Insurance in Bangladesh

Insurance is not a new idea or proposition to the people of Bangladesh. About half a century back, during the British rule in the then India, some insurance companies started transacting insurance business, particularly life in this part of the world. Since 1947 until 1971 insurance business gained momentum in this part of what was then known as East Pakistan. There were about 49 companies transacting both life and general insurance business. These companies were of various origins, Viz, British, Australian, Indian, West Pakistani and East Pakistani. Except a few companies these were mostly limited liability companies acting under a free competitive economy. With the emergence of the Peoples Republic of Bangladesh, the government in order to make available the fruit of liberation to the general mass, nationalized the insurance industry in 1972 by presidential order no 95 more specially known as the Bangladesh insurance (Nationalization) order 1972. By virtue of the order, save and except postal life insurance and foreign life insurance companies (other than the Pakistani companies), all companies and organizations transacting all types of insurance business in this country came under this nationalization. Five insurance corporations were basically established, Viz. i) ii) Jatiya Bima Corporation Teesta Bima Corporation

iii) Karnaphuli Bima Corporation iv) Rupsa Jibon Bima Corporation v) Surma Jiban Bima Corporation

The Jatiya Bima Corporation was not an underwriting corporation, actually, it was a central corporation to supervise and control the activities of the remaining four subsidiary corporations. As per this order Teesta and Karnaphuli were made responsible for general insurance business and Rupsa and Surma were made
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responsible for life insurance business. All the existing 49 companies were merged

with this 4 corporation whilst life companies or the life portion of a composite company joined the Rupsa and Surma, the general companies or the general portion of a composite company joined the Teesta and Karnaphuli. Formation of two corporations The previous 5 corporation were abolished and instead 2 corporations were established, Viz. I. Sadharan Bima Corporation

For transacting general insurance business only. The two general insurance corporations were merged under it. II. Jibon Bima Corporation

For transacting life insurance business only. The two life insurance corporations were merged under it. In the sector, postal life insurance business and corporation of life business by foreign companies (other than Pakistan) are still permitted as before.

Present position of insurance business in Bangladesh The Insurance Market in Bangladesh now consists of two state-owned corporations, forty three and seventeen private sector general & life insurance companies respectively, a total of 62 insurance companies. Thus the insurance sector in Bangladesh has grown up substantially and deepened remarkably with number of companies in both life and general segments. With the expansion of size of the insurance market, the volume of assets of the industry has also increased substantially.

From Bangladesh perspective insurance business was not a promising sector in its early age but it is getting its pace day by day with the growth of overall economic condition of the country.

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The privatization policy adopted in the 1980s paved the way for a number of insurers to emerge in the private sector. This resulted in a substantial growth of premium incomes, competition, improvement in services, and introduction of newer types of business in wider fields hitherto untapped. Up to 2000, the government has given permission to 19 general insurance companies and 10 life insurance companies in the private sector. Insurers of the country now conduct almost all types of general and life insurance, except crop insurance and export credit guarantee insurance, which are available only with the Shadharan Bima Corporation. Numerous institutions, associations and professional groups work to promote the development of insurance business in Bangladesh. Prominent among them is the Bangladesh Insurance Association (formed on 25 May 1988) having 30 members. It aims at promoting, supporting and protecting the interests and welfare of the member companies. Another example is Bangladesh insurance academy. Surveyors and insurance agents occupy a prominent position in the insurance market of Bangladesh. The system of professional brokers has not yet developed in Bangladesh. A total of 60 insurance companies are operating in Bangladesh till date. Of these companies, 57 are private, two state-owned and one is foreign. Insurance Directorate, under the Ministry of Commerce, is the regulatory-body of the country's insurance sector. At present there are 44 general insurance companies running in Bangladesh. Many other private companies are about to commence business.

