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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 `Feb 09, 2012 Md.

Mosharaf Hossain Course Instructor Dept. of Management Studies University of Dhaka Subject: Submission of the report on Problems and solution of insurance business in Bangladesh Sir, You will be pleased to know that I, Nusrat Jahan Tusty along with my group members, have completed the report on Problems of insurance business in Bangladesh. This assignment indeed has helped us to grow better understanding about the insurance business in Bangladesh. We appreciate this opportunity to show our profound gratitude to you for sparing your valuable time, guidance, constant effort and prompt attention as and when required for accomplishing this report. We hope that despite all the limitations, this assignment will serve the purpose behind it. Sincerely yours Nusrat Jahan Tusty On behalf Of Group members

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Acknowledgement This Assignment would have never been done without the guidance, constant effort and prompt attention of our course instructor Md. Mosharaf Hossain. We are also Grateful to the central library authority & Dulal Nondy, the general manager of Jibon Bima Corporation.

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Table of content
Topic Executive Summary Background of report Objective and limitations Methodology Historical background and present situation Problems of Insurer Problems of Insured Social , Economic and Administrative problems Suggestions Conclusion Sources Page 4 5 5 6 7-10 11-13 14-16 16-21 21-24 25 26

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Executive Summary
Insurance business in Bangladesh has a long history of transformation. With the change of time the problems of insurance business in Bangladesh has also been changed. The problems can be classified in to 3 major sectors: Problems of insurer Problems of insured Social problems

Besides these problems insurance business also have very good prospect in Bangladesh. The insurance companies can grasp a potential market if they can solve these problems. But cooperation from the government is required for solving this problem.

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Background of the report This report has been prepared as a requirement of the insurance and risk management course. The report was based upon the overall insurance companys problems and solutions in Bangladesh. We were duly approved by our Course Teacher Md. Mosharaf Hossain. This report will help us know about the insurance business problems and prospects in Bangladesh In a developing country like Bangladesh, insurance companies are playing a very important role in the economy. Though insurance industry has very good prospect in the economy but for some reasons its totally failed to achieve its goal. If we want to know the reasons behind this failure then we should look forward the following according to Bangladesh General Insurance Company Ltd. In this report the we have classified the major problems in performing insurance business into some major criteria which are the problems of insurer, insured and the social problems. The actual problems are discussed in detail within these criterions.

Objectives and scope of the report The research objectives regarding our report are

To fulfill the requirement of the course curriculum. To find out some major problems of Insurer Insured Social

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 The report will enhance our overall knowledge about insurance and help us further to prepare any documents regarding insurance. We think this report will also be beneficial for those people who need information about insurance.

Methodology Secondary sources of data will be used for data requirements of the report. Secondary sources of data: Use Internet and different articles published in the journals & magazines have been used.

Limitations Preparing the we have faced some obstructions which are Lack of proper information in the websites of the insurance company. 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

