Peoples Insurance Co.

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Limited in Bangladesh

Performance of Peoples Insurance Company Limited in

Bangladesh Executive Summary

The report on “Performance of People Insurance Company Ltd. as a General Insurance

Company in Bangladesh. has been prepared based on qualitative research as required forcompletion of MBA degree from AUST University. In a developing country like Bangladesh

different insurance companies are playing a very crucial role in the economic gro!th. Though

insurance industry has significant prospects in the economy but for some reasons it has failed toachieve its goal to some e"tent. There are #$ insurance companies in Bangladesh. Among them

%eoples Insurance &ompany 'imited is the second private insurance company and it has been

doing insurance business in the country over $( years since )*+,. The company !as establishedand had been operated under the Insurance Act )*-+ since its inception until $)$.

/hile observing the financial performance of the %eoples Insurance &ompany 'imited it has

been found that the company has faced different situation over years and that is !hy the

financial performance has some notable changes over the time period since $$0$)). In $$ %I&' had a gross premium of $)$.,, million B1T !hich has been increased progressively over

years and became 2.) million B1T in $)). At the same time net premium of the company

also has been increased from $$ to $)) but in $, 3 $# the organi4ation made

relatively lo!er net premium compared to the other years.

The entire report has been categori4ed into five chapters. In chapter one the introduction scope ob5ective methodology and limitations of the report have been described. In &hapter t!o

there is a brief description on insurance Insurance la!s and regulatory system and regulatoryconflicts in the insurance industry in Bangladesh along !ith the emergence of establishing and

passing the ne! insurance act. 6ence the Insurance Act $)) has been taken into focused in

this chapter specially for the non0life insurance sector7!hy the ne! act has been passed ho!

the ne! regulatory authority is !orking for the reformation and moderni4ation of the insurance sector in Bangladesh !hat are the problems that the non0life insurance companies 8specially the

%eoples Insurance &ompany 'imited9 are facing !hile trying to follo! the ne! rules and

regulations to implement the ne! act in doing their business. Besides the huge prospects of theinsurance companies !hile the ne! act !ill be fully functional also has been identified and

described. Then chapter three of the report focuses on the %eoples Insurance &ompany 'imited 7the company overvie! its services vision mission and futures plans and it:s department. Inchapter four I also have conducted a financial analysis on the company;s performance since

$$ until $)) !here short descriptions of the performance have been given along !ith

necessary graphical presentations.

&ontinuously in chapter five the findings have been presented along !ith developing necessaryrecommendations addressing both the regulatory authorities and the %eoples Insurance

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&ompany 'imited in order to overcome the conflicting situations as !ell as to make the

prospects come true. Then conclusion has been dra!n by e"pressing hope and e"pectation on

the moderni4ation of the insurance sector in Bangladesh competing !ith its neighbors.

INTRODUCTION

This study on the performance of Peoples Insurance Company Limited as a general insurance

company in Bangladesh was carried out as an internship proect supported !y the internship

program as part of the re"uirement of completing the #asters of Business $dministration%#B$& from $hsanullah'niversity of (cience ) Technology facilitated !y the head office of

Peoples Insurance Company Limited* The internship program was conducted over the course of

three months from +anuary ,- ./,0 through #arch0,- ./,0- and included wor1ing full2time as anintern under the department of 3inance ) $ccounts at the head office of PICL as well as

meetings and in2depth interviews with the top management of PICL- 4ha1a- Bangladesh*

Obecti!es of the "tudy

Purpose tells the reason of the report* Before going to the organization I set my o!ectives that

guided me until I finished the report* It always 1ept me focused to !e on right trac1* Theo!ectives are to 1now the Performance of People Insurance Company Ltd* as a 5eneral

Insurance Company in Bangladesh and !uild an overall understanding on the financial

performance of People Insurance company Ltd*

Insurance industry is one of the growing sectors in Bangladesh * Peoples Insurance Company isto !e amongst the leading insurance companies of the country with the clear perception of

upholding the principles of corporate governance and ma1ing Peoples a profita!le and growth

oriented insurance company while creating insurance awareness and culture* To ensure the

smooth operation of the concerned insurance companies- the regulatory !odies try to pass andimplement new acts ) regulations* There are 6. insurance companies in our country ) there

have !een passed several acts to regulate those companies properly* Peoples Insurance CompanyLimited is a private insurance company in Bangladesh that serves with a variety of services to its

valued customers* 4ue to the limitation of my report my scope was limited to PICL and the

insurance act ./,, for the 7on2life Insurance Companies*

#ethodology

This report is primarily !ased on my e8periences from the day to day official wor1 under thedepartment of finance ) accounts at the head office of Peoples Insurance Company Limited* $s

my research method- I have used "ualitative data collected through meetings ) interviews withthe top management of PICL and some secondary information from the annual reports %.//9-.//:- ./,/)./,,& of the company ) we! information from the related companies and

regulatory authorities* I have used !oth primary and secondary data in this report* The data were

collected !y different ways;

Primary Data



Primary 4ata were collected though !oth formal and informal discussions mainly with my

supervisor and senior manager of the company* Besides- I too1 participation in in2depth group

discussion and meeting which have given me the opportunity to ta1e very relevant informationregarding the particular topic of my report*

"econdary Data

(econdary data have !een collected from $nnual <eport- pu!lished articles on Insurance

industries- ournals- !rochures- and I4<$ ) PICL=s official we! sites In this report maority ofthe data collection wor1s was done on a secondary data !asis*In the analysis part of the report- I

have tried to focus on the points that came out through the in2depth discussions- meetings )

interviews with the respective personnel* $nd I have also tried to find out the prospects of thePICL as well as the other insurance companies in the same industry*

Limitations

The preparation of this report was not an easy tas1* I had to face some pro!lems ) limitationsduring the preparation of this report despite the fact that I have tried my !est to prepare this

proect successfully* The limitations were;

