16 10,215 29.99 459.59 16,1582006 263.32 7,580 12.13 370.56 9,622
Present Condition:
Life Insurance Industry still follows the Insurance Act1938.
New Act passed but not implemented.
Insurance Regulatory Authority yet to be formed.
Interested to launch Insurance business in Bangladesh almost 200 companies but they are not getting proper guidelines.
Current year life insurance business premium income Tk 4595 corer where non life has only TK 1389 corer.
(Source: Dainik Prothom Alo, 4th Dec 2010)
Problems of life 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 life insurance business has been classified into some major criteria which are social, economic, political, legal and other reasons. The actual problems are discussed in detail within these criterions.
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 life 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 life 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 rulesand 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 0of this. Political instability and inconsistency of political courses are a serious problem for the insurance business.
Lack of supervision from the government:
Lack of surveillance from government ministry encourages many insurance companies to follow some unethical practices like make harassment to policy holder and showing less in the financial statement. This not only destroying the reputation of the well known insurance companies but also creates negative impact in the mind of the people about insurance. Besides this government sometimes impose some conflicting rules and regulation without discussing with insurance companies governing body. It creates 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 ofcomplexities is present there. Therefore the people are discouraged to take insurance policy because they think that the complexities will create extra pressure on theirmind which may hamper other jobs.
Other problems
Lack of qualified officials:
Life 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. Whereas foreign companies are using modern systems likecomputerized 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 theofficials 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 ofpopulation 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 ethic:
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 toreturn 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 givefalse 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 totake 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 thatinsurance 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 notthat 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. Theyprovide tiny amount advertisement, which is not sufficient for increasing business development.
Limitations
Some life insurance company’s directors are found to involve as acting director of another (two or more) financial institutions which is strictly restricted by the provision of present Insurance Act 2010.
Some life insurance companies are not yet complied with the requirement of paid up capital according to section 21 of Insurance Act 2010.
Reference: According to schedule 1, the required paid capital is:
For life insurance business: minimum 300 million taka.
Some life insurance companies are not yet complied with the requirement of Statutory Deposit under section 23 of Insurance Act 2010.
Reference: For life insurance companies required deposit is: 15 million taka.
Shortage of professionally qualified personnel.
Step motherly attitude from the banks.
Limited numbers of product base of the existing life insurance companies.
Lack of proper regulations.
Technological backwardness.
Political and social condition may affect the smooth functioning as well as drastic fall to the value of its investments.
The coverage of natural calamities like cyclone, flood and tremors by insurance may severely weaken the financial strength of the Company by accruing heavy claims on account of loss of huge human life.
Unethical practices and poor corporate governance.
The new act, Insurance Act 2010 has been formulated and passed only. It is still confined in document. It is required to implement.
Delay and corruption in claim settlement process.
All the necessary information are not available in the website.
RECOMMENDATIONS
Insurance industry in Bangladesh is very large and they need to be regulated under the comprehensive laws and regulation and supervised by a strong regulatory authority. For this purpose, ‘insurance act 2010’ has been passed by modifying, correcting and omitting the drawbacks of the previous ‘insurance act 1938’.but it is a matter of great regret that this act yet to be implemented.
In addition, the government should play an active role for the development of the insurance industry in Bangladesh. For this purpose, the government may formulate favorable taxation policy, may create supportive infrastructure facility, and direct to implement the new insurance act as soon as possible. Insurance companies should introduce fair corporate governance and corporate reporting systems, arrange training for human resource development and adapt new technology and awareness building program to make the concept of the insurance popular among the people. So recommendations at a glance can be:
Implementation of new act as soon as possible;
Supportive infrastructure facility;
Fair corporate governance and corporate reporting system;
Human resource development;
Information technology development;
Favorable taxation policy;
Friendly support from the bank;
Making the claim settlement process easier;
Increasing the number of product base;
Increasing awareness among the people.
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.
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.
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.
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, curriculam and training programs of the academy need to be modified to meet the modern needs of the insurance industry..
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.
The collected premium should be invested in large and beneficial sectors so that insurance companies can return their clients expected return in timely.
Government should have a regulatory body for the surveillance on insurance companies so that they must perform their business maintaing the ethical issues properly.
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.
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.
Conclusion
Life insurance business sector is a highly prospective sector of Bangladesh. It has true potentiality to go a long way and to contribute our economy a lot. But different unfavourable conditions and lack of regulatory patronization obstructs its smooth growth. Unless and until these questions are solved it can not able to achieve its optimum level of success even it may fail to compete with its global powerful competitors. The regulatory authority should take pragmatic steps immediately not only to ensure the success of the sector but also to enlighten our country. Miles have passed, but miles to go yet.
