Executive Summary 

 
The Bangladeshi insurance industry is highly competitive. Key factors affecting the performance
of the industry during the review period included fierce competition in the non-life segment, the
rising market shares of private insurance companies, and the increasing level of risk being
retained by insurers. The Bangladeshi insurance industry increased at a CAGR of 16.0% during
the review period (2008–2012), supported primarily by the life insurance segment. The report
provides in-depth industry analysis, information and insights of the insurance industry in
Bangladesh, including:   

 The Bangladeshi insurance industry's growth prospects by insurance segments

and categories. 

 The competitive landscape in the Bangladeshi insurance industry. 

 The current trends and drivers of the Bangladeshi insurance industry. 
 The challenges facing the Bangladeshi insurance industry. 
 An overview of the regulatory framework of the Bangladeshi insurance industry. 
 A benchmarking section on the Bangladeshi insurance industry in comparison to
countries such as Sri Lanka, Bhutan, Nepal and Pakistan. 

 
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 Table of Content 

S. N  Content  Page No 

1  Introduction  1 
2  Industry Overview  2 
3  Insurance Development & Regulatory Authority  4 
4  List of Insurance Companies in Bangladesh  5 
5  Types of Insurance Business in Bangladesh  7 
6  Current pattern of Insurance in Bangladesh  8 
7  Role of private insurance companies in the economic 9 
development of Bangladesh. 
8  Risk management in the Insurance Industry  10 
9  Reasons behind the non-popularity as a service  11 
10  Analysis of the reasons behind the non-popularity of 11 
Insurance 
11  Insurance sector in Bangladesh on the way to sustainable 12 
growth. 
12  Types of Problems faced in the Insurance industry.  14 
13  Recommendations.  15 
14  Conclusion.  17 
15  Reference  18 

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Introduction:
This is the law of nature that people have to live and play with hazards and to some extent
insurance policy can free people from those frustrations. Even if this is true, people of
Bangladesh still don’t prefer to insure themselves. One may think that the people of Bangladesh
are risk lover; on the other hand other may contradict by saying that their low purchasing power
doesn’t permit them to avail insurance policy. This paper will highlight those issues relating to
non-popularity of insurance companies in Bangladesh.

The insurance services can be described as a product in the form of a written legal contract (the
insurance document) plus a bundle of services associated with it. Services are activities and/or
benefits that one party offers to the other and that services are necessarily intangible and do not
result in the ownership of anything. Insurance service is different from other services, as it is
complex and future contingent service involves substantial legal characteristics. The insurance
companies have to find ways to make their services more tangible. To increase the productivity
of providers who are inseparable from their products, to standardize the quality in the face of
variability, and to improve the demand situation and supply capacities in the face of service
perishability. Informing, educating, motivating, persuading, advising and other services prior to,
at the time of and after the issuance of the insurance document make the purchase of insurance
dissimilar from purchasing other products and from even other services.

The insurance companies of our country perform a wide range of activities such as service
designing, preparing contract and policy, marketing and selling, underwriting, rating, reinsurance
and other services and claim settlement. The insurance companies of Bangladesh practice
marketing to a different extent. Their level and depth of marketing orientation varies. A broad
distinction can easily be made between the public and private sector insurance companies. This
is because of the fact that the government owned two insurance companies i.e. the
ShadharanBima Corporation and JibanBimaCorporation get all the government insurance
business by virtue of the Insurance Act of Bangladesh.

According to the rule, all insurance in the government sector is done through these two
nationalized insurance companies, so they enjoy a monopoly. None of the private insurance
companies is allowed to offer insurance services to government organizations. Furthermore,
these two corporations are also allowed to underwrite private businesses and people feel
confident about their reliability. So they have not yet felt any strong need to practice marketing
properly. It seems that they, for the time being at least, are quite contended with their existing
market share. Although in the present situation they do not need to practice marketing
aggressively, however, if they are to retain their existing private sector business and to grow at a
pace as the overall market expands, they need to become fully market oriented. Both the public
and private sector insurance companies in Bangladesh are not practically marketing oriented.
They don’t follow the marketing concepts. Moreover, these institutions are not still popular to
the people of the country as we think they are still unable to minimize problems in providing
services to the customers. Proper understanding and minimizing those service-marketing Gaps
will have certainly a positive growth in the insurance industry of Bangladesh.