• The Insurance $ct ./,, along with rules ) regulations including the previous acts for the

insurance industry and most of the other supporting documents are written and pu!lished

in Bangla* Translating the entire act and relevant information from Bangla to >nglish was

"uite difficult*• Confidential information that no organizations inclined to share due to their !usiness

interest was another limitation*

• 4ata from different sources were "uite inconsistent which created some pro!lems in

ma1ing the report ) compelled me to verify the data diligently*

• The data collection was full of comple8ities !ecause relevant data sources were hard to

find out*

• There were so many o!stacles !ecause the company is not willing to disclose their

offerings and fle8i!ilities towards general people*

• 4ue to lac1 of practical e8perience- some errors might !e occurred during the study* In

spite of the ma8imum efforts was ta1en to avoid the mista1e*

Insurance

#eaning $ Definition of Insurance%

It is a contract in which one party 1nown as the insured also 1nown as assured- insures with

another party %person or organization&- 1nown as the insurer- assures or underwrites his property

or life- or the life of another person in whom he has a pecuniary interest- or property in which heis interested- or against some ris1 or lia!ility- !y paying a sum of money as the premium* 'nder



the contract- the insurer agrees to indemnify the insured against a loss which may accrue to the

other on the happening of some event*

$ccording to encyclopediaedia- Insurance is?

“! contract "policy# in $hich an individual or entity receives financial protection orreim%ursement against losses from an insurance company. &he company pools clients' ris(s

to ma(e payments more afforda%le for the insured.

$t present- insurance is !eing used widely and !ecoming more and more popular !oth in

personal life and in the !usiness sector as a significant ris1 management tool which is primarilyused to hedge against the ris1 of a contingent- uncertain loss* Insurance contract provides

financial protection to the insured !y the insurer against a loss arising out of happening of an

uncertain event* The insured can avail this protection !y paying premium to any insurancecompany with whom the contract has !een made* Insurance wor1s on the !asic principle and

concept of ris12sharing* @hen a company insures an individual entity %the insured&- there legal

re"uirements to share the ris1s associated with the insured !y the insurer- !rea1ing of whichcontract creates legal !indings* $ great advantage of insurance is that it spreads the ris1 of a few

people over a large group of people e8posed to ris1 of similar type and the re2insurance system

ma1es the total ris1 at zero level in the long run* On the one hand- insurance can increase fraudA

on the other it can help societies and individuals in preparing catastrophes and in mitigating theeffects of catastrophes on households- !usiness operations and societies*

&eatures of Insurance

Insurance has various effects on society through the way that it changes who !ears the cost of

losses and damage of the insured according to the insurance contract* The distinguished common

features of any insurance are as follows;

(hifting or transferring ris1 of loss or damage of any life- asset- or property from one party to

another party*

• (haring of losses !y mem!ers of the groupcompany

• One party underta1es the loss incurred on the insured property or asset of the other party*

• The ris1 is shared accepted !y the insurer for a consideration of money from the insured

called as Premium %7o ris1 to !e assumed unless premium is received in advance&*

• It is assured to the insured !y the insurer that the amount will !e paid on happening of the

specified act or event* >*g* 4eath- 3ire- Burglary- $ccident- $ny peril in (ea etc*

Parties of Insurance Contract

$s insurance !usiness has insurance contract- there are mainly two parties in the contract ?

• Insurer ; % The person who underta1es the ris1 under the contract&

• Insured; % The person to whom the underta1ing is given&



The Insurer can !e any of the following mentioned !elow;

• $n individual

• 'nincorporated !ody of individuals-

• Body corporate % esta!lished !y the Companies $ct&

• $n $ssociation of partnership firm <egistered-

• $ny other agency permitted under any other Law in Bangladesh

In order to lower the huge amount of insurance ris1- insurance companies intend to re2insure

their contract with any other %mostly larger& local of foreign insurance companies*

Prominent &eatures of Insurance La' of Bangladesh

The history of Bangladesh is a history of endless struggle* (ince the independence of

Bangladesh- its citizens have !een fighting for the improvement of their standard of living aswell as economic condition* But most of the time various accidental incidents and disasters

hamper the smooth continuation of the ourney* Over the last / years- many helping handespecially insurance companies are trying to share their ris1 associated with various tas1s- assets-

operations- and even of their life* The Insurance !usiness has !een introduced ) developed in

proportion to the development of the economic growth in Bangladesh* There are 6. insurancecompanies in the country- including two state2owned enterprises- the +iwan Bima Corporation

%+BC& for life insurance- and the (adharan Bima Corporation %(BC& for general insurance*

7evertheless- B4 remains !ehind its neigh!ors- !oth in terms of premium income and penetration* Only ,*D percent of the population has life insurance coverage in Bangladesh- as

compared to *Dpercent in Pa1istan and E*Dpercent in India %as of ./,/&*

Regulatory &rame'or( in BD

>very industry needs to !e regulated and maintained properly to ensure the conflict free

operation in any country* In this regard- Parliament of Bangladesh- on /0 #arch ./,/- passedtwo insurance laws in a !id to further strengthen the regulatory framewor1 and ma1e the industry

operationally vi!rant* The new laws- came in to effect on ,9 #arch ./,/- are Insurance $ct

./,/ and I4<$ ./,/*

#aor Insurance $cts

• The Insurance $ct- ,:09• Insurance <ules of ,:D9

• Bangladesh Insurance %7ationalization& Order ,:E.*

• The Insurance Corporations $ct- ,:E0

• Insurance %$mendment& Ordinances of ,:9



• The Insurance $ct- ./,/

)istory of Insurance $ Insurance La's in Bangladesh

Insurance !usiness is not new in Bangladesh* $lmost a century !ac1- during the British rule in