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Historical background of Insurance business in Bangladesh Insurance is a system of spreading the risk of one to the shoulders of many and which is a legal contract whereby the insurers, on receipt of a consideration known as premium, agree to indemnify the insured against losses arising out of certain specified unforeseen contingencies or perils insured against. Insurance is not a new business in the Bangladesh it almost a century back, during British rule in India, some insurance companies started transacting business operation , both life and general, in Bengal. Insurance business enlarged momentum in East Pakistan during 1947-1971, when there are 49 insurance companies transacted their business operation both life and general insurance schemes and these companies were of various beginnings with British, Australian, Indian, West Pakistani and local. Then ten (10) insurance companies had their head offices in the East Pakistan, 27 in West Pakistan, and the rest elsewhere in the world. These were mostly limited liability companies and some of these companies were specialized in dealing in a particular class of business, while others were composite companies that dealt in more than one class of business. The Government of Bangladesh nationalized insurance industry in 1972 by the Bangladesh Insurance (Nationalization) Order 1972.By virtue of this order, saves and except postal life insurance and foreign life insurance companies, all 49insurance companies and organizations transacting insurance business in the country were placed in the sector under five operations. These operations were :the Jatiya Bima Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jibon Bima Corporation and Surma Jibon Bima Corpporation. The Jatiya Bima Corporation was an apex corporation only to supervise and control the activities of the other insurance corporations which were responsible for underwriting. Tista and Karnafuli Bima Corporation were for general insurance and Rupsa and Surma for life insuance.The specialist life insurance companies or for a life portion of a composite company joined the Rupsa and Surma corporations while specialist general insurance companies or the general portion of a composite company joined The Tista and Karnafuli corporations. The basic idea behind the formation of four underwriting corporations, two in each main branch of life and general, was to encourage competition even under a nationalized system. But the burden of administrative expenses incurred in maintaining two corporations in each front of life and general and an apex institution at the top outweighed the advantages of limited competition. Consequently, on 14 May 1973,a restructuring was made under the Insurance Corporations Act 1973. Following the Act, in place of five corporations the government formed two: the SADHARAN BIMA CORPORATION for general business, and JIBAN BIMA CORPORATION for life business.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 The postal life insurance business and the life insurance business by foreign companies were still allowed to continue as before .In reality, however, only the AMERICAN LIFE INSURANCE COMPANY continued to operate in the life sector for both new business and servicing, while three other foreign life insurance continued to operate only for servicing their old policies issued during Pakistan days. Postal life maintained its business as before. After1973, general insurance business became the sole responsibility of the Sadharan Bima Corporation. Life insurance business was carried out by the Jibon Bima Corporation, the American Life insurance Company, and the Postal Life Insurance Department until 1994, when a change was made in the structure arrangement to keep place with the new economic trend of liberalization.

The insurance corporations Act1973 were amended in 1984 to allow insurance companies in the private sector to operate side by with Sadharan Bima Corporation and Jiban Bima Corporation. The Insurance Corporations Amendment Act 1984 allowed floating of insurance companies, both life and general, in the private sector subject to certain restrictions regarding business operations and reinsurance. Under the new act, all general insurance business emanating from the public sector were reserved for the state owned Sadharan Bima Corporation, which could also underwrite insurance business emanating from the private sector. The Act of 1984 made it a requirement for the private sector insurance companies to obtain 100% reinsurance protection from the Sadharan Bima Corporation.This virtually turned Sadharan Bima Corporation into a reinsurance organization, in addition to its usual activities as direct insurer. Sadharan Bima Corporation itself had the right to reinsure its surplus elsewhere outside the country out after exhausting the retention capacity of the domestic market. Such restrictions aimed at preventing outflow of foreign exchange in the shape of reinsurance premium and developing are insurance market within Bangladesh. The restriction regarding business placement affected the interests of the private insurance companies in many ways. The restrictions were considered not congenial to the development of private sector business in insurance. Two strong arguments were put forward to articulate feelings:

Since the public sector accounted for about 80% of the total premium volume of the country, there was little premium left for the insurance companies in the private sector to survive. In this context, Sadharan Bima Corporation should not have been allowed to compute with the private sector insurance companies for the meager premium (20%) emanating from the private sector;

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Being a competitor in the insurance market, Sadharan Bima Corporation was hardly acceptable as an agency to protect the interest of the private sector insurance companies and should not have retained the exclusive right to reinsure policies of these companies. The arrangement was in fact, against the principle of laissez faire. Private sector insurance companies demanded withdrawal of the above restrictions so that they could: Underwrite both public and private sector insurance business in competition with the Sadharan Bima Corporation, and The government modified the system through promulgation of the Insurance Corporation (Amendment) Act1990.The changes allowed private sector insurance companies to underwrite 50% of the insurance business emanating from the public sector and to place up to 50% of their reinsurance with any reinsure of their choice, at home or aboard, keeping the remaining for placement with the Sadharan Bima corporation.

