Course ID: FIN440, Section: 01

Spring 2022
Submitted to: Md. Mehedi Hasan
Date of Submission: 8th April 2022
Topic:
Types of Insurance Products in
Bangladesh

SUBMITTED BY
SYED NAZMUL ISLAM 1810336
SHADMAN SAKIB 1921196
MD. ARIFUL ISLAM 1810085
MD. ONIN HASAN 1921633
MD RAFSAN KABIR 1821473
MD. MAHDI ISLAM 1821162
Table of Contents
Letter of Transmittal ............................................................................................................................... 2
Introduction ............................................................................................................................................ 3
Types of Insurance products in Bangladesh ........................................................................................... 4
Health Insurance ................................................................................................................................... 14
Group Insurance.................................................................................................................................... 21
Motor Insurance ................................................................................................................................... 26
Insurance company operations ............................................................................................................ 30
Challenges of insurance industry .......................................................................................................... 35
Misconceptions of Insurance industry and its products in Bangladesh ............................................... 40
Conclusion ............................................................................................................................................. 42
References ............................................................................................................................................ 43

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 Letter of Transmittal

8th April 2022

Mr. Md. Mehedi Hasan

Independent University Bangladesh.

Subject: Valuation, Diversification and Portfolio Construction.

Dear Sir,

It is with great pleasure that we are submitting to you our report for the course. It is worth

mentioning that we enjoyed the whole event during our working period. It is a combined

effort to expand knowledge and understand more about how the market works in terms of

these products.

Coming up with this report was a work of patience, determination, consistency and effort. I

would like to thank and show gratitude to the team members who have been tireless with

their work and determined on making this report a reality. We are hopeful for the best

outcome of our efforts.

Sincerely,

Syed Nazmul Islam

Shadman Sakib

Md. Ariful Islam

Md. Onin Hasan

Md. Rafsan Kabir

Md. Mahdi Islam

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 Introduction

Insurance companies always work on providing money to people who have dealt with certain
damages be it life or non-life. They pool the assets from many entities as the insured and then
pay them back with a premium. There are many types of insurance companies which focus on
different services adhering to the policies. Insurance firms do not all offer the same goods or
serve the same clientele. Accident and health insurers, property and casualty insurers, and
financial guarantors are the three most common types of insurance firms. Auto, health,
homeowners, and life insurance are the most frequent types of personal insurance plans.

Life insurance firms typically issue plans that pay a death benefit to the insured's beneficiaries
in a lump amount following the insured's death. Term life insurance is less expensive and
expires at the end of the term, whereas permanent life insurance (usually whole life or universal
life) is more expensive but lasts a lifetime and includes a cash accumulation component. Long-
term disability insurance, which replaces the insured's income if they become sick or disabled,
are also available from life insurers.

Each insurance company has their own respective procedure. All of them do not operate in the
same way. Since mostly the policies differ from one kind of insurance to another. The
assumption and diversification of risk is at the heart of insurance companies' business models.
Individual payers' risk is pooled and re-distributed across a wider portfolio under the basic
insurance concept. The majority of insurance firms make money in two ways: by charging
premiums in exchange for insurance coverage and then reinvesting those premiums in other
interest-bearing assets. Insurance firms, like other private businesses, strive to market
successfully while reducing administrative expenses. This report explores all of these
operations in the context of Bangladesh to specify the importance and the execution of such
insurance companies.

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 Types of Insurance products in Bangladesh

Life Insurance

Life insurance is a contract between an insurance policy holder and an insurance company in
which the insurer agrees to pay a sum of money in exchange for a premium if the covered
person dies or after a certain length of time.

Your recipients are free to spend the funds for whatever they like. Paying bills, paying a
mortgage, and putting a child through college are all examples of this. Having life insurance
as a safety net can help your family stay in their house and pay for the things you planned for.

Term and whole life insurance are the two main types of life insurance. Whole life insurance,
such as whole life or universal life insurance, can offer coverage for a lifetime, whereas term
life insurance only gives coverage for a set length of time.

Life insurance is designed to save your loved ones from financial ruin. There are a few more
things to think about. It's not uncommon for people to be perplexed by their life insurance
policies. Many people are aware of it but are unsure why they might require insurance. This
may cause people to put off acquiring insurance or, even worse, not acquire one at all.

If you want to ensure that your family has income and is better able to pay off debts after you
pass away, life insurance may be essential. What's more, here's why it's significant.

Make provisions for the loss of income:

One of the main reasons people purchase life insurance is to ensure that their loved ones are
not financially disadvantaged if they pass away unexpectedly. If you're married with children,
this is very important, especially if you're the primary breadwinner. Your family might not be
able to afford your mortgage or cover college prices without your income. Your life
insurance death benefit may be used to cover these costs.

Also, if you are a stay-at-home parent, keep in mind that the value you bring via your work
with your children and at home is significant. If you were to die, your spouse would be
responsible for paying for the services you give in caring for your family.

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Even if you don't have a spouse or children, life insurance is essential. If you share finances
with a spouse, for example, they may not have enough money to cover the bills you regularly
split.

Assist with debt repayment:

Paying bills and other sorts of debt is the same way. If you die with credit card debt or a car
loan, for example, that debt will be paid off by someone else. It could be your spouse or
lover, or, if you're single, your parents or siblings, in many circumstances. These expenses
can be covered by life insurance, so your loved ones aren't stuck with the bill.

Funeral and burial expenses may be covered by your life insurance policy. This can assist
relieve the financial strain on your loved ones.

Reduce your stress level:

It's often an emotional and stressful period when a loved one dies. If you're worried about
replacing your income or paying your bills, this already stressful period might become even
more difficult.

While your life insurance coverage won't fix all of your problems, it can help your family get
back on their feet. Knowing they'll be able to pay off their mortgage with your death benefit,
for example, can offer your spouse the time they need to go forward at their own speed.

Some popular life insurance claims include:

People believe they don't need life insurance for a variety of reasons. Here are a few of the
more prevalent ones, along with why they might not add up.

I'm covered by my employer's life insurance: Many employers provide group life insurance
coverage worth one or two times your annual income. While this is a good start, in many
cases, your loved ones will not be able to replace your income in the long run. Furthermore, if
you leave your employment, your insurance policy is unlikely to follow you.

It's just too costly: Because there are so many different types of life insurance policies,
almost anyone can find something that fits their budget. If you're young and healthy, you'll
find that monthly premiums are relatively low.

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I've never heard of life insurance before:

Life insurance can be a complicated subject at times. It can be quite beneficial to meet with a
financial advisor or a life insurance agent. They can help you figure out which insurance are
appropriate for you and how much coverage you need.

I can invest that money toward my savings:

Life insurance should not be included as part of your retirement strategy. It's there to assist
your loved ones after you've passed away.

I also do not have time:

Many life insurance policies allow you to complete most of the paperwork from the
convenience of your own home. If you need to take an exam, it should only take you
approximately 30 minutes.

When you pass away, life insurance can assist relieve some of the financial strain on your
loved ones. Finding a life insurance coverage that meets your needs and assists your family
when they are in need doesn't take long.

Reasons to Have a Life Insurance Plan

1. Long-term financial goal:

Life insurance plans assist you in building a sizable financial corpus for your long-term
financial goals by allowing you to save money while being protected by a life insurance
policy.