India- some insurance companies started insurance !usiness transaction- !oth life and general- inthis region %former Bangal or Indian (u!continent&* This !usiness gained momentum in >ast

Pa1istan during ,:E2,:E,- when : insurance companies transacted !oth life and general

insurance schemes* The insurance sector was originally regulated !y the Insurance $ct- ,:09 andafter the Independence in ,:E,A the industry was governed !y the Insurance $ct ,:E0* In ./,/ a

new Insurance $ct has !een passed to modernize the sector*

*+,-.*+-/ Period%

Insurance is not a new term in this territory of Bangladesh* <ight after the great division in ,:E-the industry had got its momentum and : insurance companies started to conduct their !usiness

during the Pa1istan period %,:E2,:E,&* These companies doing insurance !usiness were ofvarious origins li1e British- $ustralian- Indian- @est Pa1istan and local* $t that time- ten

insurance companies had their head offices in >ast Pa1istan- .E in @est Pa1istan- and restelsewhere in the world* #ost of these companies were Limited Lia!ility Company* (ome of

these companies were specialized on dealing in a particular class or sector of !usiness- while

others were composite companies that dealt in more than one class of !usiness* $fter theIndependence of Bangladesh in ,:E, through the war of li!eration- the 5overnment of

Bangladesh nationalized insurance industry in ,:E. !y the Bangladesh Insurance

%7ationalization& Order ,:E.*

*+-0 12fter Nationali3ation4%

By virtue of the nationalization order- all : insurance companies and organizations transacting

insurance !usiness in the country were placed in the sector under fie operations e8cept postal life

insurance and foreign life insurance companies* These operations were; the +atiya Bima

Corporation- Tista Bima Corporation- Farnafuli Bima Corporation- <upsa +i!on Bima 0,

Corporation and (urma +i!on Bima Corporation* The +atiya Bima Corporation was an ape8

corporation only to supervise and control the activities of the other insurance corporations which

were responsi!le for underwriting* Tista and Farnafuli Bima Corporation were for general

insurance and <upsa and (urma for life insuance* The specialist life insurance companies or for alife portion of a composite company oined the <upsa and (urma corporations while specialist

general insurance companies or the general portion of a composite company oined The Tista andFarnafuli corporations* The !asic idea !ehind the formation of four underwriting corporations-two in each main !ranch of life and general- was to encourage competition even under a

nationalized system* But the !urden of administrative e8penses incurred in maintaining two

corporations in each front of life and general and an ape8 institution at the top outweighed theadvantages of limited competition* $s a result of the nationalization of the insurance industry- on

, #ay ,:E0- a restructuring was made under the Insurance Corporations $ct ,:E0* 3ollowing

the $ct- the government formed two corporations in place of five corporations; the (adharan



place up to D/G of their reinsurance with any reinsure of their choice- at home or a!oard-

1eeping the remaining for placement with the (adharan Bima corporation*

*++, 6 Present %

(ince then the Industry is growing steadily despite many !ac1 logs- several amendments weremade in the Insurance Law since ,:9* In ./,/- a 7ew Insurance $ct passed !y Parliament

called Insurance $ct- ./,/ to replace the old $ct of ,:E0* $s soon as the new insurance act has

!een passed- the old one has !ecome inactive and from now on the entire insurance industry will !e regulated !y the new Insurance $ct ./,/*

#aor Regulatory Conflicts

>ven though the different rules ) regulations have !een made to regulate the entire insurance

industry smoothly- many situations and pro!lems regarding the implementation process caused

conflicts over time* The Conflicts

• There was a restriction regarding !usiness placement under the Insurance $ct ,:09-

which affected the interests of the private insurance companies in many ways in

Bangladesh* (ince the pu!lic sector accounted for a!out 9/G of the total premiumvolume of the country- there was a little percentage of premiums left for the insurance

companies in the private sector to survive*

• In such situation- the withdrawal of the restriction !ecame essential* (o- the private sector

insurance companies demanded withdrawal of such restrictions so that they could;

%a& 'nderwrite !oth pu!lic and private sector insurance !usiness in competition with the (BC *

%!& >ffect reinsurance to the choice of reinsures*

Resolutions "ol!ing the Conflicts

@hen there is any pro!lem- there is the emergence of solutions* $s the insurance industry faced

significant pro!lems regarding the restrictions on !usiness placement- the regulatory !odies had

to ta1e necessary resolutions to face ) handle the situation* In this regard- the following stepshad !een ta1en !y the regulatory !odies;

• The 5overnment modified the system through promulgation of the Insurance

Corporations %$mendment& $ct ,::/*

• The changes through the Insurance Corporations %$mendment& $ct ,::/ allowed the

private sector insurance companies to underwrite D/G of the insurance !usinessemanating from the pu!lic sector and to place up to D/G of their reinsurance with any

reinsures of their choice- at home or a!road- 1eeping the remaining for placement with

the (hadharon Bima Corporation %(BC&*



• #any other changes were introduced such as privatization policy- which paved the way

for a num!er of insurers to emerge in the private sector*

• The overhaul also includes the esta!lishment of an Insurance <egulatory $uthority

%I<$&- which would !e autonomous- and have the power to regulate the state2owned +BC

and (BC as well as all private insurance companies on an e"ual footing under a uniformregulatory framewor1*