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LIST OF INSURANCE COMPANIES : LIST OF THE INSURANCE COMPANIES IN PUBLIC SECTOR 1. Sadharan Bima Corporation(Gen. Ins) 2. Jiban Bima Corporation (Life Ins.) LIST OF NON-LIFE INSURANCE COMPANIES 1. Agrani Insurance Company Ltd. 2. Asia Insurance Ltd. 3. Asia Pacific Gen Insurance Co. Ltd. 4. Bangladesh Co-operatives Ins. Ltd. 5. Bangladesh General Insurance Co. Ltd. 6. Bangladesh National Insurance Co.Ltd. 7. Central Insurance Company Ltd. 8. City Gen. Insurance Company Ltd. 9. Continental Insurance Ltd. 10. Crystal Insurance Company Ltd. 11. Desh Gen. Insurance Company Ltd. 12. Eastern Insurance Company Ltd. 13. Eastland Insurance Company Ltd. 14. Express Insurance Ltd. 15. Federal Insurance Company Ltd. 16. Global Insurance Ltd. 17. Green Delta Insurance Co. Ltd. 18. Islami Commercial Insurance Co. Ltd. 19. Islami Insurance Bangladesh Ltd. 20. Janata Insurance Company Ltd. 21. Karnaphuli Insurance Company Ltd. 22. Meghna Insurance Company Ltd. 23. Mercantile Insurance Company Ltd. 24. Nitol Insurance Company Ltd. 25. Northern Gen.Insurance Company Ltd. 26. Peoples Insurance Company Ltd. 27. Phonix Insurance Company Ltd. 28. Pioneer Insurance Company Ltd. 29. Pragati Insurance Ltd. 30. Pramount Insurance Company Ltd. 31. Prime Insurance Company Ltd. 32. Provati Insurance Company Ltd. 33. Purabi Gen Insurance Company Ltd.

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34. Reliance Insurance Ltd. 35. Republic Insurance Company Ltd. 36. Rupali Insurance Company Ltd. 37. Sonar Bangla Insurance Company Ltd. 38. South Asia Insurance Company Ltd. 39. Standard Insurance Ltd. 40. Takaful Islami Insurance Ltd. 41. Dhaka Insurance Ltd. 42. Union Insurance Company Ltd. 43. United Insurance Company Ltd. LIST OF LIFE INSURANCE COMPANIES 1. American Life Insurance Company (Foreign Company) 2. Baira Life Insurance Company Ltd. 3. Delta Life Insurance Company Ltd. 4. Farest Islami Life Insurance Co. Ltd. 5. Golden Life Insurance Ltd. 6. Homeland Life Insurance Company Ltd. 7. Meghna Life Insurance Company Ltd. 8. National Life Insurance Company Ltd. 9. Padma Islami Life Insurance Company Ltd. 10. Popular Life Insurance Company Ltd. 11. Pragati Life Insurance Ltd. 12. Prime Islami Life Insurance Company Ltd. 13. Progressive Life Insurance Company Ltd. 14. Rupali Life Insurance Company Ltd. 15. Sandhani Life Insurance Company Ltd. 16. Sunflower Life Insurance Company Ltd. 17. Sunlife Insurance Company Ltd. 3.

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Performance of Jibon Bima Corporation

JIBAN BIMA CORPORATION
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008

Particular

Notes

Taka 2007 2008 1,349,542,043 138,549 (156,104,527) (703,148,721) (10,639,243) 479,788,101 (10,178,821) 2,858,519 (123,00,000) -(129,636,291) 96,778 (38,617,964) 1,192,198 75,393,133 ---(221,892,448)

CASH FLOW FROM OPERATING ACTIVITIES Collection form Premium 1,708,024,240 Miscellaneous Income received 721,617 Payment for Claim (216,828,167) Payment for Re-Insurance, Management (727,116,671) expense and others Income Tax paid/deducted (22,017,663) Net Cash from operating activities 742,783,356 CASH FLOW FROM INVESTING ACTIVITIES Investment made in share Proceeds from sales of Investment in share Purchase of National Investment Bond Purchase of BD. Govt. Treasury Bond Acquisition of fixed Assets Sale of Fixed Assets Loan against Policies paid Loan against Policies realized Interest, dividend & rents received Net cash used in investing activities (32,542,655) 50,713,051 (81,500,000) (279,725,158) (16,573,544) -70,000 (7,962,256) 704,857 132,605,921 (237,209,784)