2. Ensure the future of the child:

Every parent wishes for their child to have the finest potential future. Even if you are not
present, life insurance plans ensure that your child has the greatest possible future.

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3. Liabilities and loans:

If you've taken out a loan, you should always think about getting a term plan. It ensures that
your loan is not burdened on your dependents while you are away. Term insurance policies
are the most cost-effective solution to cover a house loan's principal as well as the
policyholder's family's financial security in the event of his or her untimely death.

4. Planning for a child's education:

Child education plans assist you in saving and accumulating funds for your child's future
educational needs. These plans include life insurance, which ensures that the cash insured is
paid to the kid even if the policyholder dies unexpectedly.

5. Spouse who is reliant:

If your spouse is financially reliant on you, you should purchase life insurance. This will
ensure that your spouse is financially self-sufficient in the event of your absence.

6. Retirement planning:

Life insurance products assist you in investing and building a financial corpus for your
retirement, allowing you to live comfortably once you retire.

The advantages of term life insurance:

Typically, less expensive

It's easier to comprehend because it's solely an insurance product.

It could be converted to whole life but check before you buy.

You can walk away from it if you no longer need it or can't afford it, and you won't lose
anything other than the premiums you've already paid.

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It offers death protection insurance at a fixed rate of payment for a limited, specific period of
time. If you die within the time period defined in the terms, the insurance company will pay
your beneficiaries the face value of your policy.

Term life insurance is frequently less expensive than other methods of insurance, particularly
when obtained when the policyholder is young. It can be an excellent choice for short-term
goals, such as until your youngest child graduates from high school, while you pay off a loan,
extra insurance protection throughout child-rearing years, or until you can afford a more
permanent type of life insurance, due to its affordability. The cost and availability of the type
of life insurance that is right for you are determined by a variety of criteria, including your
age, health, and the type and amount of insurance you require.

Permanent life insurance, such as whole life, universal life, and variable universal life
insurance, differs from term life insurance. Several kinds of perpetual life insurance provide
protection for the duration of the insured person's life at a fixed premium. Term life insurance
also has no monetary value, unlike other types of life insurance. All premiums paid go toward
covering the cost of insurance protection, and you don't get a refund when the policy expires
at the conclusion of the policy period.

The biggest disadvantage of term insurance is that your premiums will increase every time
your policy is renewed because your risk of dying increases as you get older. The insurance
company's risk increases when the possibility of your death increases, and it becomes more
likely that the insurance company will have to pay a death benefit. As a result, when you
need it most – in your older years — term insurance can become prohibitively expensive.
Renewable life insurance, on the other hand, is offered, in which the annual premium paid
remains the same for the term of the contract.

Level terms of 5, 10, 20, and 30 years are available, as well as a level term payable at age 65
or older.

There are costs associated with purchasing life insurance, just as there are with most other
financial decisions. Mortality and expenditure charges, as well as significant tax
ramifications, are examples of contract limitations, fees, and charges. Surrender charges are
usually imposed if the contract owner surrenders the policy within the early years of the
contract. Any assurances are reliant on the issuing company's capacity to pay claims. Life

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insurance is not backed by the FDIC or any other government agency; it is not a deposit of
any bank or savings association, and it is not guaranteed or endorsed by any bank or savings
association.

The material in this article is not intended to be tax or legal advice, and it should not be used
to evade federal tax penalties. An independent professional advisor should be consulted for
tax or legal guidance.

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The benefits of whole life insurance:

• Life insurance (whole life)

• Has a cash value component that you can withdraw or borrow against.
• Can be used for tax-advantaged estate planning

Is it a good idea to live your entire life:

Including the life insurance, whole life insurance has a second key benefit: you're
accumulating an asset, cash value, which grows tax-deferred in your policy and can be used
in a tax-advantaged manner over your lifetime. 1,2,3. For example, the cash value can be
important in retirement and financial planning. See how the Carlsons used their cash value
benefit to fund their next steps as a family.

Consider the insurance company's six top perks when deciding which policy is right for you.

The price is certain to remain the same:

Your monthly premium payments, or the amount you pay the insurance carrier, will never
increase. These premiums may feel considerably more affordable in the long run if they
remain unchanged. While whole life premium payments are greater in the beginning than
term life premium payments, the benefits grow dramatically with time. In terms of retirement
planning, this would imply that life insurance would be assured to be available at a fixed cost
during your senior years.

Fixed benefit for your beneficiaries:

Even if you're no longer here to give financial support for loved ones, the decisions you make
now will shape your future. A death benefit is a set amount of money that is guaranteed to go
to your heirs or other designated causes when you die. This life insurance will not vanish if
premiums are paid; it is a financial product that will last the rest of your life.

Tax-advantaged benefits

Your cash values grow tax-deferred in addition to the tax-free sum you'll be leaving to your
loved ones. If you need a loan, you can borrow against the value (pay the money back in, or it
will reduce the amount going to your heirs). After you pass away, the tax-free assets you
leave to your heirs or causes will be easier to obtain than other assets. While taxes may have
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an impact on your property and other components of your estate, and probate court may take
time, life insurance isn't included in that bundle. 7 The funds may also save your heirs or
estate from having to pay for your funeral.

Potential dividends:

If you buy a whole life insurance policy from a mutual insurance company, you may receive
annual dividend payments on your policy.These payments, while not guaranteed, are a way
mutual companies share with policyholders. Dividends can be reinvested into your policy to
help build cash value faster. Another financial planning tactic is to use dividend payments to
buy additional insurance and increase the total “death benefit” (the amount of money that will
be payable to your loved ones). You can also let the dividends pay some of your premiums.
Lastly, you could have the dividends paid to you in cash.

Top 4 benefits of a whole life insurance policy:

Whole life insurance has no expiration date:

One of the most enticing features of buying whole life insurance is that your death benefit
will never expire as long as you pay your premiums. It will be paid regardless of when you
die, whether it is tomorrow, five years from now, 80 years from now, or even later.

That's a fundamental distinction between whole life insurance and term life insurance, which
only pays out a death benefit if you die within the policy's coverage period (or term).

Whole life insurance premiums remain unchanged:

Premiums are the payments you make to an insurance provider on a monthly basis to cover
the cost of your coverage. You will be obliged to pay premiums whether you have a whole
life or other type of insurance coverage.

Some insurance policies may require you to change your rates over time (or allow you to do
so). However, the premiums you pay for your whole life insurance policy are guaranteed to
be the same for the duration of your coverage. Your premium also contributes to the cash
value of your policy.

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The cash value of whole life insurance grows over time:

One of the most important living benefits of whole life insurance is cash value. Every
premium payment contributes to the cash value of your policy, which grows more slowly in
the early years of the policy. That money becomes cash, which you can withdraw at any time
for any reason. It might become an essential, stable aspect of your financial plan because it is
guaranteed to never go down.

Whole-life insurance coverage can pay off in the following ways:

1. Many life insurance firms give dividends in addition to assured cash value increase.

2. While dividends can be taken as cash or used to pay part or all of your premium, many
customers choose to reinvest them in their policies. This can speed up the accumulation of
your death benefit and cash value.