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Industry Overview:

The insurance industry in the country was nationalized in 1972 and two government
corporations- SadharanBima Corporation and JibanBima Corporation were set up for general and
life insurance respectively. All existing companies except American Life Insurance Company
(ALICO) were merged into these two corporations. The nationalized state of Bangladesh
insurance market continued until 1985 when the government had change in policy and allowed
setting up of insurance company by private sector. Over the year, a good number of life and
general insurance were in phases. Currently, in addition to the two government corporations, 17
life insurance and 43 general insurance companies are operating in the country.
Insurance industry in Bangladesh passed through a century long history of evolution, yet
struggling to achieve its mature stage. After liberation, as part of the nationalization process, the
industry was nationalized vide Presidential Order. Subsequently, in the process of
denationalization, private sector companies were allowed to operate in the industry side by side
with two state-owned corporations. Consequent to that, a good number of insurance companies
emerged in a small economy thus resulted in tough and unhealthy competition. Underhand
transaction on commission appeared as “open secret” in general insurance business. The
Controller of Insurance, even being the regulatory authority, failed to unveil sophisticated control
mechanism to bring the industry into a good shape. At certain stage, the agency commission
system was abolished to stop underhand dealing between the agent and the policy buyer. The
move was, however, failed to eradicate the unethical practices and thus resulted to the
reintroduction of commission system in the sector. The life insurance companies also follow
aggressive marketing strategy for business procurement, many of which are ended with high
policy lapse. 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. In order to make the sector
vibrant and operationally sound, the Government has taken a number of steps and some are in
process with the main objective of taming this wild horse.
The insurance industry is now at the final stage of transition. It has been decided to replace the
age old insurance laws with Insurance Regulatory Authority (IRA) Ordinance 2008 and
Insurance Ordinance (IO) 2008. The Department of Insurance will be abolished by the
fivemember Insurance Regulatory Authority headed by the Chairman not below the rank of
Government Secretary. For further enhancing the solvency position, the paid up capital for
general and life insurance companies have been raised to TK. 400 million and TK. 300 million
respectively. The number of directors in the company has also been reduced to 15 from 20 with
the participation from the policyholder directors. The new law also introduced mandatory
solvency margin for the insurance companies. Besides, the insurance companies will be required
to ensure international accounting standard, separate Islamic insurance from conventional ones
and put a limit on commission expenses. Moreover, the life insurance companies will be required
to make the valuation of liabilities on yearly basis to reveal the real strength of the company. The
law also allowed foreign investment in general insurance sector. With the promulgation of the
ordinances, the insurance industry will be under the Ministry of Finance from the Ministry of
Commerce.

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Insurance industry, as said earlier, at the final stage of its transition. Government has taken
several steps for revitalizing the sector to make it more vibrant and operationally sound.
However, amendments and initiatives can’t make an overnight change in the sector. As we know
the Department of Insurance is going to be replaced by an Independent Regulatory Authority yet
the same will not be fruitful until the authority is equipped with technocrats at the policy level
and adequate human resources at the operation level to take control over the sector. The new
regulatory body should discover some mechanism to eradicate underhand commission to reduce
the high procurement cost in general insurance business. Professionalism at every level of
management is very crucial for overall development in the sector. For efficient and prompt
decision making, management should be given sufficient delegation of power. The board should
only involve in strategic and policy aspects of the company without looking into the day to day
operation. All the insurance companies should have a sound HR policy that will attract the
qualified people to choose the profession as a ‘career’ not a mere ‘job’. HR development
program should be a part and parcel of regular business operation for the enhancement of skills
and development of professionalism. A good number of companies are still struggling for their
survival, thus huge cost of IT infrastructure is an additional burden for them. However,
awareness should be built for effective use of IT infrastructure in MIS that ultimately will bring
positive results in future.

