At first we want to express our great gratitude to our honorable Sir

to give us such a good topic for making a assignment. He gave us his

helpful hand to do this assignment. His class lecture & advice help us to
prepare our assignment very much which was very fruitful to us. So we
are grateful to him.

We are-
Intake: 12th
Section: 03
Department: BBA

Name ID Signature
Tamjida Akhter Choyti 138
Ryhanul Islam khan 139
Anjuara Akhter Sonia 125
Fakrul Islam 151
“Problem and prospect of insurance
business in Bangladesh and ways of
overcoming the problem.”

History Of Insurance
 History of insurance refers to the development of a modern laws and market in
insurance against risks. In some sense we can say that insurance appears simultaneously
with the appearance of human society. We know of two types of economies in human
societies: money economies (with markets, money, financial instruments and so on) and
non-money or natural economies (without money, markets, financial instruments and so
on). The second type is a more ancient form than the first. In such an economy and
community, we can see insurance in the form of people helping each other. For example,
if a house burns down, the members of the community help build a new one. Should the
same thing happen to one's neighbour, the other neighbours must help. Otherwise,
neighbours will not receive help in the future.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other
kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools
backed by pledges of landed estates. These new insurance contracts allowed insurance to
be separated from investment, a separation of roles that first proved useful in marine
insurance. Insurance became far more sophisticated in post-Renaissance Europe, and
specialized varieties developed.

Toward the end of the seventeenth century, London's growing importance as a

centre for trade increased demand for marine insurance. In the late 1680s, Mr. Edward
Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and
ships’ captains, and thereby a reliable source of the latest shipping news. It became the
meeting place for parties wishing to insure cargoes and ships, and those willing to
underwrite such ventures. Today, Lloyd's of London remains the leading market (note
that it is not an insurance company) for marine and other specialist types of insurance, but
it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in
1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened
an office to insure buildings. In 1680, he established England's first fire insurance
company, "The Fire Office," to insure brick and frame homes.
 What is Insurance

Insurance is a contract between two parties whereby one party agrees to undertake
the risk of another in exchange for consideration known as premium and promises to pay
a fixed sum of money to the other party on happening of an uncertain event (death) or
after the expiry of a certain period in case of life insurance or to indemnify the other party
on happening of an uncertain event in case of general insurance.

The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose
risk is covered is known as the 'insured' or 'assured'..

Concept of Insurance / How Insurance Works

The concept behind insurance is that a group of people exposed to similar risk
come together and make contributions towards formation of a pool of funds. In case a
person actually suffers a loss on account of such risk, he is compensated out of the same
pool of funds. Contribution to the pool is made by a group of people sharing common
risks and collected by the insurance companies in the form of premiums.

Insurance in Bangladesh
 Insurance is not a new business in Bangladesh. Almost a century back, during
British rule in India, some insurance companies started transacting business, both life and
general, in Bengal. Insurance business gained momentum in East Pakistan during 1947-
1971, when 49 insurance companies transacted both life and general insurance schemes.
These companies were of various origins British, Australian, Indian, West Pakistani and
local. Ten insurance companies had their head offices in East Pakistan, 27 in West
Pakistan, and the rest elsewhere in the world. These were mostly limited liability
companies. Some of these companies were specialised in dealing in a particular class of
business, while others were composite companies that dealt in more than one class of
business.

The government of Bangladesh nationalised insurance industry in 1972 by the

Bangladesh Insurance (Nationalisation) Order 1972. By virtue of this order, save and
except postal life insurance and foreign life insurance companies, all 49 insurance
companies and organisations transacting insurance business in the country were placed in
the public sector under five corporations. These corporations were: the Jatiya Bima
Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima
Corporation, and Surma Jiban Bima Corporation. The Jatiya Bima Corporation was an
apex corporation only to supervise and control the activities of the other insurance
corporations, which were responsible for underwriting. Tista and Karnafuli Bima
Corporations were for general insurance and Rupsa and Surma for life insurance. The
specialist life companies or the life portion of a composite company joined the Rupsa and
Surma corporations while specialist general insurance companies or the general portion
of a composite company joined the Tista and Karnafuli corporations.

After independence of Bangladesh, insurance industry was nationalized. Subsequently

through the enactment of Insurance Corporation Act VI, 1973, two corporations namely
Sadharan Bima Corporation (SBC) for general insurance and, Jiban Bima Corporation for
life insurance were established in Bangladesh. SBC was acting as the sole insurer of
general insurance till 1984. Between 1985 to 1988 first generation of private general
insurance companies were emerged as Bangladesh Government allowed the private
sector to conduct business in all areas of insurance for the first time in 1984. A total of 16
private general insurance companies were registered in that phase. In 1996 another 8
private general insurance companies were registered. The third generation of private
general insurance companies, which included 18 companies, came into operation between
1999 and 2001. The general insurance market in Bangladesh now consists of 43 private
sector insurance companies and 1 state owned insurance company. Insurance Corporation
(amendment) Act 1990 provides that 50% of all insurance business relating to any public
property or to any risk or liability appertaining to any public property shall be placed with
the SBC and the remaining 50% of such business may be placed with this corporation or
with any other insurers in Bangladesh. But for practical reason and in agreement with the
Insurance Association of Bangladesh SBC underwrites all the public sector business and
50% of that business is distributed among the existing 43 private general insurance
companies equally under National Co-insurance Scheme.

The government guidelines for formation of an insurance

company are:
(1) The intending sponsors must first submit an application in prescribed form to the
Chief Controller of Insurance for prior permission.