Whole life insurance has the following tax advantages:

There are several important tax advantages to owning life insurance. The death benefit is
exempt from taxation. You can also borrow against your cash value in retirement to weather a
market slump without paying taxes as long as the loans are properly repaid.

Furthermore, cash value increase (in addition to dividend growth) is tax-deferred; you will
only incur tax on the growth if you surrender your policy and take the money out. You can
always deduct the amount you paid in premiums from your taxable income.

The advantages of whole life insurance's living benefits include:

As you can see, whole life insurance can be a valuable financial asset that you can use during
your life in addition to providing a guaranteed death payout. The so-called "living benefits"
of whole life insurance, such as the cash value your policy builds, can make it one of the most
flexible aspects of your financial plan.

A benefit rider who is still alive:

A rider is an optional benefit to a life insurance policy that costs extra money. Consider it as
if you were upgrading the amenities of a new automobile, such as adding a roof rack or
leather seats. A living benefit rider allows you to take use of your death benefit while you're
still alive, such as for a qualified long-term care event. Another type of rider is a waiver of

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premium benefit, which allows you to keep your insurance active if you're unable to pay your
premiums due to specific qualifying circumstances. A financial advisor can provide you with
further information about the various possibilities accessible to you.

Find the best life insurance coverage for you by doing the following:

Although it may appear that you must pick between whole life and other types of life
insurance, many financial plans really include a combination of policies, such as term and
whole life insurance. This gives you additional options for preparing for any of life's
numerous possibilities. A financial advisor can assist you in determining the correct
insurance mix for you and demonstrating how it fits into your entire financial plan.

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 Health Insurance

Health insurance is a type of insurance that covers medical expenses due to illness. These
costs may be related to hospital stays, medication costs, or doctor consultations.

Health insurance is a contract that obliges the insurance company to pay some or all a
person's health care costs in exchange for premiums. Specifically, health insurance typically
covers medical expenses, surgery, prescription drugs, and sometimes dental expenses
incurred by the insured. Health insurance may reimburse the insured for expenses incurred
because of illness or injury or pay the health care provider directly.

Types of health insurance:

There are two basic types of health insurance:

1. Mediclaim plans

Hospital or medical insurance plans are the most basic type of health insurance plans. They
cover the cost of treatment when you are hospitalized. Pay for actual expenses incurred at the
hospital by submitting the original bill. Most of these plans cover the whole family up to a
certain limit.

2. Critical illness insurance plans

Critical illness plans cover specific life-threatening illnesses. These conditions may require
prolonged treatment or even lifestyle changes. Unlike hospital stay plans, payment is made
on Critical Illness coverage selected by the client and not on actual costs incurred at the
hospital. Insurance provides the ability to use funds for lifestyle changes and medications. In
addition, it is an income replacement during times when you are unable to return to work due
to illness. Payments under these plans are made upon diagnosis without the need for an
original medical bill.

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How health insurance works

Health insurance can be difficult to manage. Managed care plans require policyholders to
receive care from a network of designated health care providers for the highest coverage. If
patients seek out-of-network care, they pay a higher percentage of the cost. In some cases, the
insurance company may even refuse to pay for services obtained outside of the network.

Insurance companies may also refuse to cover certain services obtained without prior
authorization. In addition, the insurance company may refuse to pay for a brand-name drug if
a generic version or equivalent is available at a lower cost. All these rules should be written
in the documentation provided by the insurance company and should be carefully reviewed.
You should check with your employer or company directly before incurring a large expense.

WHY MEDICAL INSURANCE IS IMPORTANT?

Savings

The best part about health insurance is that it helps keep your savings intact in the event of a
medical emergency. The insurance company will cover all expenses like hospital stay,
medication/medication, etc. A health insurance plan is a reliable way to ensure a healthy and
financially stable future. Family health security

You need to protect your health and that of your family members or loved ones. You can
protect your family members by regularly investing in a family float plan where you can also
get health insurance for your parents. This type of health insurance ensures that all types of
medical treatment are covered. High medical costs

Due to the high cost of medical services, you may not be able to afford the treatment. But
when you join health insurance, you can get quality treatment at the best hospitals in the
network. Network hospitals are where insurance companies work with hospitals to help you
get cashless treatment. With this facility, the insurance company will pay the bills directly
with the hospital. Lifestyle change

Our busy lives have influenced our life choices. Stressful work, junk food, smoking,
environmental changes, ... affect our overall health, which can lead to deadly diseases like
cancer, liver problems, kidney failure, etc. In such cases, health insurance will cover medical

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and surgical expenses incurred during the illness. This is an established way to respond to
medical or health related emergencies.

BENEFITS OF A BEST HEALTH INSURANCE PLAN:

1. Financial Security

With the passing of time, the medical costs are rising and lifestyle related diseases such as
diabetes, cancer, stroke, etc. are also surging. In such a case, having health insurance in the
present time is of utmost importance as it can financially protect you against the unavoidable
expenses. This way, your savings also remain protected.

2. Treatment at home

Some health insurance funds offer home care coverage, where treatment for certain
conditions is done at home under medical supervision. Note that there are limits on the
amount and number of days when using coverage for home care.

3. Free health check

Health insurance understands that health is wealth; therefore, it should be under constant
health monitoring. As a policyholder, you are eligible for a free preventive health checkup
after an every 4 to 5 claim free year. Some insurers also offer cashless treatments at their
network hospital.

4. Tax benefits

You can avail tax benefits under Section 80D of the Income Tax Act. As part of the law, you
can avail tax benefit for the expenses incurred on the preventive health checkup of parents
above 60 years. Below is a table showing tax deductions for different types of health drinks:

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How to choose good health insurance?

Anyone with a health insurance policy will tell you that buying a health insurance policy is
one of the smartest financial decisions anyone can make. Now that you have decided to
purchase a health insurance policy, you need to know how to choose a good health insurance
plan that will take care of all your needs. Here is a list of benefits that any good health
insurance plan should give you:

1. Protection against many critical illnesses

2. Flexibility in choosing your health insurance

3. No increase in premium during the policy term, even if your health condition
changes

4. A long-term policy that covers you even as you age

5. Extensive hospital network for easy access to medical care

CHARACTERISTICS OF HEALTH INSURANCE

The most prominent features of modern health insurance plans are

Cover

Insurance plans provide comprehensive coverage for all expenses that may arise in the event
of a health-related emergency. It includes hospitalization costs, post-hospitalization costs,
ambulance costs, all under the same contract. Critical illnesses such as cancer, kidney failure,
and stroke are also covered by the health insurance plan. Renewal discount

No claim bonus is offered to the insured in the following year if no claim was made in the
previous year. This bonus can be in the form of a high premium reduction, or it can be an
increase in the sum insured. Some insurance companies also offer a free medical check-up if
they have a good track record. Co-payment

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Copayments are an option offered by most insurance companies to help reduce annual
premiums. A percentage of the total cost is paid by the insured while the insurance company
pays the balance. Fiscal advantage

Among the lesser-known health insurance benefits is Section 80D of the Income Tax Act of
1961, health insurance policies that entitle you to tax benefits. The premium paid for a health
insurance policy is tax-deductible, both for your policy and for your family members.
Flexible

An insurance plan offers great flexibility to the insured. The policyholder can reduce the
premium after a certain period or can change the term of the policy altogether. Health
insurance providers are also willing to adjust the terms of your plan based on changes in your
lifestyle, such as a change in your marital status.