Last but not the least; it is not the responsibility of the regulatory body alone to make
revolutionary change, rather the respective board, the management team and above all the
insured should come forward to bring the sector to the global standard. The sooner it
happens; the better is for the stakeholders in particular and the country in general.

5
Insurance Development & Regulatory Authority Bangladesh(IDRA)
Parliament on 03 March 2010 passed two insurance laws in a bid to further strengthen the
regulatory framework and make the industry operationally vibrant. The new laws, came in to
effect on 18 March 2010, are Insurance Act 2010 and IDRA 2010.
There are 77 insurance companies operating in the country and they need to be regulated under
comprehensive laws and guidelines and supervised by a strong regulatory authority. The
Insurance Act 2010 said the sector needs to be managed properly and he strengthened by
reducing business risks, and local and international insurance laws need to be harmonized
considering the socio-economic aspect of the country, and protect the interest of policy holders
and other beneficiaries.
IDRA profile
M. Shefaqueahmed, actuarychairman
Md. Quddus khan - member
Sultan-ul-abedinemolla - member
Zuberahmed khan - member
Md. Murshidalam, member

Vision:

To make the insurance industry the premier financial service provider in the country and beyond
focusing an efficient corporate sector and capital market securing ever evolving aspiration of
society penetrating deep into all segments for high economic growth.

Mission:

Our mission is to protect the interest of the policy holders and other stakeholders under insurance
policy, supervise and regulate the insurance industry effectively, ensure orderly and systematic
growth of the insurance industry and for matters connected there with or incidental thereto.

Value:

Ethical norms, unbiased treatment, integrity, blind review, high standard, continuous
improvement.

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 List of Insurance Companies in Bangladesh

List of non-life insurance companies

1. Agrani Insurance Company Ltd.

2. Asia Insurance Ltd.
3. Asia Pacific Gen Insurance Co. Ltd.
4. Bangladesh Co-operatives Ins. Ltd.
5. Bangladesh General Insurance Co. Ltd.
6. Bangladesh National Insurance Co.Ltd.
7. Central Insurance Company Ltd.
8. City Gen. Insurance Company Ltd.
9. Continental Insurance Ltd.
10. Crystal Insurance Company Ltd.
11. Desh Gen. Insurance Company Ltd.
12. Eastern Insurance Company Ltd.
13. Eastland Insurance Company Ltd.
14. Express Insurance Ltd.
15. Federal Insurance Company Ltd.
16. Global Insurance Ltd.
17. Green Delta Insurance Co. Ltd.
18. Islami Commercial Insurance Co. Ltd.
19. Islami Insurance Bangladesh Ltd.
20. Janata Insurance Company Ltd.
21. Karnaphuli Insurance Company Ltd.
22. Meghna Insurance Company Ltd.
23. Mercantile Insurance Company Ltd.
24. Nitol Insurance Company Ltd.
25. Northern Gen.Insurance Company Ltd.
26. Peoples Insurance Company Ltd.
27. Phonix Insurance Company Ltd.
28. Pioneer Insurance Company Ltd.
29. Pragati Insurance Ltd.
30. Pramount Insurance Company Ltd.
31. Prime Insurance Company Ltd.
32. Provati Insurance Company Ltd.
33. Purabi Gen Insurance Company Ltd.
34. Reliance Insurance Ltd.
35. Republic Insurance Company Ltd.
36. Rupali Insurance Company Ltd.
37. Sonar Bangla Insurance Company Ltd.
38. South Asia Insurance Company Ltd.
39. Standard Insurance Ltd.

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 40. Takaful Islami Insurance Ltd.
41. Dhaka Insurance Ltd.
42. Union Insurance Company Ltd.
43. United Insurance Company Ltd.
44. SenaKalyan Insurance Company Ltd.
45. Sikder Insurance Company Ltd.