(2) After necessary scrutiny the Chief Controller shall forward the application with his
recommendation to the Ministry of Commerce.

(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet
Committee constituted for this purpose.

(4) The decision of the Committee, if affirmative, should be sent back to the Ministry of
Commerce which in turn should send it back to the Chief Controller of Insurance for
communicating the same to the sponsors.

(5) The sponsors would then be required to apply in a prescribed form to the Registrar of
Joint Stock Companies to get registration as a public liability company under the
Companies Act. Memorandum and Articles of Association duly approved by the
Controller of Insurance would have to be submitted with the application.

(6) Once the registration process was completed the sponsors would have to obtain
permission of the securities and exchange commission to issue share capital.

(7) Reinsurance arrangements would have to be made at this stage.

(8) After all the above requirements were fulfilled the license to commence business
under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance.
Application can only be made subject to government announcements in this regard.
Problem and prospect of insurance business in
Bangladesh

1. Weak Economy: The development of insurance business dependable to the

development of economy of deferent sectors. But in Bangladesh there are many
lacking to the development of economy. Our export income in limited and 78%
income come from cloths and nightwear sector. So the types of economy are not
suitable for insurance business.

2. Lack of capital: The broadness of insurance business is helpful to survey. It needs

to establish many branches in different country. It requires lots of capital. But lack
of capital in our country creates the problem of insurance business.

3. Lower Rate Of Savings: In our country the average income of our people is very
low. Maximum people are live under poverty line. In 2004-2005 our internal
saving was only 20.16% of total GDP. Life insurance and other insurance are
mostly dependable on the saving of the people. So it creates the Problems.

4. Weakness in Industrial Sector: BANGLADESH is an agricultural country; the

industrial sector of their country is poor. In our country 9.71% are industrial labor
from the total labor force. In 2004-2005 industrial productivity was only 28.88%
of the total national productivity. This focus the weakness of our industrial sector.
So these types of weakness are one of the main barriers of insurance business.

5. Not Knowing What Customers Expect: Based on interviews, the authors found
that executives’ perceptions of superior quality service are largely congruent with
customers’ expectations. Customers’ expectations versus management perceptions
are the result of the lack of a marketing research orientation, inadequate upward
communication and too many layers of Management.

6. The Wrong Service-Quality Standards: arises when there is a discrepancy between

what managers perceive that customers expect and the actual standards that they
(the managers) set for service delivery. This gap may occur when management is
aware of customers’ expectations but may not be willing or able to put systems in
place that meet or exceed those expectations.

7. The Service-Performance Gap: Organizational policies and standards for service

levels may be in place, but is front line staff following them? A very common gap
in the service industry is the difference between organizational service
specifications and actual levels of service delivery. Service specifications versus
 service delivery is the result of role ambiguity and conflict, poor employee-job fit
and poor technology-job fit, inappropriate supervisory control systems, lack of
perceived control and lack of teamwork.

8. When Promises Do Not Match Delivery: Customers perceive that organizations

are delivering low-quality service when a gap appears between promised levels of
service and the service that is actually delivered. This gap is created when
advertising, personal selling or public relations Over-promise or misrepresent
service levels. Service delivery versus external communication may occur as a
result of inadequate horizontal communications and propensity to over-promise.

9. The discrepancy between customer expectations and their perceptions of the

service delivered: as a result of the influences exerted from the customer side and
the shortfalls (gaps) on the part of the service provider. In this case, customer
expectations are influenced by the extent of personal needs, word of mouth
recommendation and past service experiences.

10. The discrepancy between customer expectations and employees’ perceptions: as a

result of the differences in the under standing of customer expectations by front-
line service providers.

11. The discrepancy between employee’s perceptions and management perceptions: as

a result of the differences in the under standing of customer expectations between
managers and service providers
 Ways of overcoming the problem.

In our country the problems that exist in insurance business can not be overcome over a
right .It needs long term planning. Besides making the people aware the insurance
businessman should come forward with govt. to make this business famous. Coming
from the existing problems following steps should be taken to make this business
famous.
1. Spread of insurance education: To make the insurance business people should be
made aware about the helpless & necessity of insurance. For this purpose effective
steps must be taken to speared of insurance education.
2. 2. Publicity & increase of awareness: Mass publicity activities are very essential to
overcome from unwillingness wrong idea, doubt & unbelief of the people this
country. The people media can provide an effective help regarding country
interest.
3. Increase of training facilities: To continue the insurance business effective
standard training facilities must be arranged for the manager & workers who are
employed in this business.
4. Formulation of effective Principles: Long term formulation of effective principles
is compulsory to continue the insurance business successfully.
5. Uphold the interest of policy holder: Success of this type of business is depended
on the trust of insured persons. To gain the trust insurance companies should come
forward to compensate the real injured as soon as possible.
6. Importance to the economic development: Insurance business is depend on the
development of the different sector of economic .So insurance business can never
be developed by retaining the weak situation of the sectors including industry
commerce transportation.
7. Modernization of insurance Business: In this country for developing insurance
business modernization of insurance business and necessity new ideas must be
added in this sector.
 Referances
1. Bangladesh Bureau of Statistics. 2004.
“Report of Financial Service Providers in
Bangladesh”.

2. Berri, Leonard L. (1980), “Service Marketing

is Different,” Business, 30 (May-June), 24-29

3. Booms, Bernard H. and Marry J. Bitner and

Jody