What does your health insurance policy cover?

1. PERSONAL OR FAMILY HIGHLIGHTS PLAN:

The first step is to choose the type of plan you want to apply for. In most cases, family
floating plans are advantageous and beneficial. These include your family members (spouse,
children, parents-in-law) and you, and are relatively cheaper than individual packages. In
addition, these plans are great value for money, as the risk of each member getting sick at the
same time is very low. If any of your family members are over 50, you can purchase
individual insurance for them, which will help cover any health-related claims for that elderly
person.

2. CHOOSE INSURANCE AMOUNT

Medical costs add up, and health insurance is supposed to help you cover your expenses, no
matter what. When choosing a health policy, always look for one that offers coverage and the
maximum amount for your health claims.

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3. COPY OF CLAIM:

Every insurance policy has a provision called a copayment clause. This means that for each
claim made, you will incur a certain percentage of the requested amount. For example, if your
copayment terms mention 10%, for a claim of Taka 50,000 you will have to pay Taka 5,000
out of your own pocket. It is essential that you understand and accept this term before
implementing the policy.

4. HOSPITAL NETWORKS:

Review the list of hospitals included in your policy, do so with your health requirements, and
see if specific hospitals meet your needs. Almost all policies cover pre/post hospitalization
costs. This includes costs incurred during the hospital stay and costs after discharge, related
only to the illness. To be able to claim, it is necessary to be hospitalized for at least 24 hours.
If you are married and planning to start a family, you also want your plan to cover maternity
benefits. Check waiting times, extra limits, and any exclusions that may be included in your
maternity insurance.

5. Pending PHASE FOR PRIOR-TERM CONDITIONS:

If you have an existing condition, you will need to wait a waiting period before you can claim
money from the policy for your medical expenses. Most contracts have a waiting period of 2
to 4 years. It is advisable to look for a policy with a lower waiting time.

6. Life extension:

When you get older, that's when you are more likely to use your health insurance policy.
Looking for a policy without any age limits to innovate. Especially essential is that you plan
to cover parents in the plan.

7. Compare premiums:

Many online tools allow you to compare premiums with the benefits you will get. Comparing
premiums will keep you from paying higher amounts for lower claims and vice versa.

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While not an exhaustive list, these suggestions should suffice to get you started. There are
many policies available and choosing anything is a tedious task. Do your due diligence and
find the policies that work best for you and your family.

Should I buy a Mediclaim plan or a critical illness plan?

The Mediclaim program will reimburse all your hospital expenses or pay your hospital bills
through a cashless system. With a critical illness plan, you will receive a one-time payment
when a critical illness is discovered. You don't need to be hospitalized for the same things. If
you are unable to work due to illness, you can use this money to replace your monthly
income. You can even use the money to cover expenses related to medical visits,
medications, medical tests, or any other costs that may arise during this time. That's why you
need both - a Mediclaim plan to cover your hospital costs and a critical illness plan to cover
your loss of income and other expenses due to illness. disability.

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 Group Insurance

A group insurance policy is a contract of insurance with a firm or an association that covers a
group of people who work in similar vocations. The organization should be structured in such
a way that new members are constantly added while old ones retire. Individual members are
not required to sign any documents, and the benefit is available to the entire group.

There might be a number of group plans, some required by law and some voluntary. The
Group Gratuity Scheme is one such scheme in which the company can guarantee the legal
responsibility of gratuity to its employees with the insurer. Similarly, any employer's
superannuation responsibility can be paid by assuring it through a Group Superannuation
Scheme. The Group Savings Linked Insurance Scheme is designed to provide low-cost life
insurance, instill a savings habit in employees, and give insurance benefits to the family in
the event of an unexpected death.

Members of a formal group, such as employees of a business or members of an organization,

are covered by group insurance. Individual insurance, in which single policies are offered to
one person at a time, and social insurance, which is sponsored by the government (for
example, unemployment insurance, social security), are two types of group insurance.

The notion of group insurance is said to have originated in ancient Rome with the Roman
funeral societies, but the first modern group policy was implemented in 1912, covering
employees of the American retail merchandising firm Montgomery Ward & Co. Group
insurance is available in every country where private insurance firms do business, and it is
becoming more popular every year.

Group insurance comes in a number of different forms. The most frequent type of life
insurance is group life insurance. It's commonly sold as group term insurance, which lasts for
a set amount of time and has no financial value. Group permanent life insurance is sometimes
available. This kind accumulates cash value and remains in force until the policy matures and
is cashed, or until the insured dies. Group health insurance comprises group medical
expenditure insurance, which pays a portion or all of an insured's hospital, surgery, and other
medical bills, as well as group disability income insurance, which replaces a portion or all of
an insured's lost income due to illness or accident. Both life and health insurance are
combined in group accidental death and dismemberment and group travel accident insurance.

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A number of characteristics are shared by all group insurance plans. The insurer only writes
and sells one contract per group, and it is with the employer or organization rather than with
the individual members. As a result, significant cost savings in marketing and administration
are feasible.

After a group insurance has been in effect for a certain amount of time, the insurer can base
premiums partially on the experience of that specific group, or entirely on the experience of
that particular group in the case of very large groups. Furthermore, group insurance plans are
often renewed and seldom need to be resold or renegotiated. As some members leave the
organization, other members join, and the group as a whole grows in size.

These qualities make group insurance plans appealing to insurers since they are less
expensive, have a bigger volume, and are at least slightly more predictable than individual
insurance. The insured is attracted to group insurance because of the reduced cost and the
assurance that coverage would be available without the need for a medical examination or
other proof of insurability. Without the notion of group insurance, those who are considered
unacceptably high risks by insurance firms would be unable to receive any life or health
insurance at all. Another advantage of most group plans is that individuals who quit the group
can maintain their insurance by switching to an individual coverage.

Only in exceptional circumstances has group insurance been written for as little as two
persons. However, in most cases, a minimum of ten people is required. Another stipulation is
that the group must be formed for a reason other than to obtain insurance. The types of
groups covered vary, but the most prevalent are groups made up of workers of specific
organizations (businesses, non-profit organizations, and government entities). Substantial
quantities of group insurance are also issued for multiple-employer groupings, labor unions,
professional organizations, college alumni groups, veterans associations, and other common-
interest organizations. The largest group life insurance scheme in the world is that covering
civilian workers of the U.S. federal government.

INDIVIDUAL INSURANCE VS. GROUP INSURANCE

Individual Insurance: Individual insurance is a contract between the insured and the insurer,
or insurance business. The choice to insure is optional, and the circumstances under which
the insurance age cover is provided are determined by the insurer's risk assessment of the
individual.

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Group Insurance: Group insurance, on the other hand, is a single contract that covers a large
number of people. The conditions of the insurance contract are determined by the
characteristics of the entire group.

An insurance firm issues a master policy as proof of a contract with another legal body, such
as an employer, trustees, or an organization. The master policy specifies the number of lives
that will be covered, the benefits that will be provided, the amount of contribution that will be
paid, and other terms and conditions that will apply to the members of the participating
group.

