We really enjoyed working on this report . At the time of completing different parts of the report like collecting information from different source and working with the group members and then compile different parts of the report and so on. This report is a required term paper of our “Banking & Insurance” course and our honorable course faculty, Mr. Md. Amdadul Hoque is the person who has guided us throughout preparing the report . We are thankful to him and we have tried to make this report as his instruction.
We would like to thank all mighty Allah for keeping everything on right track. Finally, we would like to thank our parents and friends without whose support it was impossible for us to complete the report.
OBJECT OF REPORT
This study addresses the findings of the prolem of insurance companies in public and private sectors in Bangladesh and to suggest policy measures for improving insurance services delivery process in Bangladesh. The following research questions were addressed: what are the ways of overcoming the problems of Insurance business in Bangladesh? Moreover, this writing will try to highlight the underlying causes behind the non-popularity of the insurance companies in Bangladesh.
We also highlights the prospects of insurance business in Bangladesh.
BACKGROUND OF THE INSURANCE BUSINESS IN BANGLADESH
In Indian subcontenent the insursance come at the period of British. During the tine of Pakistan period there was about 49 insurance company in the country. After independence of Bangladesh, insurance industry was nationalized. Subsequently through the enactment of Insurance Corporation Act VI, 1973, two corporations namely Sadharan Bima Corporation (SBC) for general insurance and, Jiban Bima Corporation for life insurance were established in Bangladesh.
SBC was acting as the sole insurer of general insurance till 1984. Between 1985 to 1988 first generation of private general insurance companies were emerged as Bangladesh Government allowed the private sector to conduct business in all areas of insurance for the first time in 1984. A total of 16 private general insurance companies were registered in that phase.
In 1996 another 8 private general insurance companies were registered. The third generation of private general insurance companies, which included 18 companies, came into operation between 1999 and 2001. The general insurance market in Bangladesh now consists of 43 private sector insurance companies and 1 state owned insurance company. Insurance Corporation (amendment) Act 1990 provides that 50% 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 50% 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.
INSURANCE COMPANIES IN BANGLADESH
There are two types of Insurance companies in Bangladesh
Genarel insurance companies in our country are as follow :
Agrani Insurance Co. Ltd. Asia Pacific General Insurance. East Land Insurance Co. Ltd. Global Insurance Ltd. Home Land Insurance Co. Ltd. Janata Insurance Co. Ltd. Loyeds Insurance Company ltd. Mercantile Insurance Company ltd. Paramount Insurance Company Limited. Pioneer Insurance Company Limited. Provati Insurance Co. Ltd. Pragati Insurance Limited. Phoenix Insurance Company Ltd. Peoples Insurance Co. Ltd. Northern Generla Insurance Co. Ltd. Meghna Insurance Company Limited . Karnaphuli Insurance Co. Ltd. Islami Commercial Ins. Co. Ltd. Green Delta Insurance Co. Ltd. Federal Insurance Company Limited. Eastern Insurance Co. Ltd. Desh General Insurance Co. Standard Insurance Limited. Sonar Bangla Insurance Ltd. Sadharan Bima Corporation ltd. Samata Insurance Company ltd. South Asia Insurance Co. Ltd. Takaful Islami Insurance Ltd.
Life Insurance companies in Bangladesh:
American Life Insurance Company. Delta Life Insurance Company Ltd. Federal Insurance Company Limited. Jiban Bima Corporation Popular Life Insurance Company Ltd. National Life Insurance Co. Ltd. Progati Life Insurance Limited Rupali Insurance Company Limited Sunflower Life Insurance Co. Ltd. Baira Life Insurance Co. Ltd. Fareast Islami Life Insurance Co. Ltd. Home Land Life Insurance Co. Ltd. Meghna Life Insurance Co. Ltd. Padma Life Insurance Co. Ltd. Prime Insurance Company Limited Progressive Life Insurance Company Ltd. Shandhani Life Insurance Co. Ltd.
PROBLEMS OF INSURANCE BUSINESS IN BANGLADESH
1.1) Lack of trustworthiness : Lack of trustworthiness is the most important barrier (71.9% respondents) in case of popularity of the insurance companies where as lengthy process in getting payment after any incident is in the second position with 62% response. It can be seen that both the stated variables are related in the sense that time killing behavior in payment after incidence is reducing the trust of the customers towards the insurance companies 1.2) Low income of the people : It was also found that the low income and purchasing power (43%) doesn’t permit the people of Bangladesh to go for an insurance policy. Practically we can easily relate the above mentioned factors. For example, in one hand the lower income of the people is creating barrier in buying insurance policy
1.3) Unattractive offerings: the insurance companies offer many types of policies but these are not attractive to the peoples for this reasons they did not take policies. They always make same types of offers this is also a reason of demotivation. 1.4) Lack of information about the insurance companies: the insurance companies are not delivering their information (regarding company and insurance policy) properly or evenly which is another problem (42.8%) in case of non-popularity of the insurance companies. 1.5) High service processing cost : The service cost of insurance business are very much higher than other business and this is also a reason of non popularity of insurance business.
