Fareast International University

Assignment
On

“Role of Insurance companies in Bangladesh economy”

Course Title: Principles and Practices of Insurance

Course Code: BUS 3113

Submitted to:
Ms. Shohana Siddique
Lecturer
Department of Business Studies
Fareast International University

Prepared By:
Name: Fardin Ahmed
ID: 19301005
Program: B.B.A
Semister: Fall

Date of submission: August 28, 2020.

Table of Contents
 Topics no. Head of Topics Page no.

1. Introduction
01. 1.1 Introduction 1-2
1.2 Methods of insurance
1.3 Type of insurance

2. Insurance Industry In Bangladesh

02. 3-5
2.1 History of insurance in Bangladesh

3. Top 12 Insurance Companies in Bangladesh

0.3 6-7
List of Companies name

4. Functions of insurance Company

0.4 8-10
4.1 Primary Functions
4.2 Secondary Functions

5. Role of Insurance Companies in the Economic

Development of Bangladesh.
0.5 11-14
Particulars role of Insurance Company

6. Conclusion
0.6 15
Concluding remarks

7. References
0.7 16
List of references

Introduction:
Insurance is a means of protection from financial loss. It is a form of risk management primarily
used to hedge against the risk of a contingent, uncertain loss. An entity which provides insurance
is known as an insurer, insurance company, or insurance carrier. A person or entity who buys
insurance is known as an insured or policyholder. The insurance transaction involves the insured
assuming a guaranteed and known relatively small loss in the form of payment to the insurer in
exchange for the insurer's promise to compensate the insured in the event of a covered loss. The
loss may or may not be financial, but it must be reducible to financial terms, and must involve
something in which the insured has an insurable interest established by ownership, possession, or
preexisting relationship.

Insurance involves pooling funds from many insured entities (known as exposures) to pay
for the losses that some may incur. The insured entities are therefore protected from risk
for a fee, with the fee being dependent upon the frequency and severity of the event
occurring. In order to be an insurable risk, the risk insured against must meet certain
characteristics. Insurance as a financial intermediary is a commercial enterprise and a
major part of the financial services industry, but individual entities can also self-insure
through saving money for possible future losses

Methods of insurance:
In accordance with study books of The Chartered Insurance Institute, there are the
following types of insurance:
1. Co-insurance – risks shared between insurers
2. Dual insurance – risks having two or more policies with same coverage (Both the
individual policies would not pay separately- a concept named contribution, and
would contribute together to make up the policyholder's losses. However, in case
of contingency insurances like Life insurance, dual payment is allowed)
3. Self-insurance – situations where risk is not transferred to insurance companies
and solely retained by the entities or individuals themselves
4. Reinsurance – situations when Insurer passes some part of or all risks to another
Insurer called Reinsurer

Types of insurance
Any risk that can be quantified can potentially be insured. Specific kinds of risk that may
give rise to claims are known as perils. An insurance policy will set out in detail which
perils are covered by the policy and which are not. Below are non-exhaustive lists of the
many different types of insurance that exist. A single policy may cover risks in one or more
of the categories set out below. For example, vehicle insurance would typically cover both
the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising
from an accident). A home insurance policy in the United States typically includes coverage
for damage to the home and the owner's belongings, certain legal claims against the owner,
and even a small amount of coverage for medical expenses of guests who are injured on the
owner's property.

 Auto insurance: Auto insurance protects the policyholder against financial loss in
the event of an incident involving a vehicle they own, such as in a traffic collision.
Coverage typically includes:
 Property coverage, for damage to or theft of the car
 Liability coverage, for the legal responsibility to others for bodily injury
or property damage
 Medical coverage, for the cost of treating injuries, rehabilitation and
sometimes lost wages and funeral expenses

 Health insurance: Health insurance policies cover the cost of medical treatments.
Dental insurance, like medical insurance, protects policyholders for dental costs. In
most developed countries, all citizens receive some health coverage from their
governments, paid for by taxation. In most countries, health insurance is often part
of an employer's benefits.

 Life insurance is an insurance coverage that pays out a certain amount of money to
the insured or their specified beneficiaries upon a certain event such as death of the
individual who is insured. This protection is also offered in a Family takaful plan, a
Shariah-based approach to protecting you and your family.

