Term paper on

Insurance Act, 2010

Submitted to:
Golam Ramij
Lecturer
Department of Banking and Insurance
Faculty of Business Studies
University of Dhaka

Submitted by:
Ashak Ahmed
ID:05 Section-B
Department of Banking and Insurance
University of Dhaka

Date of Submission: September 15, 2020

 Insurance Act, 2010

Section 4: Participating policy: A participating policy is an insurance contract that pays

dividends to the policy holder. Dividends are generated from the profits of the insurance
company that sold the policy and are typically paid out on an annual basis over the life of the
policy. Most policies also include a final or terminal payment that is paid out when the contract
matures. Some participating policies may include a guaranteed dividend amount, which is
determined at the onset of the policy. A participating policy is also referred to as a "with-profits
policy."
Section 7: Islamic Insurance business means the insurance business regulated in accordance with
Islamic Sariah. Islamic insurance also known as takaful insurance where premiums are regarded as
“contributions” to a mutual fund established with a view to sharing out occurrence risk of an
unfavorable event affecting a member of the group.

Section 8: Actuary means a certified person who analyzes the financial risk using the
information which is given by the insurer when they apply for insurance.
Section 9: “Empolyer of agents” means a certified person who work for a particular insurance company
as a part time or full time agent. This types of agent basically recurred by the insurance company to sell
their policy to the people or they try to convince people to take their policy as well.

Section 14: “Schedule” means any Schedule to this Act.

Section 15: “Scheduled Bank” means the Scheduled Bank as defined in section 2 of the Bangladesh
bank order 1972.

Section 17: Registration means writing down the name of the person who is taking the insurance
contract after inquiring all the information by the actuary and the agent according to section 9.

Section 19: Policy means a contract of insurance.

Section 20: Re-insurance is an agreement by which the primary insurer that initially writes the
insurance business transfers to another insurer part or all of the potential losses associated with
such insurance. The primary insurer who writes the business initially is called ceding company.
Section 21: “Retrocession” means a contract of re-insurance under which the re-insurance company
cedes certain part of its liability to another insurance company for its own interest by which it reduces its
risk.
Section 30: Insurance surveyor means a person appointed by the insurance company who
examines and express an independent opinion as to the cause , extent , location and amount of any loss or
claimed to be incurred in relation to the goods property or any interest insured under a contract of non-life
insurance.
Section 33: Broker — an insurance intermediary who/that represents the insured rather than the
insurer. Since they are not the legal representatives of insurers, brokers, unlike independent
agents, often do not have the right to act on behalf of insurers, such as to bind coverage. Broker
can be bank or financial institution.

CHAPTER-II

PROVISIONS APPLICABLE TO INSURERS

Section 4: (1) Restriction on transaction on insurance and re-insurance business: No person shall
be carry on insurance business in Bangladesh expect:

1. Public limited company under the act.

2. Cooperative societies.
3. Statutory companies which formed under the law of any country.

(2) No mutual insurance company shall transact a non-life insurance business under this act.

Section (8): Registration certificate, etc. (1) No person can run an insurance business without
obtaining a registration certificate from the insurance development authority and the insurer have
to register its company according the insurance company act 1973.

(2) Any person who wants to do insurance business (Life or Non-life insurance) have to apply
for registration to the authority according to the regulation.

(3) If an insurer registered its business according to the insurance act 1938 and he want to
continue his business then he have to register his business before the commencement of the act.
For this he has to apply to the authority in written within 6 month before the commencement of
the act.

(4) Applicant has to pay a certain amount of fee for the registration which is called registration
fee.

(5) Every applicant under this act have to be certified that this application is true or false by a
person

Section (9): Issuance of registration certificate: If an insurance company wants to register its business
under the section 8 then he has to satisfied all the rules which is mentioned in the insurance company act
like the insurer has to maintain the paid up capital, minimum statutory deposits and the insurer have to be
in the situation to have an actuary and other qualified officers and employee. If the insurer is not able to
follow the rules then the authority will refuse the application and they will give an application for hearing
to the insurer and the person has given the chance to review within 30 days after the refusal.

Section (10): Suspension or Cancellation of registration: the authority may suspend or cancel the
application for registration for various reason for example fails to comply with the provisions of section
23 or 119 as to deposit, do not commence business within 1 year after the registration, unable to meet the
obligations, fails to maintain the solvency margin, found involvement in immoral activity etc.
Section (14): Licensing for establishing branch and office of insurer: No insurer can open or
established a branch without obtaining a license from the authority. For a license the company have to
make an application and have to give the required payment to the authority for license and on receipt of
an application for license under this section, the Authority shall, considering the application, issue license
to the insurer in the prescribed form for establishing a new branch or office. If an application is not found
appropriate, the Authority may, after giving the applicant reasonable opportunity of being heard. The
authority have to send the application of refusal within 6 week. After getting the application the authority
give the insurer an opportunity for appeal against the refusal to the Government within 30(thirty) days
from the date of his being notified of such decision and the decision passed by the Government on such
appeal shall be final.