1.6) Less convincing sales people: Surprisingly it was found that the sales people are doing well in convincing customers even though still 22% people believe that sales people are not that much convincing. 1.7) Lengthy process to get payment after incidents: The most important barrier in case of popularity of the insurance companies where as lengthy process in getting payment after any incident is in the second position with response. It can be seen that both the stated variables are related in the sense that time killing behavior in payment after incidence is reducing the trust of the customers towards the insurance companies.
PROSPECTS OF INSURANCE BUSINESS IN BANGLADESH
It is the general belief of common people that Insurance companies are not sincere in making payment and resorts many whimsical reasons for declining claims which are not taken care of while opening policy. Due to the negative attitude,the penetration rate in the industry is still very low (only 0.62% of GDP) even having immense prospects.
Overall solvency position of general Insurance companies was found moderate. On analysis, it was found that 15.38% companies have poor solvency position followed by 23.07% marginal, 42.30% above average and rest 19.23% have satisfactory solvency position. Solvency position is usually determined by a good number of indicators likeequity base, exceptional loss reserve, technical reserve, internal capital generation, underwriting leverage etc. The new Insurance ordinance re-fixed the minimum paid upcapital of TK. 400 million which will have to be met within a stipulated timeframe.None in the industry is at comfort zone regarding capital as per new law. A few 1st generation companies together with the listed third generation companies have paidup capital of TK. 150 million or more. However, couple of 1st generation companies enhanced their equity base through generating exceptional loss reserve.
CONCLUSION AND RECOMMENDATIONS
The demographic trends suggest that as private insurance companies (both local and multinational) have proliferated in Dhaka city, better educated and more affluent people have gravitated to these insurance companies for insurance services. These people/clients are likely to have better information about the quality of services provided by both public and private insurance companies and their inclination to select private insurance companies suggests, implicitly, that the quality of service is better at these private firms even though their (private insurance companies) service cost is somewhat higher. Moreover, many branch operation of private insurance companies help the people to make evaluation among them and making an insurance decision in favor of those which are trustworthy. But between the private local and foreign insurance company choice, clients are mostly considering foreign private insurance companies due to its trustworthiness, experience in operation and wide area coverage.
Less number of branches of the public insurance companies may be another prime reason of not being preferred by the local clients. By definition, it might be more authentic if the clients were inclined towards the public insurance companies from trustworthiness point of view, but as statistics suggests in favor of choosing foreign private insurance firms, probably we have to be satisfied by saying that it is in many respect guided by client’s psychology of getting better and prompt services. The incentive structure must also play a role in ensuring the quality services delivered by the public insurance companies. One solution is to tie part of the compensation of insurance personnel in public companies to services rendered and feedback received from clients. This, of course, is a complex issue and has implications for pay scale administration, since public bank staffs, as government servants, are paid according to certain pay structures.
While beyond the scope of this paper, authors feel that compensation flexibility is necessary to reward those who are dedicated to providing quality insurance services. If compensation adjustments can’t be incorporated, benefits-including promotion, transfer in more valued branches, study leave, performance bonus and the like-could be tied to performance evaluation mechanism.
There must be a formal procedure of evaluating the employees by the clients through some questionnaire type performance appraisal form. A suggestion, objection or recommendation book in the branch can be introduced where the clients can even complain or appreciate about a specific employee. Public awareness and the transparency of the high official may have a positive impact on that issue. Moreover, clients have rated reference by family and friends as another very important determinant in insurance provider choice. To enhance a positive reputation of the insurance company, they can follow the strategies stated below: –
Do a lot of personal selling of services to the clients and encourage existing customers to tell good about your services to the potential customers. Carefully choose personnel who interact with the customers .
Positive and societal marketing activities to build and project specifi company image to maximization of popularity.
Design facilities to achieve specific marketing or image objectives of the organization .
Establish formal system for controlling quality of insurance services to provide specific effort to encourage customers to tell others about your services.
From the political and social behavior of the people it can be said that demand for these services will be higher in near future. Even staying more with an insurance company is also dominated by many special services. Insurance companies, especially public one must think about more value added services.
01)Bangladesh Bureau of Statistics. 2004. “Report of Financial Service Providers in Bangladesh”.
02)Berri, Leonard L. (1980), “Service Marketing is Different
04)“Insurance Principiles And Practice” By M.N Mishra.