List of life insurance companies

1. American Life Insurance Company (Foreign Company)

2. Baira Life Insurance Company Ltd.
3. Delta Life Insurance Company Ltd.
4. FarestIslami Life Insurance Co. Ltd.
5. Golden Life Insurance Ltd.
6. Homeland Life Insurance Company Ltd.
7. Meghna Life Insurance Company Ltd.
8. National Life Insurance Company Ltd.
9. Padma Islami Life Insurance Company Ltd.
10. Popular Life Insurance Company Ltd.
11. Pragati Life Insurance Ltd.
12. Prime Islami Life Insurance Company Ltd.
13. Progressive Life Insurance Company Ltd.
14. Rupali Life Insurance Company Ltd.
15. Sandhani Life Insurance Company Ltd.
16. Sunflower Life Insurance Company Ltd.
17. Sunlife Insurance Company Ltd.
18. Zenith Islami Life Insurance Ltd.
19. Mercantile Islami Life Insurance Ltd.
20. NRB Global Life Insurance Company Ltd.
21. Guardian Life Insurance Ltd.
22. Chartered Life Insurance Company Ltd.
23. Best Life Insurance Company Ltd.
24. Protective Islami Life Insurance Co. Ltd.
25. Sonali Life Insurance Co. Ltd.
26. Sawdesh Life Insurance Co. Ltd.
27. Diamond Life Insurance Co. Ltd.
28. Alpha Islami Life Insurance Ltd.
29. Trust Islami Life Insurance Co. Ltd.
30. Jamuna Life Insurance Ltd.

List of the insurance companies in public sector

1. SadharanBimaCorporation(Gen. Ins)
2. JibanBima Corporation (Life Ins.)

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 Types of Insurance Business In Bangladesh:

The origin of insurance is lost in antiquity. However, there is no evidence that insurance in its
present form was practice prior to the twelfth century. A brief chronological historical
development of the various branches of insurance is given below:

Marine Insurance:
Marine is the oldest form of insurance and came first in the list. This type of insurance probably
began in northern Italy sometime during the 12th& 13thcentury and gradually the concept was
rather transferred to or taken over by the United Kingdom. During the 13th/ 14thcentury the
Italian merchants went to UK and along with the merchandise carried with them the trading
customs including the concept of marine insurance. Marine insurance as such was not being
practiced as a separate specialized entity during that time since it were the merchants who used
to transact marine insurance business side by side with their general trading activities

Fire insurance:
After marine insurance fire insurance developed in present form. It had been observed in Anglo-
section Guild form for the first time where the victims of the fire hazards were given personal
assistance by providing necessaries of life. It15  had been originated in Germany in the
beginning of sixteenth century. The fire insurance got momentum in England after the great fire
in 1666 when the fire losses were tremendous.

Life insurance:
The third in the list of development is the life insurance business. The earliest policy of which
there is a record dates back to 1583. During this period only short term polices were used be
issued meaning that only at the death of the life assured during the term period the money was to
be paid. On survival nothing was payable. In 1693 Halley introduced the mortality table giving a
definite value to risk of death. In 1974, the life Assurance Act was passed in the British
parliament requiring the presence of insurable interest before one could effect a life policy on the
life of another. All these gradually gave life assurance a sound, systematic and scientific basis as
we see in the present day.2.3 Development of Insurance in Bangladesh Insurance is not a new
idea or proposition to the people of Bangladesh