It is a process of group selection rather than individual life selection. Although it is

understood that every group will have some substandard lives, group underwriting assumes
that the insurer can reasonably assess the overall risk based on the group's general
characteristics. The group is expected to be homogenous and large enough to allow for a
reasonable estimation of the number of claims by death based on the average.

The level of coverage is determined by a formula rather than by the individuals who make up
the groups. Simple standards of insurability are used to give insurance on the lives of all
members up to a limit known as the "Free Cover limit." The term "simple rules of
insurability" refers to not being away from work due to illness on the date of insurance. The
absence of a cover limit does not imply the absence of an insurance payment. It's free to the
degree that no proof of health is required.

Classification of a “Group”:

1) By nature of vocation, it should be homogenous. As a result, members of a social club, a

political party, or a religious organization cannot be considered a group for the purposes of
insurance.

2) Insurance must be incidental, which means the group cannot be created just to gain
insurance.

3) To operate on behalf of all members, the group must have a single central administrative
apparatus.

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4) The organization should be structured in such a way that fresh members join year after
year, ensuring that the group does not become static or lapse due to a lack of members. This
criterion also assures that, over time, the group's average age does not rise to the point where
it is no longer insurable.

5) Another crucial need is that a significant number of the group's eligible members
participate in the group plan. This would ensure that the insurance business is not subjected to
adverse selection and that the proportion of damaged lives is not excessively large.

6) In most cases, a minimum group size is required.

DIFFERENT TYPES OF GROUPS

Employer-Employee Group

In this situation, the employer purchases a master insurance for the benefit of its employees,
and the plan is often administered by a trust. Occasionally, the employer will purchase such
group insurance to satisfy a legal need. Employee Gratuity Benefits and Employee Deposit
Linked Insurance Schemes are two examples.

The plan might be contributory or non-contributory, or the company and workers can both
contribute. All eligible workers must join the program if the employees do not contribute and
the business covers the whole expense. If, on the other hand, the plan is contributory,
meaning that it is funded by employees alone or jointly with the employer, a high level of
participation by eligible employees at the start and mandatory involvement by all new
employees thereafter is required.

Creditor - Debtor group

The creditors purchase the master insurance to cover the outstanding balance of the
borrowers' debts. In the event of a debtor's death, the claim amount will be used to the
repayment of any outstanding loans in his or her name. A creditor might be an employer, a
home loan organization, a cooperative credit society, a credit card firm, and so on.

Professional group

These might be groups of physicians, attorneys, accountants, engineers, journalists, pilots,

and insurance agents, for example.

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Other groups

Other types of organizations, such as cooperative societies, welfare funds, members of

resident societies, bank depositors, and so on, may be eligible for group insurance.

As a consequence, group insurance may be arranged to fulfill a wide range of demands, both
of a group and of an individual. Benefits provided via group insurance are tax deductible in
the same way that benefits received through individual insurance schemes are.

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 Motor Insurance

Motor insurance is insurance that covers any privately owned vehicle. Similar to other types
of insurance, motor insurance also requires a premium to be paid each month. In Bangladesh,
motor insurance terms last 1 year. Motor insurance was deemed mandatory in Bangladesh by
the Bangladesh Road Transport Authority (BRTA) and Insurance Development and
Regulatory Authority (IDRA) in 2018.

Motor insurance may be divided into 3 categories:

• Private Car Insurance Policy,

• Two-wheeler Insurance Policy, &
• Commercial Vehicle Insurance.

Private Car Insurance Policy covers motor insurance which is taken for any privately
owned car for individuals. This insurance covers the vehicle against damages caused by fire,
accidents, natural disasters. It also includes damages for theft of the insured vehicle. This
insurance also covers any damages and/or injuries caused to a third party.

Two-wheeler Insurance Policy is similar to the Private Car Insurance Policy but applies to
privately owned motorbikes.

Commercial Vehicle Insurance covers similar damages to which of Private Car Insurance
Policy but it covers those for vehicles that are not for personal use. Vehicles such as Trucks,
buses, heavy commercial vehicles (18-wheelers, etc.), light commercial vehicles and more.

Why is Motor insurance important?

Motor insurance protects against sudden costs that arise with any unforeseen events. Given
that motor insurance also covers for passengers present in the vehicle, it creates more
incentive to have the insurance rather than not.

Multiple insurance companies offer Motor Insurance such as, Meghna Insurance Company
Limited, Phoenix Insurance, etc.

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Motor Insurance coverage is determined using factors that directly affect the insurer and
insured. For each of the motor vehicle types there may be different sets of rules:

· Private Car:

1. Horse power or cubic capacity of the vehicle

2. Insured’s estimated value of the vehicle

3. Seating capacity of the vehicle

· Commercial Vehicle:

1. Passenger Carrying:

Type of vehicle

Insured’s estimated value of the vehicle

Seating capacity of the vehicle

2. Goods Carrying Vehicle:

Carrying capacity

Insured’s estimated value of the vehicle

· Motorcycle:

1. Cubic capacity of the vehicle

2. Insured’s estimated value of the vehicle

There are categories to Motor Insurance:

(1) Act Liability Policy Form (Third Party): A common policy form for all types of vehicle,
i.e., Comprehensive Policy Form: Separate policy forms to be used for private vehicle,
motorcycle & commercial vehicles.

· Policy form shall contain two sections:

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(i) SECTION 1, Own damage section. Under the Own damage section, the loss or damage to
the insured vehicle to be covered.

(ii) SECTION 2, Act liability section. Under the Act liability section, the liability of the
insured, as per motor vehicle Amendment Act, 1991 shall be covered.

(2) Act Liability Policy Form (Third Party): A common policy form for all types of vehicle
i.e., private vehicle, motorcycle & commercial vehicle to be used. Liability of the insured
made compulsory by motor vehicle Amendment Act, 1991 as well as additional liabilities
may be insured.

Coverage via Comprehensive Policy:

1. By fire, explosion, self-ignition or lighting.

2. By burglary, house-breaking or theft.
3. By riot & strike including malicious and terrorist activities.
4. By earthquake (fire and shock damage).
5. By flood, typhoon, hurricane, storm, inundation, cyclone, hailstorm, frost,
tempest.
6. By accidental external means.
7. Whilst in transit by road, rail, inland waterway, lift, elevator or air.
8. Act liability insurance risks.

Coverage for Act Liability: (Coverage, damages, tariffs and premiums depend on company to
company.)

Death 20,000 BDT

Grievous Injury 10,000 BDT

Minor Injury 5,000 BDT

Property Damage 50,000 BDT

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In Bangladesh, road accidents take place on a daily basis and it not only causes damage to the
vehicle but also the lives of innocent passengers and bystanders. Thankfully, not all of them
are required to have any insurance, unless they have one already i.e. life insurance. However
as for the motor insurance the liabilities of other parties is on the vehicle owner who perpetrates
such road accidents. In recent years there has been an urgency to mandate all private or public
vehicle owners to have insurance written on their vehicles. There are many bike owners in
Bangladesh who are not only under 18 but also don't bear their own expenses. For such
individuals the ones who carry out their expenses are liable to the damages, i.e. the parents will
have to pay for the insurance if the law mandates them to.