The coverage period for life insurance is usually more than a year. So this requires periodic
premium payments, either monthly, quarterly or annually.

Insurance Industry in Bangladesh

 The growth of insurance industry in Bangladesh has made a moderate progress in 2007.
Per capita spending on insurance is still less than $3 while insurance penetration,
measured on premium as a percentage of GDP, also below 1%. According to the
Bangladesh Insurance Association, gross premium income of the country’s insurance
sector has reached at Tk 38.55 billion in 2007. Of the total premium income, general
insurance company’s income was Tk.

9.39 billion while Tk. 29.16 billion generated from the life insurance business. The private
sector operators consolidated their foothold in the insurance business during the last
decade. The non- life insurance company’s gross investment stood at Tk. 8.58 billion in
2007 which was Tk. 7.72 billion in 2006. The total assets of the private non-life insurance
companies increased to Tk. 19.83 billion at the end of December 2007 from Tk. 15.50
billion as of December 2006. Although, no upto date statistics on insurance business for
2008 is available so far, initial estimation shows that private insurance companies are
expecting around 25% growth in the premium income. The combined premium incomes
of both the non-life and life insurers are estimated at Tk. 48.58 billion in the 2008, of
which non-life’s share is Tk. 11.26 billion. Despite, political uncertainty, natural
calamities, economic slowdown and lack of major investment and infrastructure projects,
the growth of insurance premium appeared reasonable. Intensification of marketing drive
and introduction of new products (policies) helped the Insurance Companies to attain a
positive business growth.

Growing importance of the industry in the financial system and its increasing economic
significance in other developing countries highlights the fact that, the industry needs a
closer attention for its future development. As different sectors of the financial system are
closely related to each other, risks of a particular sector can easily transmit to the other
sectors of the system. Therefore effective monitoring and supervision of the insurance
industry is crucial not only to guide the industry in efficient management of risks faced by
economic agents but also to mobilize long term savings for the economy, and thereby
allocate the funds to facilitate long term investment.

History of Insurance 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

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 Sadharan
Bima Corporation for general insurance and, Jiban BimaCorporation for life insurance in
Bangladesh. In other words Sadharan Bima 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 Sadharan Bima
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.

Top 12 Insurance Companies in Bangladesh:

Insurance service in Bangladesh are developing as local people have got more conscious
about the security of what they belong. Promising service of some companies has
established the trust and people of Bangladesh turn to them on and on with optimism.
American Life Insurance Co
This is one of the earliest insurance companies in Bangladesh, working from 1952. Even
though the concept as well as the company comes from America, they have successfully
adopted it to suit the needs and expectations of Bangladeshi people and have reached the
top position in the country.
More than a million Bangladeshis depend on American Life Insurance Company (Alico)
with thousands of agents working for them, which has also created local jobs. All sorts of
insurance plans are available to suit everybody’s need in the society.

Jiban Bima Corporation

The words Jiban and Bima mean Life Insurance in Bengali (official language of
Bangladesh). This is a state owned insurance company, providing life and other kinds of
insurance services to citizens. Located in Dhaka, Jiban Bima Corporation has branches all
over Bangladesh and touches millions of people every day. It has created a wide range of
plans to suit people in all economic groups, which has proved to be a big success.

Delta Life Insurance Co Ltd

In 1984, Bangladesh Government allowed private sectors in insurance industry, which led
to the creation of Delta Life Insurance Co Ltd, started by number of Bangladeshi citizens
then working abroad. They started this because they wanted their fellow citizens to get the
top class insurance services which are common in western countries.
From their first day, Delta life insurance has been working with the same goal in mind,
growing to a large organization today. They have designed plans keeping the expectations
of the society in mind, which is the primary reason for their success.

