Insurance Business Sector in Bangladesh1
Insurance Business Sector in Bangladesh1
Insurance:
Insurance is a co-operative device to spread the loss caused by a particular risk over a number of
persons, who are exposed to it and who agree to insure themselves against the risk.
Insurance is not a new idea or proposition to the people of Bangladesh. About half a century back,
during the British regime in the then India, some insurance companies started insurance business,
particularly life, in this part of the world. Since 1947 until 1971 insurance business gained
momentum in this part of what was then known as East Pakistan. There were about 49 companies
transacting both life and general insurance business. These companies were operating under a free
competitive economy.
After the emergence of the Peoples Republic of Bangladesh in 1971, the government, in order to
make available the fruit of liberation to the general mass, nationalized the insurance industry along
with the banks in 1972 by Presidential Order No. 95. At the same time, five insurance corporations
were initially established by the Government, viz, Jatiya Bima Corporation (National Insurance
Corporation), Teesta Bima Corporation (Teesta Insurance Corporation), Karnaphuli Bima
Corporation (Karnaphuli Insurance Corporation), Rupsa Jiban Bima Corporation (Rupsa Life
Insurance Corporation), Surma Jiban Bima Corporation (Surma Life Insurance Corporation).
On 14th May, 1973 the Insurance Corporation Act VI, 1973 was enacted under which the previous
five corporations were abolished and the following two corporations emerged:
Sadharan Bima Corporation for General Insurance and
Jiban Bima Corporation for Life Insurance in Bangladesh.
Sadharon Bima Corporation for general insurance deals with any kind of non-life insurances. Such
as: fire insurance, marine insurance, motor insurance, cyclone insurance, flood insurance,
engineering insurance etc.
On the other hand, Jiban Bima Corporation deals with the insurance of human life.
Sadharan Bima Corporation is only state-owned General Insurance Corporation operating under the
direct control and supervision of the Ministry of Finance, Government of the Peoples Republic of
Bangladesh. It emerged on 14th May, 1973 under the Insurance Corporation Act (Act No. VI) of
1973 to deal with all classes of general insurance & re-insurance business emanating in
Bangladesh.
Thereafter, SBC was acting as the sole insurer of general Insurance till 1984. In the year 1984
Bangladesh Government allowed insurance Companies in the private sector and to that effect
promulgated the insurance Corporations (Amendment) Ordinance 1984.
SBC is entitled to 50% of public sector business in Bangladesh. Insurance Corporation
(Amendment) Act 1990 provides that fifty percent of all insurance business relating to any public
property or to any risk or liability appertaining to any public property shall be placed with the SBC
and the remaining fifty percent of such business may be placed with this Corporation or with any
other insurers in Bangladesh. But for practical reason and in agreement with the Insurance
Association of Bangladesh SBC underwrites all the public sector business and 50% of that business
is distributed among the existing 43 private general insurance companies equally under National
Co-insurance Scheme.
In respect of reinsurance, the same act provides that fifty percent of a companys reinsurance
business must be placed with the SBC and remaining fifty percent may be reinsured either with this
Corporation or with any insurer in Bangladesh or abroad. Right now there are 43 (forty three)
companies are listed under SBC as general insurance company.
Missions:
To be the premier organization in Bangladesh for all insurance and reinsurance business and
to provide quality service at affordable cost
To be the Insurer of the first choice in Bangladesh by offering top class security,
comprehensive, efficient services and professional conduct of business
Maintain SBCs leading position in the insurance market of Bangladesh.
To become an insurance organization Company of international standard by attaining the
highest confidence and trust of all concerned from home & abroad through improved
services, dedication, customer care and efficiency.
To place innovation technology and knowledge at the heart of the organizations growth
Goals Venture into other areas Bangladesh and abroad on the strength of SBCs core
competency.
Enter into and expand new insurance product and services to meet the changing needs of the
clients.
Fulfillment of SBCs social commitments towards the public as a state owned enterprise.
To achieve business targets.
To increase share of private sector business through marketing efforts.
To build, maintain and improve the commercial image of the organization and gain
recognition as a competent and professional insurer as well as re-insurer.
To overhaul and simplify administration system & procedure.
To attain full computerization and to utilize IT to its full potential.
To enhance the skills and flexibility of the employees through continuous training.
To ensure better return from SBCs investment.
To improve maintenance of existing real estate and expansion of it.
(in crore) (in crore) (in crore) (in crore) (in crore)
12.33
14.54
17.72
14.98
22.16
181.37
3.66
40.99
67.43
5.34
67.87
80.36
16.61
192.30
3.84
54.47
78.61
9.81
72.45
88.53
6.12
212.44
4.68
66.08
79.10
5.41
73.11
87.73
7.29
Investment Income:
Above bar chart shows us a clear view of investment income of SBC. From 2004 to 2009
investment income of SBC has increased but in a moderate rate. In the year of 2007 and 2008
investment income increased at a good rate. SBC should take steps to increase its investment
income.
Social security
Individual policy:
There is several type of life policy that JBC serves its individual Customer. It depend on the basis
of
Duration of policy
Method of premium payment
JBCs most of the individual customers are service holder who has a steady income. Company also
prefer foreign employee, businessman, Housewife if they have the ability to give premium
continuously.
Group Policy:
JBC provides group policy mainly to the companys worker or Employee. Company provides
service to its employee by giving the service of Life Insurance.
