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making a assignment. He gave us his helpful hand to do this assignment. His class lecture & advice help us to prepare our assignment very much which was very fruitful to us. So we are grateful to him. We areIntake: 12th Section: 03 Department: BBA Name Tamjida Akhter Choyti Ryhanul Islam khan Anjuara Akhter Sonia Fakrul Islam ID 138 139 125 151 Signature
“Problem and prospect of insurance business in Bangladesh and ways of overcoming the problem.”
History Of Insurance
History of insurance refers to the development of a modern laws and market in insurance against risks. In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.
What is Insurance
Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'..
Concept of Insurance / How Insurance Works
The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.
Insurance in Bangladesh
Insurance is not a new business in Bangladesh. Almost a century back, during British rule in India, some insurance companies started transacting business, both life and general, in Bengal. Insurance business gained momentum in East Pakistan during 19471971, when 49 insurance companies transacted both life and general insurance schemes. These companies were of various origins British, Australian, Indian, West Pakistani and local. Ten insurance companies had their head offices in East Pakistan, 27 in West Pakistan, and the rest elsewhere in the world. These were mostly limited liability companies. Some of these companies were specialised 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 nationalised insurance industry in 1972 by the Bangladesh Insurance (Nationalisation) Order 1972. By virtue of this order, save and except postal life insurance and foreign life insurance companies, all 49 insurance companies and organisations transacting insurance business in the country were placed in the public sector under five corporations. These corporations were: the Jatiya Bima Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima Corporation, and Surma Jiban Bima Corporation. 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 Corporations were for general insurance and Rupsa and Surma for life insurance. The specialist life companies or the 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. 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.
The government guidelines for formation of an insurance company are:
(1) The intending sponsors must first submit an application in prescribed form to the Chief Controller of Insurance for prior permission. (2) After necessary scrutiny the Chief Controller shall forward the application with his recommendation to the Ministry of Commerce. (3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet Committee constituted for this purpose. (4) The decision of the Committee, if affirmative, should be sent back to the Ministry of Commerce which in turn should send it back to the Chief Controller of Insurance for communicating the same to the sponsors. (5) The sponsors would then be required to apply in a prescribed form to the Registrar of Joint Stock Companies to get registration as a public liability company under the Companies Act. Memorandum and Articles of Association duly approved by the Controller of Insurance would have to be submitted with the application. (6) Once the registration process was completed the sponsors would have to obtain permission of the securities and exchange commission to issue share capital. (7) Reinsurance arrangements would have to be made at this stage. (8) After all the above requirements were fulfilled the license to commence business under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance. Application can only be made subject to government announcements in this regard.
Problem and prospect of insurance business in Bangladesh
1. Weak Economy: The development of insurance business dependable to the
development of economy of deferent sectors. But in Bangladesh there are many lacking to the development of economy. Our export income in limited and 78% income come from cloths and nightwear sector. So the types of economy are not suitable for insurance business.
2. Lack of capital: The broadness of insurance business is helpful to survey. It needs
to establish many branches in different country. It requires lots of capital. But lack of capital in our country creates the problem of insurance business.
3. Lower Rate Of Savings: In our country the average income of our people is very
low. Maximum people are live under poverty line. In 2004-2005 our internal saving was only 20.16% of total GDP. Life insurance and other insurance are mostly dependable on the saving of the people. So it creates the Problems.
4. Weakness in Industrial Sector: BANGLADESH is an agricultural country; the
industrial sector of their country is poor. In our country 9.71% are industrial labor from the total labor force. In 2004-2005 industrial productivity was only 28.88% of the total national productivity. This focus the weakness of our industrial sector. So these types of weakness are one of the main barriers of insurance business.
5. Not Knowing What Customers Expect: Based on interviews, the authors found
that executives’ perceptions of superior quality service are largely congruent with customers’ expectations. Customers’ expectations versus management perceptions are the result of the lack of a marketing research orientation, inadequate upward communication and too many layers of Management.
6. The Wrong Service-Quality Standards: arises when there is a discrepancy between
what managers perceive that customers expect and the actual standards that they (the managers) set for service delivery. This gap may occur when management is aware of customers’ expectations but may not be willing or able to put systems in place that meet or exceed those expectations.
7. The Service-Performance Gap: Organizational policies and standards for service
levels may be in place, but is front line staff following them? A very common gap in the service industry is the difference between organizational service specifications and actual levels of service delivery. Service specifications versus
service delivery is the result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.
8. When Promises Do Not Match Delivery: Customers perceive that organizations
are delivering low-quality service when a gap appears between promised levels of service and the service that is actually delivered. This gap is created when advertising, personal selling or public relations Over-promise or misrepresent service levels. Service delivery versus external communication may occur as a result of inadequate horizontal communications and propensity to over-promise.
9. The discrepancy between customer expectations and their perceptions of the
service delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.
10. The discrepancy between customer expectations and employees’ perceptions: as a
result of the differences in the under standing of customer expectations by frontline service providers.
11. The discrepancy between employee’s perceptions and management perceptions: as
a result of the differences in the under standing of customer expectations between managers and service providers
Ways of overcoming the problem.
In our country the problems that exist in insurance business can not be overcome over a right .It needs long term planning. Besides making the people aware the insurance businessman should come forward with govt. to make this business famous. Coming from the existing problems following steps should be taken to make this business famous. 1. Spread of insurance education: To make the insurance business people should be made aware about the helpless & necessity of insurance. For this purpose effective steps must be taken to speared of insurance education. 2. 2. Publicity & increase of awareness: Mass publicity activities are very essential to overcome from unwillingness wrong idea, doubt & unbelief of the people this country. The people media can provide an effective help regarding country interest. 3. Increase of training facilities: To continue the insurance business effective standard training facilities must be arranged for the manager & workers who are employed in this business. 4. Formulation of effective Principles: Long term formulation of effective principles is compulsory to continue the insurance business successfully. 5. Uphold the interest of policy holder: Success of this type of business is depended on the trust of insured persons. To gain the trust insurance companies should come forward to compensate the real injured as soon as possible. 6. Importance to the economic development: Insurance business is depend on the development of the different sector of economic .So insurance business can never be developed by retaining the weak situation of the sectors including industry commerce transportation. 7. Modernization of insurance Business: In this country for developing insurance business modernization of insurance business and necessity new ideas must be added in this sector.
1. Bangladesh Bureau of Statistics. 2004. “Report of Financial Service Providers in Bangladesh”. 2. Berri, Leonard L. (1980), “Service Marketing is Different,” Business, 30 (May-June), 24-29 3. Booms, Bernard H. and Marry J. Bitner and Jody
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