There are multiple insurance companies in Bangladesh who provide motor insurance services.
They include: Green Delta Insurance, Desh Insurance, Provati Insurance, Phoenix Insurance
etc. They all cover the before mentioned perils and damages adhering to the comprehensive
policies. The only difference among them is the amount of premium earned from each of the
insurance companies. Yet, the number of contracts written over motor insurance is not that
significant. Since only car owners tend to have motor Insurance, some companies provide car
only insurance dubbed "Car Insurance". As for this insurance the other vehicles are excluded.
However, it is only a niche service.

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 Insurance company operations

Insurance companies provide insurance, but behind those insurance products there are many
more steps and other work they have to do in order to remain both operational and profitable.
Insurance company operations are:

• Rating and Ratemaking

• Underwriting
• Production
• Claim settlement
• Reinsurance
• Investments

Ratings and Ratemaking

Ratemaking is the act of pricing insurance products and the calculation of insurance
premiums.

Rate is the price per unit of insurance and exposure unit is the unit of measurement used in
insurance pricing. The following equation is applied:

The premiums that are paid by the insured have to be sufficient for the payment of all claims
and expenses during the policy period. A company’s previous loss experience and industry
statistics are used in order to decide the rates and premiums for the products. This is done by
an actuary who is responsible for the rates and premiums.

Underwriting

Underwriting is the system used to select, classify and pricing for applicants whether people
or firms. This is a very important process used by insurance companies as this determines
whether processing the insurance for a person or firm is a good decision on the part of the
insurance company. This system verifies the amount of risk that may be involved in the
insurance of said person or firm.

Policies regarding the insurance products that are in-line with the insurance company are
described in the Statement of underwriting policy. The objectives define the acceptable
classes of businesses, the amount of insurance that can be written and more.

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As stated before, underwriting is an important part of the insurance industry. The key
objective of which is to ensure a profit from the underwriting. Companies are selected from
criteria defined by the insuring company’s standards so as to keep the risk to a minimum.
This in turn reduces the number of companies or individuals which are selected to be insured
that are graded as adverse selections. An adverse selection is when people of higher-than-
average risk try to get insurance at standard rate which would, more often than not, lead to a
loss for the insurer.

Maintaining a standard of equity among the policyholders is key, this is so that one group of
policyholders are not subsidizing the insurance costs of another group.

Responsibilities of an underwriter:

Underwriters are responsible for finding out information about the person or firm trying to be
insured, through an agent who is responsible for going into the field and finding out the
required information. This information comes from the applications, the agent’s report,
inspection report, physical inspection and in regard to medical purposes a physical inspection
and attending physician’s report.

Reviewing this information, an underwriter can choose to accept the application, accept the
application subject to restrictions or modifications or completely reject the application.

Production

This is another key operation of an insurance company, the marketing and sales of insurance
products. This is because having products to sell but not having potential customers not know
about them means we are not selling any products.

Insurance companies have either their own marketing and sales departments or have agencies
employed for selling their products.

Agents are also called producers, these agents are also expected to be competent
professionals and have excellent knowledge regarding their area of insurance. This is
important because agents are also responsible for identifying potential insurance customers
who find out their needs, requirements and offer them a product that would suit their needs.
An agent’s work does not end after the sale of a product, rather they have the responsibility of

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following up with the customer to keep their information and any changes in requirements up
to date.

Claim Settlements

Claims settlement is mostly associated with the insured’s point of view. According to their
perspective insurance companies deal with settling claims which can satisfy the insured’s
needs and requirements. Claim settlements include three major goals which are required to be
fulfilled. First is to verify that the loss is covered by the insurance company. An investigation
is carried out to see if everything regarding the loss has been covered. Secondly the insurance
company has to pay the insured fairly and promptly. In many cases, some corrupt insurance
companies have failed to do such. Since not all insured individuals are quite knowledgeable
in this regard, many incidents have taken place where the insurance company has not
provided the insured their fair payment. This is tightly associated with the reputation of the
insurer. Legal actions are often taken when claim settlements fail to fulfill the first two goals.
Lastly, to provide the insured personal assistance. This may not always be necessary, but
when an insured has to deal with a major loss which can be financially lethal for them.
Sometimes the insurer provides regular assistance even if the loss has taken place only once
in the lifetime. This also comes with consulting with the insured and providing proper advice
to move on to the next step.

Claims settlement includes four major parties: agents, staff claims representatives/staff
adjusters, independent adjusters and public adjusters. The agents have the authority to settle
small scale claims submitted by the insured to the insurer. The submission of documents and
such is done directly to the agents. From then, they carry out their duties to cover the loss and
meet the objectives of the insured. As for staff adjusters, they are salaried employees who
work directly under the insurer and work as claim representatives. Independent adjusters can
be an organization or just one individual who does not work under the insurer and finally
public adjusters administrate the representation of the insured, rather than the insurer or the
insurance company they work under. In Bangladesh, there aren't any public adjusters since
most of the time insurance companies don’t tend to employ individuals as public adjusters,
mainly to have them work in their favor most of the time.

As stated, in cases of claim settlements the objectives have not been met in some incidents.
Since claim settlement is associated with the insurers’ reputation it also brings the question of

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trust. In recent years, claims settlements in Bangladesh have been at an all time low even
though the procedure has gotten a lot better. Claim settlements can be submitted online
through proper documentation. Yet, the number of claim settlements is still very low.
Because not all insurance companies have been able to digitalize their claim settlement
services. Some have failed to gain the trust of their potential clients as well. As of 2021, the
claim settlement rate rose in the life and non-life insurance sector, around 22 percent of
claims are still refused, which is the main cause for low confidence in the sector.

Reinsurance

Reinsurance has to be the most helpful operation for the insured group in terms of insurance
operations since they are the ones who favor it. Reinsurance is basically the process where
the primary insurer that initially writes the insurance, transfers it to another insurer. The
writing includes all the potential loss related to the insurance. The initial insurer or the ceding
company transfers the writing to the reinsurer on the client's behalf.

In Bangladesh, according to the Insurance Corporation Amendment Act 1990 and Insurance
Act 2010 it is mandatory for the Bangladesh based private non-life insurers that they would
reinsure 50% of their re-insurable risk with Sadharan Bima Corporation (popularly known as
SBC), the state-owned non-life insurer and reinsurer in Bangladesh, and the remaining 50%
is allowed to place with any Reinsurers either home or abroad. Reinsurance has various
reasons to be applied but it’s not the same all over the world.

The three main reasons Bangladeshis want reinsurance are to get proper protection against
catastrophic loss, enabling themselves to retire from a region or territory and getting
underwriting advice. As for the insurer, they focus on reinsurance to stabilize their profits so
no fluctuations can take place in their financial performance.

Reinsurance mostly takes place in cases of Bangladeshi immigrants. They either choose to
reinsure in the country they’re moving to or reinsure it in Bangladesh depending on their
personal and financial requirements. The insurer has to adhere to the rules and regulations of
the law, making it mandatory for them to provide such services no matter how dire the
financial performance of the insurer is. Reinsurance is only done in cases of non-life
insurance in Bangladesh. As for life insurance, there are 50% chances that reinsurance can be
done. If it is done within the same region, then there is a possibility but if it’s abroad then

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reinsurance of life insurance might not be possible due to the difference in policy of laws of
the foreign region the insured is trying to reinsure. Also, only Sadharan Bima Corporation or
SBC can provide reinsurance in Bangladesh. Basically, the Bangladeshi insured, insurers and
foreign insurers have no choice other than choosing SBC as their reinsurance option.