9
Current pattern of Insurance in Bangladesh:
After the emergence of the People’s Republic of Bangladesh in 1971, the government
nationalized the insurance industry along with the banks in 1972 by Presidential Order No. 95.By
virtue of this order, all companies and organization transacting all types of insurance business in
Bangladesh came under this nationalization order. This was followed by creation of five
insurance companies in the life and non-life sector. Further changes were brought on 14th
May,1973. Through the enactment of Insurance Corporation Act VI, 1973 which led to creation
of two corporations namely SadharanBima Corporation for general insurance and,
JibanBimaCorporation for life insurance in Bangladesh. In other words SadharanBima
Corporation (SBC)emerged on 14th May, 1973 under the Insurance Corporation Act (Act No.
VI) Of 1973 as theonly state owned organization 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. Bangladesh Government allowed the private sector to conduct
business in all areas of insurance for the first time in 1984. The private sector availed the
opportunity promptly and came forward to establish private insurance companies through
promulgation of the Insurance Corporations (Amendment) Ordinance (LI of 1984) 1984.The
Insurance Market in Bangladesh now consists of two state-owned corporations, forty three and
seventeen private sector general & life insurance companies respectively, a total of 62insurance
companies.
Thus the insurance sector in Bangladesh has grown up substantially and deepened remarkably
with number of companies in both life and general segments. With the expansion of size of the
insurance market, the volume of assets of the industry has also increased substantially. SBC is
entitled to 50% of public sector business. 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
company’s reinsurance business must be placed with the SadharanBima Corporation and
remaining fifty percent may beer insured either with this Corporation or with any insurer in
Bangladesh or abroad. At present, nearly all the company’s place 100% of their reinsurance
business with the SBC.

10
Role of private insurance companies in the economic development of Bangladesh:
 Formation of capital & increase of investment: Insurance companies receive premiums
from insured persons. These premiums increase national capitals. By investing the se
capitals, national productions increase.
 Reduce of hindrance of risk: every sorts of business consists of risks. These risks are more
hazardous in Bangladesh. Insurance companies minimize these risks by giving privileges on
loss.
 Maintenance of national wealth: insurance companies not only secure financial facts, but
also influence people to take necessary steps to avoid risks.
 Distribution of risks: insurance companies deal with lots of insured people. So risks
are being distributed among them.
 Extension of business: By taking all uncertain business risk insurance companies extended
the field of business in our country. Insurance gives the assurance of indemnity and help to
collect the capital to lunch a new business and expand the existing business.
 Increase of awareness: As the maximum people of our country are illiterate so they have not
much knowledge about the future life and what will do to enhance the living standard.
Different types of advertisement, publicity and others awareness activities of insurance
company which helps to increase the awareness of general people.

11
Risk Management in the Insurance Industry:

An insurance company, by virtue of its business nature, undertakes the risks of the
policyholders. Management of risks is very crucial as the same is highly correlated with the long
run sustainability and operating efficiency of the insurer. Principally, the higher the risk
management practice, the lower the risk and the more protection for the stakeholders. The risk
management primarily deals with the fortuitous events and their impacts, which basically come
from the core business activities of the insurance company. In addition, some operational risks
and market risks are also associated with, which also need to be addressed.

a. Business Risk Management

General Insurance:
General insurance companies of Bangladesh, by and large, follow traditional business
risk management tool. Most of the companies don’t have any underwriting Manual yet
follows common practice, rules and guidelines as framed by the regulatory authority.
Many of the companies have no regular risk inspection team before underwriting a
policy. Policies other than high valued risk (as framed by the management) are usually
underwritten based on the ‘principle of utmost good faith’. Excepting few instances,
policies underwritten at branch level aren’t turned down by the head office after
appropriate verification thereto, due to immense competition among the companies in
the industry.

Life Insurance:
Life insurances have underwriting rules and guidelines which are printed in the product
rate books. The underwriting requirements (for new policies and revival of lapse
policies) are based on age and sum assured and are consistent with the reinsurer’s
underwriting requirements. Policyholders up-to certain age enjoy taking policy up-to
certain amount of sum assured without having any special medical test; however, full
medical report (FMR) and pathological urine report (PUR) are required for
policyholders exceeding the certain age limit and sum insured. However, it has been
observed that rules and regulations regarding underwriting aren’t strictly followed in
practice. The field level workforces are less interested in proper investigation of the
policyholders as a significant portion of 1st year premium (new policy) is being
absorbed by them in the form of commission.

b. Internal Control Risk

Internal control procedure is an integral part of financial and business processes which
acts as the safeguard of the assets, promotes operating efficiency, and ensures
compliance with applicable policies and regulations and adherence to the prescribed
managerial policies. Most of the insurance companies follow centralized internal control
mechanism. Funding requirements of branches are approved by the head office.
67.64% of the companies have Board Audit Committee yet couples of which are nonfunctional.