Reforms in Insurance "ector

In order to smooth the overall insurance !usiness in Bangladesh- the concerned authority hadalways !een alert* @hile there was any pro!lem or conflicting situation arises- the authority

doesn=t sit idleA rather they try to solve it at their !est*

• Considering the e8pansion of trade and commerce in the country and for reducing ris1

related pro!lems in people=s life- the new law titled Insurance $ct ./,/= has !een

enacted to update the provisions of Insurance $ct- ,:09=*

• Insurance 4evelopment and <egulatory $uthority $ct ./,/= has also !een formulated

with a view to synchronizing the functions of the e8isting Insurance 4epartment with the

spirit of newly enacted Insurance $ct- ./,/ to maintain proper control and supervision ofthe sector and protect the interests of policy holders and !eneficiaries under the insurance

policy*

O!er!ie' of the Ne' Insurance 2ct /7*7

Bangladesh=s insurance industry is set to start a new ourney with the passage of two new laws in

the parliament recently* The House passed two insurance laws in a !id to further strengthen theregulatory framewor1 and ma1e the industry operationally vi!rant* The new laws are Insurance

$ct ./,/ and Insurance 4evelopment and <egulatory $uthority $ct ./,/* The government has

ta1en the pragmatic step to !oost the insurance sector*

Name The Insurance 2ct8 /7*7

$ct 7um!er ,0 of ./,/

(ummary This law is related to the matters of Insurance

#inistry #inistry of 3inance

Passing 4ate #arch /0- ./,/

4ate in 3orce Thursday- ,9 #arch- ./,/

<egulatory $uthority Insurance 4evelopment ) <egulatory $uthority%I4<$&

Insurance $ct ./,/ and Insurance 4evelopment and <egulatory $uthority $ct ./,/ were passed

to !etter regulate the insurance industry and protect customers interests* $nd Insurance Bill./,/ said the !ill was moved aiming at modernizing and updating the old Insurance $ct and to



trim down the ris1s of investment in trade and commerce and of course particularly in the

insurance industry* The laws update Insurance Ordinance .//9 and Insurance <egulatory

$uthority Ordinance .//9 of the past careta1er government* Insurance 4evelopment and<egulatory $uthority %I4<$& were passed !y the +atiya (angshad in #arch- ./,/* The newly

esta!lished I4<$ started functioning in +anuary- ./,,* There are a!out D/ rules and regulations

to !e framed under the Insurance $ct- ./,/* The I4<$ have !een wor1ing on the initial drafts prepared under an $sian 4evelopment Ban1 %$4B&2funded Technical $ssistance %T$& proect*

The Ordinance has some notable ne' stipulations%

The much tal1ed a!out the Insurance $ct ./,/ and Insurance 4evelopment and <egulatory

$uthority $ct ./,/ were passed in the parliament on 0rd #arch- ./,/* The new ordinance hassome nota!le provisions as follows;

1*4 "etting up of a Policyholders9 Protection &und%

In order to ma1e the overall claim settlement procedure smooth and timely- the insurancecompanies have to set up a special fund named Policyholders= Protection 3und as per the‖

new re"uirements of the newly passed and !eing implemented Insurance $ct ./,/*

1/4 :reater capital re;uirements for insurers%

The new Insurance $ct ./,/ raised the paid2up capital of life and non2life insurance companies

to ma1e them financially sound* The minimum paid2up capital of a life insurance company will

now rise to T1 0// million from T1 ED million and for nonlife the capital size will !e T1 //million from T1,D/ million under Basel2II* 3or 3inancial Institutions %3Is-& full implementation

of Basel2II has !een started in +anuary /,- ./,. %Prudential 5uidelines on Capital $de"uacy and

#ar1et 4iscipline %C$#4& for 3inancial Institutions&* 7ow- 3Is in Bangladesh are re"uired tomaintain T1* , !illion or ,/G of Total <is1 @eighted $ssets as capital- whichever is higher*

104 Creation of bro(erage houses for insurance policies%

The new Insurance $ct ./,/ %section 00& said that !ro1erage houses %Ban1s- financial

institutions or any middleman companyorganization& should !e created for insurance policies*

'nder the section D9%,&- none can give money of commission to any!ody e8cept the certainagents or !ro1erage houses in order to launch or e8pand any insurance !usiness in Bangladesh*

The distri!ution of the commission must !e as follows;

•

0DG of the premium in the first year*• ,/G of the renewed premium in the second year*

• DG of the renewed premium in the 0rd year and on after *

1,4 #andatory sol!ency margins for insurers%



$ll authorized life assurance companies are closely regulated !y the I<$* <egular internal and

e8ternal audit activity and strict reporting re"uirements ensure that the companies comply with

the regulator=s safeguardsA one of those safeguards is a solvency margin* The solvency margin isthe comparison !etween what a company owns %its assets& and what it owes %it lia!ilities& and

indicates the ratio of assets to de!t* Therefore the solvency margin provides a good indicator of

the financial sta!ility of that company* The I<$I4<$- as the regulator- monitors any falls insolvency !elow a certain percentage*

>ach and every insurance company has to 1eep a mandatory solvency margin following a

certain percentage %which has not yet !een fi8ed& and !y using a certain formula %which has not

yet !een esta!lished& according to section 0 %,& of the Insurance $ct ./,/*

1<4 2llo'ing foreign in!estment in the insurance sector%

The Insurance $ct ./,/ said the sector needs to !e managed properly and !e strengthened !y

reducing !usiness ris1s- and local and international insurance laws need to !e harmonized

considering the socio2economic aspect of the country and protect the interest of policy2holdersand other !eneficiaries*

1=4 Reduction of the number of directors from /7 to *<%

The insurance act !ars a director of an insurance company to !ecome director of any other

financial institution including !an1s* 'nder the Insurance $ct ./,/- the num!er of the directors

cannot e8ceed ,D- while it was ./ under the Insurance $ct ,:09*

1-4 Categori3ation of Insurance Business%

The section D %,& of the Insurance $ct ./,/ proposed that insurance company to !e categorizedas life= and non2life= instead of life= and general= and it have replaced the Insurance $ct ,:09*

(o- from now on the insurance companies in the entire insurance sector in Bangladesh will !ecategorized as life and non2life insurance companies under the new insurance act*