Benefits given by company to its policyholder
There is a several type of policy that company served to its policy holder like extra care. These are:
Disability of protection Rider
Accident Indemnity Certificate
Accident Death Benefit
Consideration of proposal:
After this company consider this proposal. For this reason they collect some information to justify
the probability of risk of the proposal.
Proof of Age:
To consider the proposal company need to justify the age of the person. For this reason they collect
the birth certificate and other related documents of propose.
Selection of proposal:
In this step company select the proposal by justifying all information like medical certificate, birth
certificate, agents reports etc.
Acceptance of offer:
In this step company accept the offer and announce the amount of premium to propose.
Insurance of policy:
In this step company collect money from the person and give him the policy and the cover note.
Risk Management:
Their risk management is a process of identifying, measuring, analyzing, monitoring and
controlling risks. In life insurance business the factors which may affect the risk are usually those
factors which are affecting the mortality; they are also called factors affecting longevity of a person.
These factors are Age
Physical condition
Personal History 1) Health record, 2) Past habit, 3) Previous occupation, 4) Insurance
history
Family History
Occupation
Residence
Present habits
Morals
Race and Nationality
Sex
Economic Status
After collect the risks the company confirm to the following principles in their risk management
practices and then accept the offer of proposal and announce the amount of premium to propose.
To define risk profile on the basis of their risk tolerance.
To determine risks and analyze them from the beginning with the help of their risk strategy.
To comply with regulatory requirement and guidelines for risk management.
Settlement of Claim:
Image and goodwill of the corporation largely depend on early settlement of claims. JBC fulfill the
claim in this situation.
Payment of claim after certain period that means corporation fulfills the claim if the policy is
matured. It may be 10, 15, or 20 years.
Payment of claim after the death of insured: Company pay insured money after the death of the
policy holder according to the contract of the policy here need
Customer Service:
The reputation and progress off the corporation largely depends on prompt and efficient services
rendered to the policyholders. Keeping this in view they have further strengthened their servicing
and computer departments for rendering quick services to policyholders and marketing personnels.
In order to give easy access to their products and to give best possible services to the customers, the
company offers personalized services by recruiting highly experienced and customer focused
professionals.
Bonded by common goals, each of the employees will truly proud to be a member of JBC.
Information policy:
Jiban Bima corporation informs regulatory authorities, and the public in an open, transparent and
timely manner relating to its operational performance and progress made towards achievement of
corporate goals. Equal treatment to all shareholders is the guiding principle behind their
partnership-oriented approach. They practice and nurture an open dialogue with their shareholders
based on mutual respect and trust. The most important tools for the outflow of information from the
company are annual reports, statements, media release, disclosures to regulatory authorities, annual
general meetings, extra ordinary general meetings etc. Besides, companies website:
www.jbc.gov.bd is rich with corporate information. This promotes an understanding of their
objectives and ensures a high degree of awareness about their company.
Contribution in Economy:
Insurance performs multi various economic functions. It helps economic progress. Class-wise
specific contribution in economy is discussed below:
Marine Insurance:
Marine Insurance primarily provides financial protection to the ship owners, cargo owners or the
freight owners in respect of any loss or damage to their interests caused by maritime perils insured
against. Marine insurance is a positive aid to various business enterprises, importers, exporters and
persons engaged in international trade and commerce.
Fire Insurance:
Like marine, the main contribution of fire insurance is to provide financial protection to the insured
in respect to loss or damage sustained by him to his properly caused by fire. Business efficiency is
increased with fire insurance.
Life Insurance:
Life insurance provides an income or capital sum to the dependants of the deceased. Life insurance
encourage saving. It provides profitable investment. When the owner of a business is free from
botheration of losses, he will certainly devote much time to the business. The carefree owner can
work better for the maximization of the profit. Thus, the life insurance meets all the requirements of
the economic growth of a country. National development depends largely on borrowed capital and
insurance companies by means of huge investment provides and facilities supply of this huge
capital.
Contribution in Society:
Insurance provides security and safety. The security wish is the prime motivating factor. So,
insurance affords peace of mind insurance protects mortgaged property. At the death of the owner
of the mortgaged property, the property is taken over by the lender of money and the family will be
deprived of the uses of the property. The insurance will provide adequate amount to the dependents
at the early death of the property-owner to pay off the unpaid loans. Life insurance can be
effectively utilized for providing childrens marriage and educational expenses. So, Life insurance
provides loss of human wealth. Through prevention of economic losses, insurance protects the
society against degradation. Insurance eliminates dependency. At the death of the husband or father,
the destruction of family needs no elaboration. Similarly, at destruction of property and goods, the
family would suffer a lot. The economic independence of the family is reduced or, sometimes, lost
totally. What can be more pitiable condition than this that the wife and children are looking others
more benevolent than the husband and father, in absence of protection against such dependency.
The insurance is here to assist them and provides adequate amount at the time of sufferings.
Conclusion
Finally we can say that, Sadharan Bima Corporation helps the insurances to minimize their
different business risk. After all, in modern insurance system, Sadharan Bima Corporation, by
increasing the number of policy holders, is not only reducing financial risk of policy holders, but
also by reducing their risk, it is earning more profit. Insurance is a recent idea for Bangladesh and
we have many problems in our economy like lack of capital, unfavorable commercial position, lack
of savings etc. So Sadharan Bima Corporation should create more publicity among the insurances,
give training facilities to the employees, and more efficient management system. If government
also gives more attention to Sadharan Bima Corporation, thenit will contribute to our economy.