Present position of insurance business in Bangladesh In Bangladesh, the Insurance business, after an 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 its 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 hitherto 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

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 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 business. Nevertheless, the country remains behind its neighbors in the sub-continent, especially India and Pakistan, both in terms of premium income and penetration. Only 1.5 percent of the population has life insurance coverage in Bangladesh, as compared to 4.5 percent in Pakistan and 7.5 percent in India. Further, per capita insurance premium in 2003 was found to be only 2.1 percent (Pakistan 2.9 percent and India 16.4 percent). On the upside, the ADB finds that growth in premiums was remarkable. Life insurance sector clocked a growth in premiums of 22 percent per year Country Population under Per capita Insurance between 2001 insurance premium and 2003, Bangladesh 1.5% 2.1 whereas general Pakistan 4.5% 2.9 India 7.5% 16.4 insurance showed an 11 percent per year growth in the same period.
Insurance sector in Bangladesh, Pakistan and India

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Problems of Insurance Business in Bangladesh

The problems of insurance sector can be classified into three sections Problems of Insurer Problems of the insured Social problems related with insurance

Problems of Insurer Selection of target group Selection of target group is a major problem for the insurers. Most of the time they try to attract the market from urban area. But there is a big market in the rural area .Targeting and focusing on the dimensional market can bring success for the insurers. Lacking of planning The insurer also suffers from lacking of planning. Determining the right option for the right customer and implementing market oriented marketing strategy includes in this type of problem. Lacking of logistic support from local administration The local administration sometimes fails to understand the importance of the insurance policy. So they remain reluctant to cooperate with the insurer .Whether the insurer is from the Government Company or private company. Delay in claim settlement 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.

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Lack of qualified agents Usually insurance agents propose insurance policy to the mass people and pursued them to buy it. The agents therefore ,must have insurance knowledge .They need to be familiar with insurance functions and must know the art of convincing .The convincing art is the key element to allure people in a positive way .But 80% of the respondents believe that the insurance agents are not capable enough to motivate then potential customers. Unskilled insurance officers Another widely recognized problem of insurance business in Bangladesh is the incompetent officers. There is an acute shortage of qualified personnel in the public insurance corporations. Most of the top level officers in Shadharon bima corporation (SBC) were in deputation. The same scenario has also been prevailing in Jibon bima corporation(JBC)There are few full time top level officers in both organizations. Many top level position are being held by bureaucrats who had hardly any knowledge about insurance.

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 jobholders is not properly appraised. Fabricated information provided by the agent A large number of agents act for different insurance companies in the remote areas of the country. The agents usually perform on a commission basis. The commission depends on the number of clients they can secure. Therefore, a common belief is that the agents always have the intention to increase their commission and sometimes furnish favorable information to sell a policy. But this popular belief is not found in reality at the extreme rate. Limited operational area Another clear problem of insurance business is that insurance companies operate only in big cities for their operational benefits. There was no single negative answer about this question. Majority of the companies has their agencies in Dhaka, Chittagong and in other few big cities.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Lack of training 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.

Corruption The real scenario of every sector in our country-private or public-is the extreme level of corruption .Insures are also greatly involved with this common practice .JBC and SBC are attacked by severe corruption .As a result , performance of these two corporation is degrading gradually and they are losing market to private insurers. Strict payment system The policy holders pay premiums on installment basis predetermined by the insurance companies .The companies follow a rigid system of installment adopt at the beginning of the business. But , sometimes the poor policyholders cant consistently comply with the predetermined system for paying premiums on their policies .The premium rate appears higher to them and therefore ,the policyholders face difficulty to continue their premiums that results in discontinuation of policies and potential insured are discouraged to buy policy . Higher cost of business The required cost of business is very high in Bangladesh. The license fee ,application fee is very high comparatively other countries of the subcontinent. Licensing difficulty 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.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Problems of insured:

Lack Of Interest About Insurance

A major striking problem of insurance business in Bangladesh is a lack of interest of people about insurance. 40% respondents opined that they have no intention of buying insurance policy. The rest of the respondents (60%) had the opinion that they are not completely noninsurance minded, rather they are unaware about the utility of insurance. People can be made eager to buy insurance policy through motivational mechanism. They emphasized that insurance provides certainty of payment against the uncertainty of loss. But this fundamental services of insurance is clear to the mass people . People are unaware about the pre-loss utility of insurance. They usually buy insurance policy due to agents influence. Earlier researches also supported this finding. Ahmed (1977) found that for all professions, the bulk of insurance (about 75%) was bought due to agents persuasion and remaining 25% of the policies were bought at the initiative of the policyholders themselves. Another researcher revealed that about 22% people are absolutely unaware of life insurance business irrespective of variation in education, age and occupation (Khalily, 1978, P.27).