12
For establishing internal control mechanism, 91.18% companies have
established internal audit department, however, the function of the internal audit
department is found inadequate mainly because of insufficient human resource. Only a
few companies makes regular branch/service cell audit while a good number of
companies make necessary inspection/audit as and when required basis.
Performance: Overall macro-economic slow down resulting from change of government,
successive devastating natural calamities and price hike in the international market affected the
whole insurance sector.

Reasons behind the non-popularity of Insurance as a service:

1. Lack of trustworthiness
2. Low level of income group
3. Unattractive offers
4. Lack of information regarding insurance companies
5. Less interest earnings sources than that of banks
6. Inefficiency in solving problems when approached by customers
7. High service or documentation processing costs
8. Less aggressive/convincing sales personnel
9. Lengthy process to get payment after incidents
10. Lack of marketing research
11. Lack of quality controlling process

Analysis of the reasons behind the non-popularity of Insurance

 The lack of trustworthiness is the most prominent barrier in case of popularity of the
insurance companies where as lengthy process in getting payment after any incident is
the other most significant reason. 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.
 The low income and purchasing power 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, on the other hand lack of trustworthiness makes this insurance avoiding
behavior more acute.
 The insurance companies are not delivering their information (regarding company and
insurance policy) properly or evenly, which is another problem in case of non-popularity
of the insurance companies. The insurance companies are not delivering their information
(regarding company and insurance policy) properly or evenly, which is another problem
in case of non-popularity of the insurance companies. Moreover, the respondents are
happy with the quality controlling process of the insurance companies. Problem solving
skill and quality control related complaints are relatively less; which indicates that those
who have insurance policy at present are happy with the company’s services.
 The lack of advertisement and trustworthiness is creating problem in attracting new
customers towards the insurance company. This is a positive sign for the industry that
they are capable enough to retain their existing customers, but all they need to do is to
attract new customers by building a good ground of trust with timely payment system and

13
 better distribution of information. Surprisingly it was found that the sales people are
doing well in convincing customers.

 Insurance sector in Bangladesh on the way to sustainable growth: 

 
The commitment of the government to promote development of the insurance sector is of
enormous consequence for its promising future. In view of the pro-active policy support of the
government that the sector has so far received in an unstinted manner, we are certain that within
the next few years we will be able to make insurance a very important component of the
country's financial system. This will go a long way for eradication of poverty and
promoting sustainable economic growth. 
 
Insurance serves a number of valuable functions, which are very different from those, rendered
by other types of financial intermediaries. The indemnification and the risk pooling properties of
non-life insurance facilitate commercial transaction and the provision of credit by mitigating
losses as well as the measurement and management of risk. The availability of insurance enables
risk-adverse individuals and entrepreneurs to undertake higher risk and activities that yield
higher rate of return, promoting higher productivity and growth. The liabilities of life insurers, on
the other hand, are of long terms and due to the nature of their liabilities they can serve an
important function as institutional investors providing capital to infrastructure and other long-
term investments. 
 
Thus insurance makes a significant contribution to economic growth by improving investment
climate and promoting a more efficient mix of activities than would be undertaken in the absence
of risk management instruments. The contribution is magnified by the complementary
development of banking and non-bank financial institutions. 
 