Popular Life Insurance Co Ltd

This unique organization started its journey with the goal of reaching every insurable
citizen in Bangladesh. There were many companies, but they didn’t have means to reach
out to all of them. Popular Life Insurance Co Ltd achieved this by designing unique
schemes and campaigns to bring everyone under their protection. They achieved this by
providing number of schemes which focused on the direct benefits. They indirectly
provided the protection which is the essential reason for doing insurance. Hundreds of
agents are working with public directly to ensure the movement is constantly moving
forward.
Shandhani Life Insurance Co Ltd

This organization is operating for 25 years, creating a change in the society by their
‘micro insurance’ segment. People or the general consumers may not buy insurance
mainly due to
cost. Shandhani life insurance approached them with smaller policies which are a good
start, and would bring them to the regular fold, as they grow socially and economically.
With this focus, Shandhani Life Insurance Co Ltd reached out to hundreds of thousands of
poor people, while keeping the focus on big customers as well. This approach has helped
this company to reach the top position with a great impact on the society.
Meghna Life Insurance Co Ltd

This company was started by many Bangladeshis who wondered if they can participate in
the growth of the nation. They decided a life insurance company would be the ideal start
and with their dream, Meghna Life Insurance Co Ltd was born in 1996. They focused on
providing services at the right price, with modern facilities. Their efforts, in the next
decade, brought this company to a great reputation in the country. They work with people
from all backgrounds and provide services to all kinds of individuals and corporate
organizations.

Takaful Islami Insurance Ltd

Being an Islamic country, Bangladesh’s needs with respect to any investment may be
guided by their religious principles too. Hence, most insurance companies provide
policies keeping this in mind and Takaful Islamic Insurance Ltd specializes in providing
unique schemes, which are Islamic in nature.
This company operates in both life and nonlife sectors. It has established a very effective
network to work with the entire nation via its officers. This works particularly well in the
individual insurance policies.
Pragati Insurance Co Ltd

This is a leading non-life insurance company in Bangladesh. It provides schemes such as

Mediclaim Insurance, Accident Insurance, Building Insurance, Factory Based Insurance,
Aviation Insurance, Home Insurance etc. Based on the type of the insurance and the way
Bangladesh culture sees it, they have designed their policies so that it is accepted well.
Their success journey is a proof to this. Today, the company has reached a top position by
getting a credible rating by number of financial analysis companies. They invest in the
right areas to improve their value to investors. As a result, it has grown to a top position in
the country.
Padma Life Insurance Co Ltd

This is another Islamic insurance company in Bangladesh with a great track record and
success. It focuses on Life insurance segment, earning the confidence of Bangladeshi
public from all walks.
Their plans are designed keeping the security as well as growth aspects in mind.
Depending on the need of the customer, they will be able to choose the best one that suits
them and get maximum returns.
Sunlife Insurance Co Ltd

Started by businessmen from various fields, this company focuses on customer security
and benefits from 2000. They went public in 2012 and today, operating as one the top
insurance companies in Bangladesh.
Specialty of this company is its focus on even the smallest member of the society. Their
officers work with all kinds of people to ensure they are sufficiently protected. This has
brought a social change, as well as a successful company.
Golden Life Insurance Co Ltd

This company splits its services into two parts, macro insurance and micro insurance.
Based on the needs of its customers, it selects the right scheme. This approach has given
them great many opportunities to grow with full support of public.
Headquartered in Dhaka, Golden Life Insurance Co Ltd has branches all over the country
and the officers of the company work directly with public to educate them about their
insurance needs. This direct approach is the primary reason for Golden Life Insurance Co
Ltd growing to the top position in Bangladesh.