Lack Of Confidence Lack of faith upon insurers is one of the fundamental reasons for which insurance business cant occupy a strong position in Bangladesh. Out of the total sample, 60% opined that insurance in Bangladesh couldnt achieve the fullest faith of people. At one side insurance 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 (Rahman, 2000, P. 152). Majority of the insurance concerns an almost all the non-policy holders confessed this very frankly and counted it as a burning constraint behind the progression of insurance business in our country. This feeling of distrust is very intense in the case of life insurance. Because life insurance contract is usually made for a longer period of time. The non-policy holders argued that the motive of insurance company is to be millionaire over Night. Non-settlement of claims It is a complementary problem of the preceding one. Remarkable, policyholders are suspicious about claim settlement at the maturity of their policies. This refers the insured has little faith on Insurers. A survey of 170 shows that about 47% insured people did not want to believe that

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 their claims would be settled in future. However, non-policy holders opined that insurers cannot give a confidence that claims will be met in due time. Prevailing law and order situation further heightens this problem. Insufficient return on policy Adaption of insurance policy is basically a business entity. Though insurers give certainty of indemnification at the uncertainty of loss, profit earning is their private motive. A high rate of return paid to the policyholders reduces the volume of policy and vise-versa. The private company always want to maximize their profit by giving the insured person minimum return. Insurance also provide a low rate of return compared to other moods of saving and investment. These activities arise concern on policyholders mind.

Inability to continue premium Another severe problem of insurance is inability to continue premium. Sometimes policy holders cant pay the premium due to their personal and other problems. For this problem insurance business cant expand successfully.

Insufficient Investment Opportunity Insurance is a financial institution. It collects premium from the insured against the protection of risks. This aggregate premium is not kept idle rather is Invested in various productive channels to generate income. Profit earned by the insurers on their investment influences rate of dividend, bonus declared to policyholders and the financial soundness of the business. But 40% insurers opined that they dont have attractive channels of investment. They said that a huge fund is in their hands that cant be invested to earn adequate return. Latest estimation reveals that the amount of life fund (reserve) of life insurance companies stood up to Tk.2700 cores. But this fund cant be invested in the private sector. Present Insurance requires that 30% of the life fund is to be invested in Government securities and the remaining 70% is to be invested in shares and debentures of listed companies, or in the form of fixed deposit in NCBs. All these further channels of investment provide a very low rate of return. Earnings from such investment have further declined since the government has cut interest rate on government securities and on fixed deposit schemes. Thus, life insurers are at a great problem with huge amount of life fund in their hands. Lapse ratio is high

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Very often policy holders take policy without taking proper knowledge about insurance. That is why policy holders cant continue their premium and finally the policy becomes lapsed. Due to this problem insurance business cant grow properly. Over selling Sometimes insurers provide false information about insurance to the insured person. By taking this false information insured persons take policy without considering any things. The consequences of this facts turn to stop the policy.

Under selling This is one of the major problems of insurance. Under selling is a problem by which insurers provide less facility than ones ability. As a result the interest of continuing the policy is being reduced. For this reason the progress of insurance business is going seemingly. Deceived by insurer The insurance business is mainly developed on the basis of utmost good faith. When anyone breaks this principle than it is difficult to continue this business. Most often the policyholders are deceived by the insurer for false information and this one of the major problems of insurance.

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 dont 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.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 Centralization Most of the insurance companies in our country are located in urban areas and there are few branches in rural areas. They think that they might have better scope for performing their business as the economic condition of the urban is better than the rural areas. They dont 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. 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.

Anti-religious Some people also consider insurance as anti-religious activity due to fundamentalism religious concept. Life insurance is still considered contra-religion among a large section of the population(Rahman,2000,p153). The devotees view that Allah is only protector. He only can save and no one else. Therefore, according to them, taking insurance policy as a safeguard of risks is contrary to their religious values. However, the emergence of some Islamic insurance companies has changed this perception to some extent.

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. Backwardness of mentality In spite of the world wide acceptance of insurance, it has not been accepted as a satisfactory profession to the people of Bangladesh. In many cases the insurance officers and agents are disregarded in the society. However, this view is changing gradually.