Ne' 2dditions by the 2ct8 /7*7%

The newly passed Insurance $ct ./,/ has some nota!le new additions- which were a!sent in the

previous Insurance $ct of ,:09* Therefore- the entire insurance industry is facing some new

practice while implementing the new act in the insurance !usiness* The new additions !y the newact are as follows;

Creation of Ne' Regulatory 2uthority%

Insurance <egulatory $uthority %I<$& will !e esta!lished for the Insurance sector* There are 6.

insurance companies %see $ppendi8& operating in the country and they need to !e regulatedunder comprehensive laws and guidelines and need to !e supervised !y a strong regulatory

authority* The Insurance $ct ./,/ said the sector needs to !e managed properly and !e

strengthened !y reducing !usiness ris1s- and local and international insurance laws need to !e



harmonized considering the socio2economic aspect of the country- and to protect the interest of

policy holders and sta1eholders of the insurance industry in Bangladesh* The 7ew Insurance $ct

provides for the composition of such $uthority- its terms ) conditions* The I<$ will have the power to;

•

#a1ing regulation for Insurance Industry and delegation of powers-• >sta!lishment of the Insurance <egulatory 3und-

• >sta!lishment of Insurance $dvisory Committee-

• Power to ma1e any future rules or amendments- etc

The Insurance 4evelopment and <egulatory $uthority $ct ./,/ said the authority will comprisea chairman and four mem!ers and they will loo1 after the whole sector* The enactment of the law

will a!olish the department of insurance under the 3inance #inistry of Bangladesh* Premium

charged !y the companies will !e determined !y a committee formed !y the authorities and it

will also investigate any irregularities of the companies- the act said* To create a vi!rant

insurance sector- the industry got its recognition from the government and a new Insurance$ct./,/ has !een passed to replacing the old Insurance $ct of ,:E0*

Legal &rame'or( for Islami Insurance%

Islamic Insurance was already in Bangladesh !ut it was now !ought under legal framewor1 !ythis new $ct ./,/* 'nder the section E %,& of the Insurance $ct ./,/- no insurance company is

allowed to do !oth Islami Insurance !usiness and non2life insurance !usiness together* If any

company have !oth of this !usinesses- then according to section E %.& of the new act it has togive up one and can continue any of these two* $nd the decision has to !e informed to the

insurance authority within si8 month of forming the !usiness authority* However- the claim of

the previous policy holders shall !e settled according to the previous Insurance act of ,:09*4uring ,::: ) onward many insurance companies have !een given license to underwrite Islamiinsurance !usiness without having proper law- rules and regulations to guide them* It is not

proper to allow Islami insurance !usiness without having legal !ac1ing and- therefore- this

!usiness has !een !rought under the am!it of new law*

#icro Insurance Business%

The new Insurance $ct ./,/ is ma1ing way for the #icro Insurance Business opportunities in

the insurance sector of Bangladesh which has a great prospect for the small and medium

enterprises as well as the growing !usinesses especially in the rural areas2 2

• #icro insurance can !e a great prospective area for the insurance !usiness in our country

especially in the rural areas* #ost of the people of our country are una!le to have costly

and long term insurance policies since a great portion of the country=s population is from

lower ) middle income class*

• #icro insurance can !e provided to individual personnel or to small !usiness owners

against little insurance premiums and with easy terms and conditions* @hen they will



afford to minimize their ris1s at a lower price- they will ta1e that opportunity and they

will !ecome to get used to it* This can cover a huge portion of the society who can !e a

prospective target mar1et for this !usiness*

Changes Bought by the Ne' 2ct

The Insurance $ct has not only !rought the new additions- !ut also has !rought some eye2

catching changes in some significant areas that e8isted in the previous insurance act* The

changes !rought !y the Insurance act ./,/ are descri!ed shortly !elow;

Capital Re;uirements%

$n insurer transacting life insurance !usiness would !e re"uired to have a minimum paid2up

capital of T1* 0// million while the minimum paid2up capital for non2life insurer would !e T1*

// million*

"pread of Business in Rural 2reas%

Provision has !een made to induce insures to underta1e such parentage of his !usiness in therural areas or in social sectors as may!e specified !y the $uthority- This provision would

encourage savings among the people in the rural areas and social sectors on the one hand- and

provide financial security to the insurer- on the other*

Reinsurance 2broad%

The present mandatory provision for reinsurance of general insurance with the state2owned

(adharan Bima Corporation %(BC& has !een rela8ed* $n insurer may reinsure with any other

insurer inside or outside Bangladesh*

Penalty %

'nder the new insurance law- ma8imum penalty for any violation will !e T1* ,/ la1h in fine

while the minimum fine will !e T1* D/-///* If the violation continues- an additional fine of T1*

D-///per day will !e imposed*

Pro!ision for &oreign In!estment%

@ith a view to attracting foreign investment in the insurance sector in Bangladesh- foreign

investors would !e allowed to hold or su!scri!e to the share of an insurance company up to a prescri!ed ma8imum %the ma8imum limit has not yet !een set&*

The role of Insurance in >conomic De!elopment

The management of ris1 is a fundamental aspect of entrepreneurial activity* >ntrepreneursmanage the ris1 of accidental loss !y weighing the costs and !enefits of each alternative* In a

structured ris1 management process- this involves; %,& identifying the e8posures to accidental