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CASH FLOW FROM FINANCIAL ACTIVITIES: Dividend not claimed/(paid) Net cash used in financing activities Net increase in cash & cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

51,073 51073 505,624,645 1,009,730,300 1,515,354,945

(25,631) (25,631) 257,870,022 751,860,278 1,009,70,300

Statistics of Business Performance.

Assets (Taka in Crore)

300 250 197.95 139.04 96.68

296.47

200
150 100 50 0 2003 2004 2005

66.83

2006

2007

Investment (Taka in Crore)

250 200 150 100 50 0 2003 2004 2005 2006 30.28 50.19 78.69 128.37

220.39

2007
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Premium with Life Fund (Taka in Crore)

300 256.13 250 200 150 100 50 0 2003 2004 2005 2006 2007 165.72 171.41 135.19 112.12 110.25 70.62 70.14 51.23 46.44
Life Fund Total Premium

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Premium & Claim (Taka in Crore)

180 160 140 120 100 80 60 40 51.23 112.12 135.19

171.41

70.62

Claim Total Premium

21.15 14.85 15.9 16.24 20 11.36 0 2003 2004 2005 2006 2007

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Five Years at a glance of JBC

300 250

296.47 256.12

200
150 100 50 0 2003 2004 2005

197.95 165.72 139.04135.19 112.12 110.28 96.68 70.62 66.83 70.1 51.23 46.44 11.38 14.85 15.9 16.24 2006 21.15 171.41
Claim Life Fund Premium

Assets

2007

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Activities of Jibon Bima Corporation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Schemes Anticipated Endowment Insurance With Profit Plan-05 Anticipated Endowment Insurance Without Profit Plan-25 Child Endowment Insurance Without Profit Plan-47 Child Protection Policy With Profits Plan-09 Double Protection Insurance With Profit Plan-10 Endowment Assurance With Profit Plan-03 Endowment Assurance Without Profit Plan-23 Grameen Jiban Bima With Profit Plan-91 Granted Bonus Endowment Insurance Plan-48 Group Endowment Assurance Group Term Insurance Joint Life Endowment Insurance With Profit Plan-08 Marriage Endowment Policy Plan-07 Money Back Term Insurance Policy Plan-50 (Without Profit) Multiple Payment Policy With Profit Plan-06 Pension Policy Plan-12 Progressive Premium Policy With ProfitPlan-04 Single Premium with Profit Plan-17 Swanirber Bima (Single Premium Policy) Plan-52 Term Insurance Without Profit Plan-51 Whole Life Assurance With Profits Plan-01 Whole Life Assurance Without Profits Plan-21 Overseas Assurance Plan With Profit Mortgrage Protection Policy Without Profit Monthly Saving Scheme With Profit Monthly Saving Scheme Without Profit Triple Protection Policy

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Product and Services of Shadaron Bima Corporation

SBC accepts different policies that are noted below1. Fire Insurance Policy. 2. Marine Hull Insurance Policy. 3. Marine Cargo Insurance Policy. 4. Motor Insurance Policy. 5. House Holders Comprehensive Insurance Policy. 6. Product Liability Insurance Policy. 7. Burglary insurance Policy. 8. Contractors All Risk Policy. 9. Engineering Insurance Policy. 10. Public Liability Insurance Policy. 11. Aviation Insurance Policy. 12. Workmens Compensation Policy. 13. Cash In Safe Insurance Policy. 14. Cash In Transit Insurance Policy. 15. Cash In Counter Insurance Policy. 16. Personal accident Insurance policy. 17. Peoples Personal Insurance Policy. 18. Dread Disease Insurance Policy. 19. Overseas Medi-Clam (Business and Holiday). 20. Overseas Medi-Clam (Employment and Student). 21. Export Credit Guarantee Insurance. 22. Livestock Insurance Policy. 23. All Risk Insurance Policies. 24. Fidelity Guarantee Policy.