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Economic Problems

Poor economic conditions Bangladesh is one of the poorest countries in the world and most of the people in this country live under extreme poverty level. All of these people fight hard to earn their livelihood and are marginal in relation to the expenditure with the income. It is quite impossible for them to save some money for future need. Therefore they are quite unable to give the amount to the insurer which is called as premium and regarded as safety or precautionary measures against any accident. The number of people who can bear the premium to the insurance company is very few in regard to those mentioned above. Therefore the overall poor economic condition is creating obstacle to flourish the insurance business in Bangladesh.

Poor financial position of the insurance companies Most of the insurance companies of our country are facing financial problems. Recently government is trying to take initiative to close some of the insurance companies because they are not maintaining the minimum standards. They are investing their money in poor securities and business which is vulnerable regarding getting back the money with profit. As a result most of the insurance companies are suffering from loss years after years and for poor financial condition the insurance companies are also unable to expand their branch which is a barrier for the growth of insurance business in Bangladesh. Low per capita income Poor economic condition is considered to be the main reason for poor life insurance penetration in Bangladesh. The country has a very low per capita income and over 50% of our total population lives below the poverty line. Inability to save or negligible savings by a vast majority of population kept them away from the horizon of life insurance.

Inflation Inflation can adversely influence insurance in many ways and reduce loss reduction incentive. Due to inflation, money losses its purchasing power over time. Therefore, in a country like Bangladesh where rate of insurance tends increase continuously, insurance can not grow in

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 rapid way since its deals with future expectations. Inflation also leads to lapses, surrender and discontinuation of policies. Lapse and discontinuation of policies adversely affect the potential policyholders. Low rate of industrialization Bangladesh is predominately an agricultural country. Out of the total population of Bangladesh, still 85% are dependent on agricultural occupations. Per capita income is very low that causes low savings and low investment. As a result, the rate of industrialization is very significant. But growth of fire and marine insurance is largely linked with the growth of industrial sector. The fire insurance has achieved wide acceptance only due to industrial revolution occurred in England in 1750 to 1850. Since Bangladesh is not an industrialized country, fire and marine insurance can not grow in a desired way.

Government problem:

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.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 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.

Inconsistent rules for public and private company In the present world, private sector performing as a key economic player. In Bangladesh the operation of private insurance is allowed in 1984 by the government. From this time, private sector is contributing much on insurance business. A survey shows that over the last few years, private insurer is performing better than public sector corporations. However, the rules of insurance business in private sector is not congenial for private owners. The Sadharan Bima and the Jiban Bima Corporation have a captive market in the public sector and dont try to tap the private sector business. These two public corporations are also allowed to undertake reinsurance business (section 12, Insurance corporation Act 1973).This discrimination greatly damage the insurance business in Bangladesh.

Licensing difficulty Licensing complexity is major impediment behind the commencement of new insurance companies. The insurer opined that the government does not evaluate their application documents with due consideration and unnecessary delay to approve. In many case the government gives registration to those applicant who have political relationship and maintain liaison. Thus heinous role of government not only encourage corruption but also hinders proper growth of insurance business.

High rate of government tax High rate of government tax has a lagging impact on insurance business. The new entrepreneur of insurance company always concerned about the high payment of government tax. Besides high rate Government tax is also increase the cost of insurance which discourage the insured person to undertake insurance policy as well as the insurer to conduct insurance business.

Inadequate evaluation of performance by the government

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 The performance of insurance company is not properly evaluated by the government. This ignorance also encourages corruption and slow down the speed of insurance business. The respondents opined that insurance companies are increasing like mashroom but cant bring the desired flourishment in the sector because of the ineffective role of the government.

Suggestions
Spread of insurance education Because of worldwide acceptance of increased role of insurance, it would be as a satisfactory profession toe the people of Bangladesh. Since major portion of people in Bangladesh are uneducated, they are unconscious about insurance. It is necessary for creating awareness in general people to lessoning about advantages and disadvantages of insurance.

Publicity and increase of awareness It's very important to vast publicity and increase of awareness to overcome the lack of interest, doubt, bad impression about the insurance business of the people of Bangladesh. In this purpose, Media can take an important part to help to consider the economical development of Bangladesh.