Investment

There are generally two kinds of investments regarding insurance companies. The first being
the life insurance investment and secondly property and casualty insurance investments. So
the investment operations differ one from the other depending on the type of insurer.

A life insurance company's assets are split between two accounts. Contractual obligations for
guaranteed fixed-dollar payouts, such as classic single life insurance death benefits, are
funded by the assets in the general account. The assets in the separate account are used to
cover the costs of investment-risk products including variable annuities, variable life
insurance, and private pension benefits. Because premiums can be invested and produce
interest, investment revenue is critical in lowering the cost of insurance for policyholders.
The initial premium rate and the delivery of dividends to policyholders are both influenced by
the interest earned on investments.

Now for property and casualty insurance investments, most assets in the securities can be
sold very quickly to pay for claims if any major catastrophic loss exists. The majority of
property insurance contracts are for a limited period of time. Most contracts have a one-year
coverage period or shorter, and property claims are frequently filed fast. Furthermore, unlike
life insurance claims, which are usually fixed in amount, property insurance claims are not.

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 Challenges of insurance industry

Lack of Public Trust: Insurance agents are to blame for the public's poor perception of
insurance. It reduces the scope of the insurance industry. The lack of expansion is primarily
due to a negative public image.

Lack of Public Awareness: The insurance industry's expansion is hampered by widespread

illiteracy. Most people, particularly those living in rural areas, are uninsured. Even a huge
section of the country's population has no basic understanding of insurance. People are
unaware of the benefits of insurance policies, and many believe that the insurance industry is
nothing more than a sham, and that insurance policies are completely useless.

Policy of Centralization: Most insurance businesses in our country are based in cities, with
only a few branches in rural areas. They believe that because the economic situation in cities
is better than in rural areas, they will have better prospects for their business in cities. They
overlook the fact that most of our population lives in rural areas. As a result, our country's
centralization policy is impeding the growth of the insurance industry.

Poor Economic Conditions: Bangladesh is one of the world's poorest countries, with most
of its citizens living in abject poverty. All these people put in a lot of effort to make a living.
They will never be able to save any money for a future need. As a result, they are unable to
pay the premium to the insurer, which is seen as a safety or preventative step against any
accident.

Excessive Management Expense: Increasing company costs is a concern that insurance

businesses are currently confronting. The majority of second- and third-generation insurance
firms are dealing with an issue of excessive management costs that exceed the statutory limit.
Now, the field level has ten or more tiers. Overall, this is unsustainable.

Political Instability: For a country to develop, it must have a stable political climate.
Political unrest is a significant issue for the insurance industry. Furthermore, the Bangladesh
government formulates national policy, laws, and regulations based on political
considerations, which further limit the country's normal insurance growth.

Lack of Government Supervision: Many insurance companies are encouraged to engage in

unethical tactics such as delaying claim settlement, harassing policyholders, and presenting
false financial statements due to a lack of oversight by government agencies. This not only

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tarnishes insurance firms' reputations, but also develops an unfavorable perception of
insurance in the minds of the public.

Legal Complexity: The existing Insurance Act is deficient in various areas, including
assessing solvency margins, investing funds, accounting standards, mortality tables, and
protecting the insured's interests. The insured individual must go through a lengthy procedure
and deal with numerous obstacles to obtain insurance coverage. As a result, many are hesitant
to get insurance policies because they believe the intricacies will place more stress on their
minds, potentially interfering with their daily activities.

Lack of Qualified Officials: Insurance companies use marketing agents to conduct their
operations. They aim to persuade others to adopt a policy. Most of the agents are untrained
and unaware of the correct procedures for catching potential policyholders. A lot of
individuals believe that insurance businesses lack effective personnel. As a result, these field-
level agents are unable to achieve their goal.

Lack of Staff Training: The insurance industry's expansion in Bangladesh has stalled due to
a lack of effective employee training, particularly among insurance company field
employees. There are still insufficient training institutions to provide suitable training for
insurance firm officials regarding insurance activities.

Lack of Exposure: Another major issue in the country is that the media is uninterested in
informing the public about insurance. As a result, a massive portion of the public is
completely uninformed of the insurance coverage. Another issue is that the insurance
company's websites do not provide sufficient information to answer potential customers'
questions and urge them to purchase insurance policies.

Absence of Business Ethics: In a competitive market, some insurance companies employ

business methods that are in violation of business standards and insurance laws. When
policyholders want their money returned after death or maturity, certain insurance companies
harass them. The insurance companies give several reasons for not settling the claim in a
timely manner. Aside from that, some field agents frequently try to mislead individuals into
purchasing insurance by providing incorrect information. Such illicit activities tarnish
insurance businesses' reputations and stymie the growth of the country's total insurance
industry. Customers who have been harassed by insurance companies frequently try to
persuade others not to acquire insurance.

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Lack of Public Motivation: According to our poll, the corporation does not sufficiently urge
the people of the country to purchase insurance policies to protect themselves against any
type of risk. They do not realize that having insurance coverage protects them from risk.
Insurance businesses are continuously falling short of their planned targets due to a lack of
enthusiasm among employees.

Lack of Information Technology: Automation facilitates service and allows for cost and
time savings, yet the insurance industry in Bangladesh still operates manually (or on
conventional method). They do not have a website address, which is required for an insurance
company. Using the web site, they may supply additional information to their clients.
However, insurance company activities are still not fully automated. Clients in the insurance
sector are deprived of the convenience of using e-insurance, online business, the internet, the
Web, and computerized systems.

Inadequate Service: The insurance industry has failed to provide better services to the
public in the country. As a result, people who desire to get an insurance policy lose interest in
doing so. Insurance professionals visit customers' homes and businesses on a frequent basis
in other countries to persuade them to buy insurance policies, however in Bangladesh,
insurance people rarely perform this service.

Lack of Marketing Policy: One of the key issues in this country's insurance companies is
the lack of a comprehensive marketing policy. Management is not taking the initiative to
expand their marketing efforts. They only invest a small amount on advertising, which is
insufficient to increase business development.

Lack of Information: Potential insureds are unable to make informed decisions about
insurance plans due to a lack of information about the policies. They are uninformed about
the advantages of insurance policies. Insurance firms do not have proper arrangements in
place to help individuals comprehend various plans, opportunities, and benefits, among other
things. The public does not have access to accurate and sufficient information. The
government, too, has yet to establish an institutional information unit to educate the public
and deliver timely information in this area.

Claim Settlement Delays: Insurance firms have a bad public image because of their failure
to properly settle customers' claims on time. There is apprehension about receiving insurance

37 | P a g e
claims after the policy has matured. This issue makes the insurance industry unpopular with
the public.

Commission Practices: The practice of commission is the primary motivator for selling
insurance products. It is poorly practiced in the insurance sector, where insurance companies
compete in an unhealthy manner. They are giving an extremely high commission rate,
potentially up to 60% of the premium earned, to procure the business, even though this is
illegal under the Insurance Act. It reduces the likelihood of profit and risk coverage.