Rupali Life Insurance Co Ltd

Established in year 2000, this company has grown from a small position to a large
success, mainly due to its strong backbone support from investors and the passionate work
from agent officers. Their schemes are designed to suit the segments they work on, which
has connected well with the
customers. They focus on promoting local talent. This ensures
that the representatives of Rupali Life Insurance Co Ltd will never be a stranger to the
potential prospects. This approach has created jobs for the country and helped many
people stay protected helping the society.
As their vision statement says, they want to be the “best life insurance company of choice
among Life Insurance Companies”. This goal is the primary motivation for their staff,
resulting in this success. On the process, they have ensured financial security for hundreds
of thousands of Bangladeshi citizens
Functions of insurance company:
Insurance is defined as 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 ensure themselves
against that risk. Risk is uncertainty of a financial loss. It should not be confused with the
chance of loss which is the probable number of losses out of a given number of exposures.
It should not be confused with peril which is defined as the cause of loss or with hazard
which is a condition that may increase the chance of loss.
Finally, risk must not be confused with loss itself which is the unintentional decline in or
disappearance of value arising from a contingency. Wherever there is uncertainty with
respect to a probable loss there is risk.
Every risk involves the loss of one or other kind. The function of insurance is to spread
the loss over a large number of persons who are agreed to co-operate each other at the
time of loss. The risk cannot be averted but loss occurring due to a certain risk can be
distributed amongst the agreed persons. They are agreed to share the loss because the
chances of loss, i.e., the time, amount, to a person are not known.
Anybody of them may suffer loss to a given risk, so, the rest of the persons who are
agreed will share the loss. The larger the number of such persons the easier the process of
distribution of loss, In fact; the loss is shared by them by payment of premium which is
calculated on the probability of loss.
In olden time, the contribution by the persons was made at the time of loss. The insurance
is also defined as a social device to accumulate funds to meet the uncertain losses arising
through a certain risk to a person insured against the risk.
The functions of insurance can be studied into two parts (i) Primary Functions, and (ii)
Secondary Functions.
Primary Functions:

(i) Insurance provides certainty:

Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss
can be reduced by better planning and administration. But, the insurance relieves the
person from such difficult task. Moreover, if the subject matters are not adequate, the self-
provision may prove costlier.
There are different types of uncertainty in a risk. The risk will occur or not, when will
occur, how much loss will be there? In other words, there are uncertainty of happening of
time and amount of loss. Insurance removes all these uncertainty and the assured is given
certainty of payment of loss. The insurer charges premium for providing the said
certainty.
(ii) Insurance provides protection:
The main function of the insurance is to provide protection against the probable chances
of loss. The time and amount of loss are uncertain and at the happening of risk, the person
will suffer loss in absence of insurance. The insurance guarantees the payment of loss
and thus
protects the assured from sufferings. The insurance cannot check the happening of risk but
can provide for losses at the happening of the risk.
(iii) Risk-Sharing:
The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When
risk takes place, the loss is shared by all the persons who are exposed to the risk. The risk-
sharing in ancient time was done only at time of damage or death; but today, on the basis
of probability of risk, the share is obtained from each and every insured in the shape of
premium without which protection is not guaranteed by the insurer.
2.1 Secondary functions:
Besides the above primary functions, the insurance works for the following functions:
(i) Prevention of Loss:
The insurance joins hands with those institutions which are engaged in preventing the
losses of the society because the reduction in loss causes lesser payment to the assured
and so more saving is possible which will assist in reducing the premium. Lesser premium
invites more business and more business cause lesser share to the assured.
So again premium is reduced to, which will stimulate more business and more protection
to the masses. Therefore, the insurance assist financially to the health organisation, fire
brigade, educational institutions and other organisations which are engaged in preventing
the losses of the masses from death or damage.

(ii) It Provides Capital:

The insurance provides capital to the society. The accumulated funds are invested in
productive channel. The dearth of capital of the society is minimised to a greater extent
with the help of investment of insurance. The industry, the business and the individual are
benefited by the investment and loans of the insurers.
(iii) It Improves Efficiency:
The insurance eliminates worries and miseries of losses at death and destruction of
property. The carefree person can devote his body and soul together for better
achievement. It improves not only his efficiency, but the efficiencies of the masses are
also advanced.
(iv) It helps Economic Progress:
The insurance by protecting the society from huge losses of damage, destruction and
death, provides an initiative to work hard for the betterment of the masses. The next factor
of economic progress, the capital, is also immensely provided by the masses. The
property, the valuable assets, the man, the machine and the society cannot lose much at
the disaster.
3. Role of 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 these 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.