"l? No? Name of the Insurance

Company

/,* $merican Life Insurance

Company %3oreign Company&

/.* Baira Life Insurance Company

Ltd*

/0* 4elta Life Insurance Company

Ltd*

/* 3arest Islami Life Insurance Co*

Ltd*

/D* 5olden Life Insurance Ltd*

/6* Homeland Life Insurance

Company Ltd*

/E* #eghna Life Insurance Company

Ltd*

/9* 7ational Life Insurance CompanyLtd*

/:* Padma Islami Life InsuranceCompany Ltd*

,/* Popular Life Insurance Company

Ltd*

,,* Pragati Life Insurance Ltd*

,.* Prime Islami Life Insurance

Company Ltd*

,0* Progressive Life InsuranceCompany Ltd*

,* <upali Life Insurance Company

Ltd*

,D* (andhani Life Insurance

Company Ltd*

,6* (unflower Life InsuranceCompany Ltd*

,E* (unlife Insurance Company Ltd*

LI"T O& T)> NON.LI&> IN"UR2NC> CO#P2NI>"%

"l? No Name of the Company

/,* $grani Insurance

Company Ltd*

/.* $sia Insurance Ltd*

/0* $sia Pacific 5en



Insurance Co* Ltd*

/* Bangladesh Co2operatives Ins* Ltd*

/D* Bangladesh 5eneral

Insurance Co* Ltd*

/6* Bangladesh 7ational

Insurance Co*Ltd*

/E* Central Insurance

Company Ltd*

/9* City 5en* Insurance

Company Ltd*

/:* Continental Insurance

Ltd*

,/* Crystal Insurance

Company Ltd*

,,* 4esh 5en* InsuranceCompany Ltd*

,.* >astern InsuranceCompany Ltd*

,0* >astland Insurance

Company Ltd*

,* >8press Insurance Ltd*

,D* 3ederal Insurance

Company Ltd*

,6* 5lo!al Insurance Ltd*,E* 5reen 4elta Insurance

Co* Ltd*

,9* Islami Commercial

Insurance Co* Ltd*

,:* Islami Insurance

Bangladesh Ltd*

./* +anata Insurance

Company Ltd*

.,* Farnaphuli Insurance

Company Ltd*..* #eghna Insurance

Company Ltd*

.0* #ercantile Insurance

Company Ltd*

.* 7itol Insurance

Company Ltd*



.D* 7orthern 5en*Insurance

Company Ltd*

.6* Peoples Insurance

Company Ltd*

.E* Phoni8 Insurance

Company Ltd*

.9* Pioneer Insurance

Company Ltd*

.:* Pragati Insurance Ltd*

0/* Pramount Insurance

Company Ltd*

0,* Prime Insurance

Company Ltd*

0.* Provati Insurance

Company Ltd*

00* Pura!i 5en InsuranceCompany Ltd*

0* <eliance Insurance Ltd*

0D* <epu!lic InsuranceCompany Ltd*

06* <upali InsuranceCompany Ltd*

0E* (onar Bangla Insurance

Company Ltd*

09* (outh $sia InsuranceCompany Ltd*

0:* (tandard Insurance Ltd*

/* Ta1aful Islami Insurance

Ltd*

,* 4ha1a Insurance Ltd*

.* 'nion Insurance

Company Ltd*

0* 'nited Insurance

Company Ltd*

CO#P2N@ OA>RI>

Peoples Insurance Company Limited

Peoples Insurance Company Limited is the second private insurance company and it is a relia!leinsurance company in the insurance landscape in Bangladesh* The company was founded in

,:9D in order to provide non2life insurance services in the country* Customers satisfaction is the



Aision of Peoples Insurance Company Limited %

The mission of the company is to reach at zenith point of providing "uality service and hence

achieving highest corporate goal and customer satisfaction* The slogan of PICL is Kmanushmanusher +anna

#ission of Peoples Insurance Company Limited%

The dignity and well !eing of all people %especially the !usiness houses and their interests& are

ensured through insurance protection services in order to produce value for the shareholders all

the way through customer- employee and general people satisfaction*

&uture Plans%

The Company has underta1en various realistic future plans which include the following plans to

!e implemented?

• To computerize the entire operation system within the shortest possi!le time

• To impart e8tensive training for the employees at home and a!road* 3ield force %,//G&

has to !e properly groomed up*

• To e8pand Companys operations to all commercially important places of the country

gradually*

• To introduce new products depending on the demand of the mar1et*

• To o!serving #arch as the KClient (ervice #onth in every year*

•

To follow K(ervice 3irst than Business K!y e8peditious and udicious settlement of claim

#aimum #anagement >penses

4ue to the increased price of various products used in any office or !usiness- the PeoplesInsurance Company Limited along with other insurance companies e8isting in the insurance

sector of Bangladesh are having a great load of continuously increasing management e8penses as

well as other e8penses* However- there has not !een made any change in the ma8imum percentage of management e8penses since ,:09 under the new Insurance $ct ./,,- the company

cannot show the actual management e8penses if it e8ceeds the certain percentage*

"er!ices of Peoples Insurance Company Limited

(ince its inception- PICL is serving a variety of services to its valued customers* Currently- the

company has . types of non2life insurance services through its 0 !ranches located in .0districts throughout the country* The names of the services offered ) provided !y PICL are

given !elow;

Name of the "er!ices Pro!ided by PICL



,* 3ire Insurance ,0* Cash2in2safe Insurance

.* Industrial K$ll <is1s Insurance ,* Cash2on2counter Insurance

0* #arine Cargo Insurance ,D* Pu!lic Lia!ility Insurance

* #arine Hull Insurance ,6* Personal $ccident Insurance

D* #otor Insurance ,E* Peopless Personal $ccident Insurance6* Contractors K$ll <is1s Insurance ,9* @or1mens Compensation Insurance

E* >rection$ll <is1s Insurance ,:* 5oods2in2transit Insurance

9* #achinery Brea1down Insurance ./* Comprehensive Travel Insurance

:* 4eterioration of (toc1 Insurance .,* Over2seas #edi2claim Insurance

,/* Boiler ) Pressure Messel Insurance ..* K$ll <is1s Insurance

,,* Burglary ) House!rea1ing Insurance .0* 3idelity 5uarantee Insurance

,.* Cash2in2transit Insurance .* Ban1 Loc1ers Insurance

Location of Branches of Peoples Insurance Company Limited in Bangladesh

There are < departments in peoples insurance company Ltd? Those are%

$s per the #B$ degree completion re"uirement of $'(TBusiness(chool- $'(T'niversity- I

had !een appointed in the three2month internship program under the 4epartment of 3inance and