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Performance of FAREAST ISLAMI LIFE INSURANCE COMPANY

From the records of SBC, In 2005, it earned revenue BDT 170.09 crore from Fire insurance, BDT 98.38 crore from Marine insurance and BDT 104.88 crore from Miscellaneous insurance. By increasing each year, in 2009 (FILI) has earned BDT 239.28 crore from Fire insurance, BDT 150.59 crore from Marine insurance and BDT 168.13 crore from Miscellaneous insurance.

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From the graph of total revenue we can learn the total revenue of SBC in 2005 was BDT400.52 crore. SBC earned BDT 441.14 crore in 2006, BDT 519.47 crore in 2007, BDT 582.37 crore in 2008. In 2009, by increasing the revenue became 602.33 crores. From the graph we can see a liner trend of incensement of total revenue. In five years period revenue has increased about 50%. It reflects that (FILI) is running well by contributing vastly in insurance market of Bangladesh.

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Revenue, Expense and Claims

We can see an overall financial view of (FILI) at a glance. By the passing of years (FILI)s revenue has increased gradually and reached at BDT 602.33 crore. At the same time its expense has also been increased. But the increase in profit figure (BDT 101.50 crore) is quite satisfactory. SBC is generating its investment income at a slow pace.

In 2005, the total expenditure of (FILI) was TK364.14crore. In 2006, it was TK399.1 crore. It had been increased at TK34.96 crore. In 2007, the total expenditure was TK458.86 crore and it had been increased at TK59.76

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crore. The total expenditure was high in 2007 than that of 2006. The total expenditure in 2008 was TK484.21 and in 2009 TK500.83 crore. The amount of increased in 2008 was TK25.35 crore and 2009 was TK16.62 crore. Though every year the total expenditure has been increased, the total revenue has also been increased. So the amount of profit has been increased.

From the graph we can see in 2005 net claim was 86.29 crore and it increased next two years and reached in figure 133.19 crore in 2007. Graph line shows from 2007 to 2009 net claim rate was steady. At last 2009 figure was BDT 132.22 crore.

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From this graph we can see in 2005 the profit was BDT 36.38 crore and in 2009 that was BDT 101.5 crore. The graph line shows us from 2006 to 2009 profit increased very sharply which was quite satisfactory.

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Above bar chart shows us a clear view of investment income of SBC. From 2004 to 2009 investment income of (FILI) has increased but in a moderate rate. In the year of 2007 and 2008 investment income increased at a good rate.

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Prospects and future of insurance business in Bangladesh

As well as the problems mentioned above, there are many good signs for the insurance business in Bangladesh. The factors that can facilitate the insurance business in our country are discussed below. These facts can be measured as the prospective fields for insurance business in Bangladesh.

Higher GDP
The GDP of our country is increasing than the previous years which results in increase of per capita income. So this growing GDP and income holds bright prospects for insurance companies. The major problem is the incapability of our people to pay the premium charged by the insurance companies. . With the growth in the income more and more people are now willing to take an insurance policy for safeguarding themselves from any danger.

Increased population
There is a big opportunity lies ahead for the insurance companies as the population of our country are increasing day by day. Although most of people of our country live under extreme poverty level and want to avoid insurance policy number of potential policy holders in Bangladesh is growing with growth of the population. There is somewhat relationship between growing populations with the number of public vehicle. As we know all public vehicle must have an insurance policy. So growing population also increase the motor insurance too. That is growth in population opens greater scope for every kind of insurance business that results in growing prospect for insurance companies.