To accelerate the process of economic development the government of Bangladesh initiated a set
of policy and institutional reforms within the banking sector in recent years. These reforms have
continued unabated and extended to non-bank financial institutions in one form or other. Though
the insurance sector in Bangladesh has shown remarkable growth in recent years reflecting
product development and innovation, it was kept outside the purview of the
reform programme until the present government embarked on a set of reform measures to
promote a vibrant insurance sector to mobilize savings both from rural and urban areas and use
those savings for investment in social and economic programmes and projects.  
 
As a first step towards achieving these objectives, Insurance Act, 2010 and Insurance
Development and Regulatory Authority Act, 2010 have been enacted. Following the
development of an appropriate legal framework, the government has established a strong
supervisory body for effective and efficient supervision of the insurance industry. Since its
inception in January 2011, Insurance Development and Regulatory Authority (IDRA) have been
working relentlessly and, in the process, have undertaken a series of measures in an effort to
transform the insurance sector into one of the most efficient, competitive and productive
sectors of the wider financial system in Bangladesh. 
 
The First SAARC (South Asian Association for Regional Corporation) Insurance Regulators'
Conference, organized by the IDRA, Bangladesh, in Dhaka early this month, has given an

14
opportunity to the regulators and insurance professionals and experts of SAARC countries to
exchange views of mutual interests and have a better understanding of the regulatory framework
and functioning of the insurance markets in this region. Besides the distinguished speakers from
SAARC countries, resource persons from Hong Kong, Malaysia, Nepal, Singapore and the
United Kingdom have presented papers on the occasion, on contemporary issues relating to
regulation and supervision of insurance, among other taken part in deliberations. 
 
Regulations requiring insurance to invest a certain percentage of their assets in government
securities and government-approved infrastructure project have been prepared after due process
of consultations with the stakeholders. After these regulations come into effect the government
would be in a better position to obtain funds from the insurance sector to finance its development
and non-development expenditures without having to worry about the inflationary impact
of financing budget deficits. 
 
During the last two years, the IDRA has undertaken a package of wide-ranging measures to
enhance persistency of life insurance business, reduce business acquisition costs, ensure
transparency, improve corporate governance and enhance the rate of return on investment of life
insurance fund through monitoring and strict surveillance of pattern of investment of life
companies. The insurance companies in Bangladesh are now poised to take a big leap forward to
achieve a very high rate of growth in premium income and life fund. With the sound institutional
and regulatory framework in place and with the entry of a few good insurance companies,
particularly life companies, in the market, this writer, as an actuary, can make a projection with
a fair degree of precision that life fund would reach Tk.1000 billion in 2021. 
 
Innumerable martyrs and hundreds of thousands of our mothers and sisters made enormous
sacrifices to win freedom for us so that we could live in peace with honour and dignity. They
sacrificed their lives to make us free from hunger and exploitation, free from social repression
and injustices. 
 
While the present government under the leadership of Prime Minister Sheikh Hasina has been
working to achieve this goal and to transform this land into a middle income country by 2021,
the 50th anniversary of our liberation, this would require all the citizens of this country to make
sustained efforts to realize that goal. The IDRA is committed to make a humble contribution,
within its jurisdiction, in promoting a healthy and vibrant insurance sector, paving the way for
achievement of our eventual goal.  
 

15
Types of Problems faced in the Insurance industry:

The key to delivering high quality service is to continually monitor customer perceptions of
service quality, identify causes of service quality shortfalls, and take appropriate action to
improve the quality of service (close the service gaps).

The insurance industry in Bangladesh needs to look into solving the following service quality
shortfalls if it wants to play a dominant role in the financial sector of Bangladesh:
(1) Not Knowing What Customers Expect:
Based on interviews, we 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.

(2) The Wrong Service-Quality Standards:

This 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.

(3) 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 are 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.

(4) 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.
(5) 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.

(6) The discrepancy between customer expectations and employees’ perceptions as a result
of the differences in the understanding of customer expectations by front-line service
providers.