$ccounts at the head office of Peoples Insurance Company Limited- Bangladesh* 4uring theinternship2training program I have wor1ed in different significant programs underta1en !y the

3inance ) $ccounts department of the company* 3ortunately- I had the advantage of wor1ing in

the very friendly atmosphere in the Head office of PICL* Here I had the chance to learn a greatdeal*

The &inance $ 2ccounts Department%

The department of 3inance ) $ccounts %3)$& is responsi!le for all matters relating to 3inance

and $ccounting functions of the Peoples Insurance Company Limited* To ena!le it perform itsstatutory responsi!ility- the department is structured into D different sections as shown in the

figure 0*,* $ll these divisions however reports administratively to the C3O through the 45# )

5# of the respective department* $s an intern- I had wor1 with the unior e8ecutives luc1ily

under the supervision of the C3O shown in the graph !elow;

Responsibilities in &inance $ 2ccounts Department%

The finance ) accounts department of PICL ta1es responsi!ility for organizing the financial and

accounting affairs including the preparation and presentation of appropriate accounts- and the

provision of financial information for managers ) sta1eholders* It is the one of the mostimportant departments of the head office of Peoples Insurance Company Limited* One can have

a complete view of the functions and monthly e8penses of the company from the finance )

accounts department* The functions the department include managing- controlling and recordingthe inflow and outflow of cash from the daily !asis to monthly and annual !asis* It is very



difficult o! to record all the e8penditure of the company which increases the importance of

account department in the company* The !asic functions of the department of finance ) accounts

are as follows;

• Planning ) esta!lishing !udget

•

Posting %'nderwriting- ournals etc*&

• Billing and 1eeping proper record

• Petty cash management

• Ban1 reconciliation

• #aintain cash !oo1 ) !an1 !oo1

• Preparation of financial statements

• $nalysis of financial statements

• Ta8 ) M$T calculation

• Preparation ) su!mission of organization contri!uted ta8 return of the employees to

7B<

• Conducting internal audit through the internal control unit

• 3inancial reporting to the management ) to the sta1eholders when necessary

• #aintaining payroll

•

#aintaining liaison with the !an1s ) other financial organizations etc*

Responsibilities assigned on me%

The profita!ility of a company can !e udged through the analysis of its accounts record* #aor

wor1 of account is done in company head office located at 4il1usha- #otiheel- 4ha1a* One can

have a complete picture of the different activities and e8penses !y sitting in the department of3inance ) $ccounts* 3rom this perspective it was a 1nowledgea!le e8perience for me to wor1 in

this department as an intern throughout the three2month internship period* On the very first day

my on2site supervisor- #r* (i! (an1ar (aha- 3L#I%I&- 3C$- who is designated as the Chief

3inancial Officer %C3O& gave me an overall view of the various functions performed !y the

department* 4uring the internship period- I learnt a lot not only a!out the $ccounts !ut also‖

various other activities of the Insurance company* Besides- #r* (i! (an1ar (aha- the 5#- 45#-

) the (r* e8ecutives of the concerned department were very helpful and co2operative over thethree2month internship period* I learnt a!out various functions of the department of 3inance )

$ccounts* @ith the help of my supervisor- I was a!le to manage internal control tools and other

related financial documents of the head office* He along with the other respected personnel of thedepartment were helpful enough to ta1e out time from their !usy schedule to teach me how to

maintain records relating to !an1 !oo1- cash !oo1* The main wor1 of accounts is done in the



company=s head office* The manager- #r* $*(*#* $!dul $wal %(aleh& supervised me a!out

different activities of the department of finance and accounts* He was responsi!le for

#anaging Ban1 <econciliation ) Mariance $nalysis which is a tough o! and I helped him‖ along with the +r* >8ecutives in doing this tas1 during the period of my internship* @or1ing in

this department was a very 1nowledgea!le ourney for me*

4uring the training period- I was a!le to get a complete idea of the wor1ing of an insurance

company* It was a very 1nowledgea!le e8perience* In the following pages I have e8plained the performing various tas1s that I have done during the period of internship period* #aor

<esponsi!ilities;

• Internal audit for internal control

• 3inancial reporting

• Preparation of Ban1 reconciliation and necessary adustment

• Training to the newly recruited +r* e8ecutives

7ow- I would li1e to give a short overview of the responsi!ilities that I have performed and my

significant learning that I have learnt from my internship at the head office Peoples Insurance

Company Limited under the department of 3inance ) $ccounts*

*?Internal audit for internal control %

4uring the internship period- I too1 participation in internal audit which is a significant tool ofinternal control and is one of the most important functions of the department of finance )

accounts*

Internal control%

Internal Control is the process designed to mitigate ris1s to the !usiness and ensure that the !usiness operates efficiently and effectively* I($ and B($ N 0,D N <Understanding the =ntity

and its =nvironment and Assessing the >isk of Material Misstatement? defines the internal

control N

“Internal Control is the process designed and implemented to address identified %usiness ris(s

that threaten the achievement of the entity's o%)ectives

#ateriality%

$s part of internal audit- I had to calculate materiality* #ateriality relates to the level of error

that affects the decisions of users of the financial statements* I$( and B($ N 0./ N defines N