Section (15): Restriction on name of insurer: An insurer shall not be registered by a name
identical with or closely resembling to the name, which may mislead public perception or be
considered deceiving, of an insurer registered under this act or under the insurance act 1938 . If
any insurer, inadvertently and unintentionally, is registered in a name which is identical with or closely
resembling to an already registered insurer’s name and the already registered insurer has no consent to
this effect, in that case, if, upon the application of the insurer registered earlier and within the time-limit
determined by the Authority, the insurer registered later does not change its name, it shall not be allowed
to carry on any insurance business.

PREMIUM, INSURANCE AND RE-INSURANCE

Section (16): (1) Soundness of premium rates for life insurance: When Considering an application
for registration under section 8, if the authority thought that the given premium rates, benefits,
term and conditions offered in connection with life insurance business are not acceptable than
they can change their condition.

(2) Without certifying the terms, conditions, premium rates and benefits no life insurance
company cam issue there policy.

(3) If a life insurance company wants to issue a new insurance policy then they have to issue a
certificate of the appointed actuary and the prospectus or pamphlet along with full details to the
authority at least 30 days before marketing it.

(4) If the authority fails to comply with the sub-section 2 and 3 then the authority impose a fine
TK. 5 Lack.

Section (17) Determination of premium rates for non-life insurance: In non-life insurance the
authority constitute a central rating committee to determine the rate of premium for non-life insurance
business. The central rating committee shall be headed by the chairman of the authority.

Section (19) Provision relating to the insurance abroad: No person shall insure outside
Bangladesh any risk in respect of any property or interests in Bangladesh unless a certificate has been
obtained from the Authority to the effect that such risk cannot be covered in Bangladesh:

Section (20) Provision relation to re-insurance abroad: An insurer may, subject to such terms and
conditions as may be prescribed by regulations, reinsure with other insure any liability in or outside
Bangladesh arising out of executed and effected contract or policy of insurance in order to ensure that the
interests of the policy-holders and the insurers are adequately safeguarded.

CAPITAL AND DEPOSIT

Section (21): Requirement as to capital and share holdings: No insurer other than insurers
who had been than insurers who had been transacting any class of insurance business in Bangladesh
before this Act coming into force, shall be registered after this Act coming into force transacting any class
of insurance business unless it has a minimum paid-up capital of the amount specified in the Schedule-1
and its shares have been paid up in such manner as may be prescribed by rules:
Provided that Government may, if necessary, by notification in the official Gazette, increase or decrease
the amount of paid-up capital.

Section (30) Actuary report and abstract: Every insurance company made a report at least
once in every year and the report is made by the actuary to investigate there financial condition
including a valuation of its liabilities in such manner as may be prescribed by regulations and shall cause
an abstract of the actuarial report to be made in such form and manner as may be prescribed in regulations

SOLVENCY MARGIN, LOANS AND MANAGEMENT

Section (43): (1) Solvency margin requirement: According to this act every insurance company
should maintain a solvency margin which help them at the critical moment.

(2) If any insurer does not maintain the solvency margin according to the subsection (1) then
they have to submit a plan of action according to the law of authority and they have to full fill the
required amount of solvency act within 3 month.

(3) If the required amount of solvency is inadequate then the authority have the power to increase
the amount and the insurance company have to maintain that amount.

Section (44) Restriction on grant of loan, advance and financing facility: (1) No insurer shall
grant an advance .a loan or a financing facility against the security of its own shares.

(2) NO insurer shall grant to any director, manager, actuary, auditor or officer of the insurer or to
any member of their family any loan or temporary advance, either on hypothecation of property
or on personal security.
(3) NO insure can approve any kind of loan or temporary advance to any firm or company in
which any director manager, actuary, auditor and there family member without the permission of
its board of director.

(4) The director who receive loam shall not vote and participate in, the proceedings of the Board
of Directors.
(5) Nothing in sub-section (1) or sub-section (2) shall apply to loans or advances granted by an
insurer to a banking company or to a subsidiary company being an insurer or to any insurer.

AMALGAMATION AND TRANSFER OF INSURANCE BUSINESS

Section (52) Amalgamation and transfer of insurance business: (1) No insurance company
shall be merged with another insurance company which is outside the country without a scheme
prepared under this section and approved by the authority and if a scheme is made then all the
conditions shall be mentioned.

(2) The balance-sheets, reports and abstracts referred to in clause (c) of subsection (1) shall be
prepared as at the date on which the amalgamation or transfer.

ASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATIONS

Section (56) Assignment and transfer of life insurance policies: (1) A transfer of a policy of
life insurance made by endorsement which is signed either by the transferor or by assignor or
duly authorized agent.

02. This policy may be transferred/assigned, wholly or in part, with or without consideration.

03. An Assignment may be effected in a policy by an endorsement upon the policy itself or by a
separate instrument under notice to the Insurer.

04. The instrument of assignment should indicate the fact of transfer or assignment and the reasons
for the assignment or transfer, antecedents of the assignee and terms on which assignment is made.

05. The assignment must be signed by the transferor or assignor or duly authorized agent and
attested by at least one witness.

06. The transfer of assignment shall not be operative as against an insurer until a notice in writing of the
transfer or assignment and either the said endorsement or instrument itself or copy there of certified to
be correct by both transferor and transferee or their duly authorised agents have been delivered to the
insurer.
Section (57) Nomination by policy-holder: The holder of a policy of life insurance on his own life,
may, when effecting the policy or at any time before the policy matures for payment, nominate the person
or persons to whom the money secured by the policy shall be paid in the event of his death.

COMMISSION, REBATES AND EXPENSES OF MANAGEMENT

Section (58) Restriction on payment by way of commission or otherwise for procuring

business: No person shall pay any kind of commission to gain insurance business to any person
except insurance agent and broker.

In insurance business insurance company have to give a certain amount of money to the
insurance agent to get all the insurance policy. Sometimes the insurance agent get 50% money of
the sold policy as commission. Some this we can see insurance agent commission is greater than
there salary.

Commission that is given by the insurance agent to the as the policy duration is given below:

(a) 35 (thirty five) percent of the first years premium.

(b) 10 (ten) percent on second years renewal premium and

(c) 5 (five) percent of renewal premium on subsequent years.

Section (70) Payment of money into court: In case on life insurance after the insured persons
death or after the expire of the contract the insurance company have to pay the insured amount to
the insured person or on the other hand in case of non-life insurance after one year if the insured
property is destroyed then the insurance company have to pay the compensation.

In this section there is also mentioned that if there is any conflict arise regarding claim settlement
the court will interfere and will take legal action or the insurance company can go to the court for
settlement.

Section (76) Board of directors of insurer : As a public limited insurance company, the
maximum number of director of that company shall not exceed 20 and in case 12 shall be
sponsor-Directors holding public share and 2 shall be independent directors.

LIFE INSURANCE: DIVIDEND, BONUS, PROFIT DISTRIBUTION ETC

Section (82) Restriction on payment of dividends and bonuses: In insurance, the insurance
company pay a certain amount which is called bonus. Bonus is actually given after the maturity
date or after the death of the insured person if bonus is mentioned is the contract. Bonus is a
portion of net profit which is given by the insurance company to the shareholders. So life
insurance is profitable if the company give bonus.

Section (88) Acquisition of surrender value: If the insured person met up 2 years of that
insurance then he or she can get surrender value but if the insured person does not continue that
policy at least 2 year then he or she will not get the surrender value or if the insured person
continue the policy for 2 years but does not pay the premium according to terms and condition
then he will not get the surrender value.

Section (124) Appointment of insurance agent: (1)An insurer or broker shall appoint and
register a person as an insurance agent and every insurer of broker shall maintain in such manner
as may be prescribed by regulations made by the Authority, a register of all such appointment
and registration as insurance agent.

(2) Every insurance or broker required to send a copy of the register being maintained under
sub-section (1).

(3) If an insurance agent is unsuitable then the insurance company can delete his name from the
recruitment.

(4) No insurer of broker shall appoint as an insurance agent under him any person who is already
registered as an insurance agent with any other insurer or broker.

(5) No insurer or broker shall appoint any registered insurance agent under him without release order
from the previous insurer of broker with whom the agent was registered.

Capital and Deposit

Minimum paid-up capital under section 21:

(1) For life insurance business-

a. In the case of companies Incorporated in Bangladesh: At least Taka 30 crore

of which 60 percent shall subscribed by the sponsored and the remaining 40
percent shall remain open for public.

b. In the case of companies incorporated outside Bangladesh: At least Taka

30 (thirty) crore which shall be deposited in Bangladesh by transfer of fund from outside
Bangladesh.

For Non-life insurance –

a. In case of companies incorporated in Bangladesh: At least Taka 40 corer of
which 60 percent shall be subscribed by the sponsored and the remaining 40
percent shall remain open for public subscription.

b. In the case of companies incorporated outside Bangladesh: At least Taka 40

corer which shall be deposited in Bangladesh by transfer of fund from outside
Bangladesh.