Formulation of effective principles Long term formulation of effective principles is badly needed to procedure the insurance business. It is not possible to forward insurance business if its not followed the proper formulation. At the necessity of needed insurance act can be reformed. Say for example, insurance act 1938, rules 1958 & Insurance Corporation Act 1973 have been changed. The new act has proposed named by Insurance Corporation Act 2012.

Uphold the interest of policy holder The success of insurance business depends on the trust of insured person. To be trustworthy, insurance companies should settle the claims as quickly as possible to create a healthy public image,

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Modernization of insurance business It is very essential to added new ideas & thinking for the development & to modernize the insurance business. By giving the opportunity of opening insurance policy , if its follows the famous policy of developed countries, then general people will show their more interest. According to the religious value of people Islamic insurance policy can be introduced in vast way.

Increased role of Government The government should monitor the functions of insurance companies, appraise their performance & seized the license of companies that they are engaged in corruption. In evaluating performance, it is an essential to consider the condition of reserve or life fund, premium on various policies, claims & outstanding claims, lapses & surrenders, profit & surplus, bonus, tax returns workers benefit etc. The government must take controlling responsibility in its own hands & must ensure proper application of law.

Training Officers Insurances companies lack skilled & qualified people. Therefore training must be given to concerned & employees to impart insurance know how to them & to enhance their efficiency. Adequate & effective efforts should be made by the insurance Academy to train up all levels of employee of insurance industry.

Introducing new insurance products Life insurers should adequately cover the health & disability insurance whereas, the general insurers should intensify their efforts towards non-traditional business such as crop insurance cattle insurance etc. The economy of Bangladesh is predominantly an agrarian one, with most people engaged in farming & fishing .The uncertainly of agriculture production due to crop failure caused by climate variations, drought, cyclone, flood & pets affects farmer income as well as government revenue. Furthermore, in the last few years commercialization has occurred in some sections of the agriculture sector. Increase in investment in the agriculture sector is creating a new opportunity for insurance industry. Variation agriculture insurance loans, livestock loans, fisheries loans & equipment loans are also increasing day by day.

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Expanding the operational location The benefits of insurance should not be concentrated only in the urban areas. For the sake of integrated & balanced development, companies should expand their operations in the rural areas.

Improving the quality of service 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 & SBC. Due to poor quality of services public corporations are loosing 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.

Training to the policy holders Companies should step up its training program. The Insurance Academy is used for training the officers & insurance personnel but it has so far neglected the training of policyholders for which claim submission become complex & problematic in resulting delays in claim settlement. Moreover the bureaucracy-ridden insurance academy has failed to convert it to a modern training institution of the 21st century for which results of such institute after long time of its establishment is yet to be up to the expectation.

Easy & transparent licensing procedure The government should eliminate the difficulty in licensing procedure & should not delay in the approval of new companies if all the requirements are fulfilled Itll help not only to increase volume of business but also solve the problems of unemployment.

Quick settlement of claims The policyholders are very much worried about the settlement of claims. Ordinary people also consider it as a prime constraint. Therefore, insurance companies should settle the claims as

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012 quickly as possible to create a healthy public image. For this purpose the claim settlement procedure can be simplified & the insurers can provide proper written guidelines of claim settlement of the policyholders.

Clear responsibility The responsibility & authority of the employees should be made clear. In many cases the private owners locks the information & necessary documents in their own hands. Instead of this practice, the concerned officers should be given adequate freedom to discharge their duties.

Special attention should be given to the industrial work force Since life insurance business is not popular among low income groups, the life insurers should pay special to industrial labor force, which ultimately will have greater mobility among rural people. It is worth mentioning that recently our government has asked the industrial entrepreneurs for insuring the workers against industrial accidents. Obviously the enforcement of this declaration will make life insurance business more successful.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012

Conclusion
Insurance is a key mechanism for handling risk .It is also a core component of financial infrastructure of a country .As people are exposed to new type of risks in everyday life , they increasingly feel the importance of insurance . 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. Now a day, 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 solutions of insurance business in Bangladesh. The progress of insurance business depends on the progress of economic condition . So if we can develop economic condition and overcome the problems, it will help a lot to flourish this business in our country.

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[PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH] April 10, 2012

Sources
Insurance principle and practice M.N. MISHRA & S.B MISHRA

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