Absence of a Research and Development Cell: A well-organized organization necessitates

the presence of an effective research and development cell. It is ideal for diagnosing and
analyzing industry illnesses and problems. It is a process of inventing, constructing,
improving, adopting, and improving.

Poor Risk Management: When measuring comprehensive risk, many of the sample
insurance companies employed traditional methodologies. Because of a scarcity of qualified
and experienced personnel in the insurance industry, most of the sample businesses are
unable to underwrite and manage their risks on a scientific basis. They underwrite and hold
risks indiscriminately, without regard for the potential outcomes. Due to a lack of expert
understanding, these organizations are misled when it comes to risk assessment, claim
handling, and risk management, eroding their financial strength.

Constrained Investment: Insurance company zonal and local branches are only responsible
for collecting premiums and do not have the right to invest the funds as they see fit. As a
result, the insurance industry is not developing into the potential and ideal sector that the
banking industry is. A portion of the funds in the insurance business is required to be held in
the form of Fixed Deposit Receipts (FDR) in various banks. If these monies were put into
physical assets such as land, buildings, machinery, and manufacturing ventures, the
investment would be more profitable.

Lack of Product Diversification: Insurance companies often offer a limited number of

standard and traditional products. Customers, in general, are continuously looking for new
products. The insurance business requires innovative solutions to meet the risk associated
with society's changing and growing needs.

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Tax Constraints: Insurance officials claim that the high corporate tax limits the insurance
industry's growth. Insurance businesses now pay a 42.5 percent corporation tax rate, which is
higher than in most countries.

Reinsurance: Under current insurance legislation, all general insurance firms are required to
deposit 50 percent of their reinsurance with SBC, with the remaining 50 percent placed with
SBC or other re-insurers at home or abroad. SBC has evolved into an insurance company at
this point. The job of an insurer and a re-insurer is seen to have an inherent conflict of
interest. In terms of direct insurance business, an insurance company cannot and should not
compete with its own reinsuring clients. Even though SBC has evolved into a re-insurer in
Bangladesh, its services have steadily deteriorated over time, thereby impacting the
operations of private sector insurance businesses.

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 Misconceptions of Insurance industry and its products in Bangladesh

There is a widespread belief that people in this country are unaware of the importance of
insurance. However, the insurance sector's unpopularity is due to a lack of dependability, a
shortage of competent people, unappealing insurance products, and, more broadly, law
enforcement negligence and poor coordination among government entities.

Some of the common misconceptions of the insurance industry are:

Insurance claim process is very complicated- If anyone gets their insurance coverage from
a reputable firm, they can rest assured that filing a claim will be simple. All life insurance
policies have terms that state when the coverage is not in effect. Except under specific
circumstances, making a claim on their life insurance should be simple.

Before making a final purchase choice, it is critical that the person should understand which
incidents are covered by their insurance and which are not. It will assist them in avoiding any
unnecessary complications when filing a claim. If they have problems filing a claim, they can
seek help from the Insurance Development & Regulatory Authority Bangladesh (IDRA).

Savings is enough, I do not need insurance- Nobody can deny the significance of a healthy
savings account. However, to ensure the safety of them and their loved ones' lives, they
should consider purchasing a life insurance policy. MetLife Bangladesh offers a variety of
insurance packages that can give them and their family the financial security that they
require.

Life insurance is expensive – The most common misconception regarding life insurance
among Bangladeshis is that it is incredibly expensive. Many potential insurance purchasers
do not proceed with a purchase because of this frequent misconception. The truth is that they
can get life insurance coverage that fits their needs and income level. Starting with basic
insurance, they can add more coverage as their income rises. Through financial underwriting,
MetLife Bangladesh's financial partners can recommend a reasonable premium.

I am single and young; I do not need life insurance- It is great for them to acquire life
insurance when they are still young because it is the most affordable option when they are
healthy and young. They have the potential to develop medical issues over time, increasing

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the cost of their life insurance. Planning of time not only helps them defend themselves, but it
also protects their family.

My employer provides me with life coverage, and it is enough- Employer-provided life

insurance policies typically have limited coverage and do not allow employees to modify the
policy to meet their specific needs. These policies cannot be transferred. The coverage will no
longer be in effect when they move on with their career and quit their current employment,
leaving them and their family open to financial dangers. The tax credit provided by the
Bangladesh government does not apply to insurance policies obtained through an employer.
They will be eligible for a tax exemption if they have their own life insurance policy.

I cannot get life insurance because I have health issues- They can usually purchase life
insurance unless they have serious health problems. Regular health problems, such as high
cholesterol or diabetes, will raise their insurance premiums. They can, however, be insured
for a little higher rate. They can choose from a variety of health insurance products offered by
MetLife Bangladesh, depending on their needs.

At my age, I will not be able to get life insurance- Unless a person has a serious condition,
a person can normally acquire life insurance up to the age of fifty-five in our country. Of
course, the cost of covering is higher for older people because their mortality risk is much
higher than that of younger ones.

Most Bangladeshis are still unaware of the advantages of life insurance coverage. Rather,
they are led astray by common misunderstandings. If they want to secure their life and their
family's financial security, they can look up information on the best insurance policies for
them online. By making the wise selection, anyone may assure a better future for themselves.

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 Conclusion

The insurance industry in Bangladesh is a competitive industry with multiple companies

involved. The demand for insurance in Bangladesh is limited to people who want it rather
than need it. Insurance involves a premium payment, which to people in a country which is
still developing, may seem like an option rather than a security measure. With the industry
being plagued by issues and problems which cannot be solved without government
supervision will continue to be a secondary thought for people. Motor insurance was
mandated by the government of Bangladesh back in 2018 but due to the lack of public
response and more push-back than expected, it was not enforced further.

According to an article published by MetLife Insurance Bangladesh, health insurance in

Bangladesh stands at a measly 0.5% which is ways behind other emerging markets which
stand at 3.3%. While it is believed that the lack of insurance in Bangladesh is due to the lack
of knowledge and understanding of the subject, there are more reasons than only this. The
lack of trustworthiness, a shortage of skilled manpower in this sector and poor coordination,
unattractive insurance products and unethical practices that plague the industry all add up to a
sector that is ways behind. Insurance products need to be advertised, the lack of which also
adds to the sector lagging behind.

Insurance is also indicative of a country’s development, this means that as a developing

nation which has recently entered the lower-middle-income status in 2015 there needs to be
more done to bring people under the insurance coverage. Industries such as the construction
industry, fisheries industry, and those involved in hazardous jobs must be brought under
insurance coverage. One of the most prominent method to increase coverage would be to
diversify the products that are offered to the people. For this, there needs to be a more
focused approach to getting more people involved in the industry. People who qualify as
actuaries and researchers for the insurance industry.

While the whole industry is lagging behind, there are steps which are being taken by the
government to increase the coverage on a step-by-step basis. The establishment of Insurance
Development and Regulatory Authority (IDRA) in 2011 was a step in the right direction. If
the government pushes for a more pro-insurance industry, it can be said that the benefits
would outweigh the costs.

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 References

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https://www.metlife.com.bd/common-myths-about-life-insurance/

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