— Provide safety and security:

Insurance provide financial support and reduce uncertainties in business and human life. It
provides safety and security against particular event. There is always a fear of sudden
loss. Insurance provides a cover against any sudden loss. For example, in case of life
insurance financial assistance is provided to the family of the insured on his death. In case
of other insurance security is provided against the loss due to fire, marine, accidents etc.
— Generates financial resources:
Insurance generate funds by collecting premium. These funds are invested in government
securities and stock. These funds are gainfully employed in industrial development of a
country for generating more funds and utilised for the economic development of the
country. Employment opportunities are increased by big investments leading to capital
formation.
— Life insurance encourages savings:
Insurance does not only protect against risks and uncertainties, but also provides an
investment channel too. Life insurance enables systematic savings due to payment of
regular premium. Life insurance provides a mode of investment. It develops a habit of
saving money by paying premium. The insured get the lump sum amount at the maturity
of the contract. Thus life insurance encourages savings.
— Promotes economic growth:
Insurance generates significant impact on the economy by mobilizing domestic savings.
Insurance turn accumulated capital into productive investments. Insurance enables to
mitigate loss, financial stability and promotes trade and commerce activities those results
into economic growth and development. Thus, insurance plays a crucial role in
sustainable growth of an economy.
— Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a
victim of critical illness unexpectedly. And rising medical expense is of great concern.
Medical Insurance is one of the insurance policies that cater for different type of health
risks. The insured gets a medical support in case of medical insurance policy.
— Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic principle
of insurance is to spread risk among a large number of people. A large number of persons
get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is
compensated out of funds of the insurer.

— Source of collecting funds:

Large funds are collected by the way of premium. These funds are utilised in the industrial
development of a country, which accelerates the economic growth. Employment
opportunities are increased by such big investments. Thus, insurance has become an
important source of capital formation.

Others Contribution
  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
 Reinsurance Services:
Sadharan Bima Corporation in its role as a re-insurer has lent support to the private
insurance companies in Bangladesh in a big way. In view of the huge networth and
retention capacity, SBC has accepted both treaty and facultative businesses from the
private insurance companies. SBC also accepts reinsurance business from overseas market
through its intermediaries and as well as directly.
 Industrial development through equity participation:
SBC plays a vital role in the industrial development of Bangladesh. SBC is the sponsor
shareholder of Investment Corporation of Bangladesh, Industrial Development and
Leasing Company, National Tea Company Limited, National Housing Finance and
Investment Ltd, Aramit Ltd, Central Depository BD Ltd.etc. SBC has huge amount of
fixed deposit reserve with various commercial banks in Bangladesh.
 Risk Improvement Services:
SBC would always endeavor to deliver the best customer services for the fulfillment of
insurance, reinsurance and risk management needs and problems to the insurance
market in
Bangladesh. On the other hand, SBC provides risk improvement services to its valued
clients through Pre-underwriting inspection services. SBC has the opportunity to take the
necessary help and advice from the foreign reinsurer regarding risk improvement
techniques.