There are so many new businesses starting every day and manufacturing sector is booming with global demand. Every business is insured under an insurance

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New businesss individual insurance

company to protect its company from any kind of accident. Therefore growing industry, mill, factories are creating better scope for the insurance companies to flourish their business.

Developing mass awareness about insurance

People are now much more conscious about their safety. So they are encouraged to take an insurance policy for making their life free from any unexpected occurrence. Increase in literacy rate is helping predominantly to create awareness among the people regarding taking insurance policy. Besides this insurance companies are also trying to eradicate the negative attitude of people towards the insurance company by organizing various programs such as seminars, programs including social responsibilities etc.

Micro insurance
Micro insurance can be a great prospective area for the insurance business in our country. Most of the people of our country are unable to have costly and long term insurance policies. Micro insurance can be provided to individual personnel or to small business owners against little insurance premiums and with easy terms and conditions. When they will afford to minimize their risks at a lower price, they will take that opportunity and they will become to get used to it. This can cover a huge portion of the society who can be a prospective target market for this business.

Development of new policy

SBC has long been the sole reinsures in Bangladesh and private insurance companies were statutorily compelled to place 100% of their reinsurance business with SBC.In 1990 the government amended the relevant provisions of the insurance Act allowing 50% of all reinsurance of general insurance business to be placed compulsorily with SBC and the rest to private reinsurance

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companies .About 70% of premium income from general insurance business in Bangladesh is retained locally and the rest 30% goes to reinsures abroad. Permissions to private insurance companies to act as reinsures will open up new opportunities to them. This will initiate open competition between the SBC and the private reinsures within the country and will reduce the reinsurance cost and increase efficiency. This amendment of the existing rules can be another important policy making that will facilitate the insurance business in Bangladesh. The private insurance companies can argue in favours of their capability to act as reinsures on the basis of the fact that the total capital belonging to the government owned general insurance companys is Tk. 550 million while the private sector insurance companies own Tk.2500 million.

Scope in non-traditional sector

Nowadays, along with traditional insurance services, they can offer various nontraditional insurance services to their customer. Target market of insurance company may expand and they can offer different types of non-traditional insurance services such as health insurance, personal accident insurance, travel insurance, burglary insurance and pension scheme.

Scope of investment
Insurance companies can usually make more profit from investment activities than from their regular insurance business. The private insurance companies are realizing this fact and playing role in the financial market. Insurance companies are making large investment in government bonds, ICB projects and in private sector business. There are opportunities to enhance profit through effective and efficient money management by employing capable and experienced personnel. Scope of investment expansion persists in the areas leasing, housing, health and money market.

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Service diversification

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Insurance is not just a tool of risk coverage. It is also an attractive instrument of savings. The mixture of risk coverage with savings gives the opportunity for innovative product designing which means service diversification. In a dynamic insurance market one can expect to see new products being promoted at regular intervals. So far very little efforts have been taken to innovative and introduce need oriented insurance services in response to existing threats.

The prospect of the insurance business in various sectors that affect our economy can be differentiated in the following way.

Agriculture sector
The economy of Bangladesh is predominantly an agrarian one, with most people engage in farming and fishing. The uncertainty of agriculture due to crop failure caused by climate variation, drought, cyclone, flood and pests affects farmer income as well as government revenue.Furhermore, in the last few years commercialization has occurred in some sections of the agricultural sector. Increase in investment in the agricultural sector is creating a new opportunity for insurance industry. Various agricultural insurance services are becoming common these days. Demand for insurance protection against crop loans, livestock loans, fisheries loans and equipment loans are also increasing day by day.

Business sector
Nowadays in Bangladesh the SME plays a important role in the economic development. But they are deprived from taking loans from bank for large amount. If insurance business focuses this section in Bangladesh they are able to contribute more in the economy .Thus insurance business has a bright prospect in business sector in a developing country like Bangladesh

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Education sector:
Insurance companies can provide different types of scheme to expand education plan insurance.

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