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Recommendations:

A rating scale could also be established to rate the quality of services based on insurance
company’s facilities, past performance records, and client’s evaluations. The rating factors and
mechanisms would have to be developed on the basis of inputs from clients and the profession. It
would also be important to determine, specify, and strongly enforce the legal consequences for
tampering with client records and their evaluations. This process will lead to qualifying and
ranking each and every insurance company (Private and public). We think the insurance policy
collection and profit margin should not be the only benchmark to position a specific insurance
company.It was found in the analysis that that lack of trustworthiness and reliability is the main
reason of not choosing an insurance company. In addition a large number of respondents 255 out
of 416 considered lengthy payments time in getting payment as another major obstacles in
choosing an insurance company. 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:

1. 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.
2. Carefully choose personnel who interact with the customers.
3. Train personnel to interact well with the clients
4. Positive and societal marketing activities to build and project specific company image
5. Design facilities to achieve specific marketing or image objectives of the organization
6. Establish formal system for controlling quality of insurance services

7. Perform industry analysis on a regular basis and to remain competitive Base prices on
what competitors’ charges.

8. Public insurance companies must increase the rate of payment to encourage more
accounts
9. Public insurance companies must pay attention to understand the problems of the
clients. A short response time is expected from the public firms.
10. Take steps to eliminate hustle in getting payment after any incident.
11. Use a combination of cost and competition based costing system as gradually
competition based costing will be popular in the industry due to increment in the
number of competitors.

12. Use heavy informative advertisement to show how the service can be better utilized.
But as the insurance company’s benefit of service is long should practice more of
reminder advertisement.

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13. Encourage the existing customers to promote your services to the new customers and
use newspaper as the prime media for advertisement to show the cost benefit of
insurance policy.
14. For the institutional insurance service provider, empower your customer by close
contact through sending mail and knowledgeable sales personnel.
15. Choose service-providing employees very carefully; train them highly to make them
knowledgeable regarding the service standards.
16. Insurance companies must be concentrating on their physical infrastructure and wide
distribution facilities.
17. Use technology to maximize the service quality and to reduce the fluctuation in
service quality. Provide service above standard as promised to the customers to
reduce the service gaps.

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Conclusion:

The insurance companies can expand their target market by identifying and by providing
responsive diversified services. While the industry is stuck to the traditional insurance
services, the world is changing fast. The need for innovation is felt frequently which the
industry can’t provide. Unless insurance industry devotes its attention to innovative needs of
the economy, neither the economy nor the insurance industry is likely to flourish. 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.

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References:

Azad, AbulKalam (2001), 'Does InsuranceContribute Significantly to the Capital

MarketDevelopment in Bangladesh?', ,BIBM, Dhaka, Bangladesh.

Bangladesh Bank (2006), ,Research Department, BB, Dhaka.Bangladesh Insurance

Association (various issues),, BIA, Dhaka, Bangladesh.

Choudhury T.A. and Raihan. A. (1999),"Implications ofWTOon the Banking and Financial
Sector in Bangladesh." .June No-1, Volume -XXIV.

Government of Bangladesh (2006),, Ministry of Finance, GOB,Bangaldesh.

Fross, Mikael, EskoKalimo and TapaniPurola(2000), 'Globalization and the Concept

ofInsurance'- a paper presented in the international research conference on Social Security
held at Helsinki during 25-27 September, Finland.

GOB and World Bank (2004), 'A Review and Proposals for Reform of the Insurance Laws in
Bangladesh', Dhaka, Bangladesh.

Sengupta, Arjun, 2000. 'Financial Management of Globalization- IMF and Developing

Countries', January 15 issue,India.

Pant, Niranjan (2000), 'Development Agenda for Insurance Regulation',, India.

Rao, D Tripati(2000), 'Privatization and Foreign Penetration in Insurance Sector',, March,

India.

The Financial Express (various issues), a businessdaily, Dhaka, Bangladesh.

The Daily Star (various issues), a daily newspaper,Dhaka, Bangladesh.

www.dse.org.bd.com

www.insurance industry.com

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