 Human resources development for insurance

industry: To develop the human resource for the insurance industry in
Bangladesh. SBC has arranged professional training for its officers & staffs both
within the country and abroad. SBC also arranged professional training for the
officers of the private insurance companies operating in Bangladesh.
 Obtaining financing. Consumers cannot obtain a loan to purchase a home, car,
boat or airplane without proof of insurance. Likewise, business owners and would-
be entrepreneurs cannot obtain financing to buy a commercial building or
commercial equipment, or to otherwise invest in their business, without proof of
insurance. Lenders won’t lend without proof of insurance, because the risk would
be too high. Without financing, businesses are unable to expand, and when
 businesses are unable to expand, they do not create jobs. In fact, they may lay off
some of their employees. Without jobs, consumers have less money to spend and
the economy stagnates. Over time, peoples’ quality of life suffers because their
income decreases.
 Expanding business. Whether businesses are launching a new product, signing a
new sales contract or purchasing a new company, the business needs assurances
that the other party is conducting business in good faith. Insurance provides the
necessary protection, in case business doesn’t proceed as planned. Likewise,
businesses would be reluctant to hire new employees if not for workers’
compensation insurance, which protects the employer while providing the
employee with income when an accident temporarily puts the employee out of
work.
 Paying claims. The U.S. insurance industry pays out more than $300 billion a
year in policy benefits and claims. These funds help insured consumers and
businesses recover from their losses, whether it’s a loss of property, the loss from
a lawsuit or the loss of a loved one. Funds paid out by insurers enable people to
rebuild, maintain their lifestyle after a breadwinner dies or becomes disabled, and
replace property that is stolen or damaged. For businesses, payment from claims
may be necessary for a business to continue operating, but insurance is also used
to plan for succession, protect intellectual property and pay damages from
unanticipated liability. As just one example of the benefit of insurance, consider
the rebuilding taking place in New York and New Jersey as a result of damage
caused last year by Superstore Sandy. While some claims are still being worked
out, insurance companies will end up contributing $10 billion to $20 billion
toward the damages caused by Sandy.
 Funding development. Funds from premiums that are not used to pay claims and
operating expenses are invested by insurance companies. Insurers have $1.4
trillion invested in the U.S. economy, according to the Insurance Information
Institute (III).
 Insurance companies invest in bonds that are used to finance major projects, both
in the public sector and the private sector. They invest in commercial and retail
development, apartment buildings and other projects. They also invest in stocks,
which increases prices, to the benefit of all investors.
 The International Association of Insurance Supervisors (IAIS) noted that by
investing in bonds and other securities issued by financial institutions, insurance
companies provide “an important contribution to the financial soundness of banks
and more broadly to financial stability. In a similar fashion insurers are also
allocating capital to the real economy by purchasing debt securities of industrial
companies or through real estate investments.”
 Paying taxes. Insurance companies and their employees pay taxes, which fund
 government programs that help needy people, contribute to education, protect the
country, and maintain and expand the infrastructure.
 Managing their business. The III notes that there are 6,115 insurance companies
in the United States, and they accounted for 2.6 percent ($398 billion) of the
country’s gross domestic product (GDP) in 2011. The U.S. insurance industry
employed 2.3 million people in 2012, including 1.4 million who worked directly
for insurance companies.

4. Concluding Remarks:
To conclude, I would like to mention that the whole internship period was a significantly
knowledgeable journey for me which allowed me to learn and improve my skills and I
hope the significant experience will allow and help me to build a better career in future. I
think Insurance Industry is playing a significant role in the economic improvement of
Bangladesh through its risk sharing operations which motivate investment in many
important businesses. The government has now embarked on a reform program me in the
insurance sector to promote a vibrant insurance sector in our country. As a first step
towards achieving the objective, the Insurance Act, 2011 in replacement of the previous
Insurance Act, 1938, and the Insurance Development and Regulatory Authority Act, 2011
also has been passed for establishing a stronger insurance sector in Bangladesh. I am
upbeat that the new laws will help the entire insurance industry of Bangladesh to face the
challenges of the time and thus bring dynamism in this sector. While I am genuinely
joyous, I also would like to say that the proper implementation of the new act is extremely
important. As the Insurance Act 2011 is for the insurance industry, the concerned
authority should consider the interests of the insurance companies of Bangladesh as well
as the stakeholders ‘interests. Strict transparency and discipline need to be there where
around 3.0 million people are involved. In this regard I support the stand of the
Bangladesh Insurance Association that has stressed the need for formation of the
Insurance Development and Regulatory Authority and formulate necessary rules and
regulations to make the new laws effective and purposeful.
In the era of globalization, domestic market should be well organized while the legal
framework should be effective to address the changed circumstances in the business and
socio- economic entities. In order to meet the challenges caused by changes, the Insurance
Ordinance 2011 should be kept as flexible as practicable so that any change in the
operational procedure, accounting, actuarial standard that would be needed in future inline
without change in the international and domestic environment could be made without
further amendment to the Ordinance. The new Insurance Act 2011 promised to bring the
positive changes and I am looking forward for the beginning of a Globally Competitive
Modern Insurance Sector in Bangladesh.
Reference:
1. Dhaka stock exchange ltd/Sector wise company list/ insurance company
2. Google.com/search-insurance definition & insurance overview.
3. Investopedia.com/terms/i/insurance.asp
4. AftabMulla/functions-of-insurance/slideshare.net
5. pwc.com/../insurance/../insurance-risk-co..
6. toptenbrandlist.blogspot.com/2012/history-of-insurance-business
7. en.wikipedia.org/wiki/insurance