“*ateriality is the auditors' )udgment a%out the si+e of misstatements in the financial

statements

)o' the #ateriality is used in the course of audit engagement%



Calculation of #ateriality

#ateriality depends on the size of the errors in the conte8t if its omissions or misstatements* I

came to 1now that materiality assessment helps the auditors to decide N

How many and what items to e8amine

@hether to use sampling techni"ues

@hat level of error is li1ely to lead an auditor to stay the financial statements do not give a true

and fair view

There are different methods used !y different audit firms in calculating materiality* But among

them- the following are an e8ample used !y the Peoples Insurance Company Limited*

*ateriality for Planning Purposes ,

It is DG of profit !efore ta8 or *DG of total assets or total revenue*

Significant *isstatement &hreshold ,

It is EDG of #ateriality for Planning Purposes*

!udit -ifference Posting &hreshold ,

It is 0G N DG of (ignificant #isstatement Threshold*

>ample

<evenue B4T* ,0-/9:-0: Profit !efore ta8 B4T* ,-/0- Total assets B4T* -0/D-D09Based on this information- calculation is conducted using the a!ove given percentage for

calculating the #ateriality for Planning Purposes %#PP&- (ignificant #isstatement Threshold

%(#T& and $udit 4ifference Posting Threshold %$4PT&* In the a!ove cases- materiality can !eindividually or in aggregated in the class of transactions or account !alances in the financial

statements*

I have learnt that there are t$o approaches to calculate materiality ,

•

Income (tatements approachA and• Balance (heet approach*

&inancial reporting

I have audited the accompanying financial statements of Peoples Insurance Company Limited-

which comprise the statement of financial position as at 4ecem!er 0,- ./,/- and the statement of



comprehensive income- statement of changes in e"uity and statement of cash flows for the year

ended- and a summary of significant accounting policies and other e8planatory information*

#y Responsibility and Learning 'hile Reporting

#y responsi!ility was to e8press an opinion on these financial statements !ased on the financialanalysis ) internal audit* I conducted the audit in accordance with International (tandards on

$uditing %I($&* Those standards re"uire that we comply with ethical re"uirements and plan and

perform the audit to o!tain reasona!le assurance a!out whether the financial statements are freefrom material misstatement* $n audit involves performing procedures to o!tain audit evidence

a!out the amounts and disclosures in the financial statements* The procedures selected depend on

the auditor=s udgment- including the assessment of the ris1s of material misstatement of thefinancial statements- whether due to fraud or error* In ma1ing those ris1 assessments- the auditor

considers internal control relevant to the entity=s preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances- !ut not

for the purpose of e8pressing an opinion on the effectiveness of the entity=s internal control* $n

audit also includes evaluating the appropriateness of accounting policies used and thereasona!leness of accounting estimates made !y management- as well as evaluating the overall

presentation of the financial statements*

#aintaining Professional >thics

4uring auditing- I have learnt that professional ethics is as important as conducting a proper

audit in the purpose of ensuring proper internal control in (outh $sia Insurance Company

Limited* Professional ethics concerns the moral issues that arise !ecause of the specialist1nowledge that professional attain and how the use of this 1nowledge should !e govern when

providing a service to the pu!lic can !e considered a moral issue and is termed professional

ethics* It agreed that Professionals are capa!le of ma1ing udgments- applying their s1illsAreaching informed decisions in situations that general pu!lic cannot- !ecause they have notreceived the relevant training* I have learned that as an auditor- I am re"uired to comply with the

following fundamental principles N Integrity- O!ectivity- Professional Competence and 4ue

Care- Confidentiality- and Professional Behavior*

Preparation of Ban( reconciliation

I have prepared a num!er of !an1 reconciliation of /. !ranches of Peoples Insurance Company

Limited as well as of the head office for the month of 7ovem!er24ecem!er- ./,. ) +anuary2

3e!ruary- ./,0* I have learned that mainly things are considered for preparing !an1

reconciliation;

• Che"ue issued !ut not yet presented in the !an1*

• $mount 4eposited and shown in !an1 statement !ut not shown in !an1 !oo1*

• Che"ue issued !ut not yet accounted for

• $mount 4eposited and shown in !an1 !oo1 !ut not shown in !an1 statement*



The first two amounts along with !an1 interests are added with the closing !alance of the !an1

!oo1 1ept !y the organization- and the ne8t two are deducted from it along with the !an1

charges* Thus the !an1 reconciliation is prepared- the !alance of which is ust same as theclosing !alance of the certain !an1 statement* %Please see $ppendi86*D for the format of Ban1

<econciliation used !y PICL& *

Pro!ided training to the ne'ly recruited r? >ecuti!e

Before leaving the organization- I had to train up the newly recruited +r* >8ecutives under thedepartment of finance ) accounts a!out what I had learnt so that they can perform their tas1s

effectively in my a!sence*

Other responsibilities%

The other tas1s that I have done in the internship period at PICL include the following;

•

Posting of transaction %#<&- underwriting- and money collection using accountingsoftware O<$CL> ./,.*

• Preparing ) posting vouchers- and Feeping file ) 4ocumentation etc*

C"R 2cti!ities of PICL

Peoples Insurance Company Ltd* has !een participating in Corporate (ocial <esponsi!ility

%C(<& continuously since its inception in various ways* $s for instance- the company hasdeveloped a uni"ue culture to help distressed peoples- environment- heritage- sports- education-

employment and much more* $ few of the corporate social responsi!ilities are as follows;

•

$fter the natural disasters- PICL participates in various types of the activities for thereconstruction of the damaged infra2structures* #oreover- when the calamity is over- wetry to ta1e care of those who have lost their lives and their valued properties*

• The company always in favor of protecting our tradition and heritage* 3or e8ample- our

company always sponsors not only the sports which are our own- for e8ample- Fa!adi-

Bali Fhela- Lathi Fhela etc* !ut also our non2traditional sports li1e foot!all and cric1et*

• The company created a significant num!er of employment opportunities for the

unemployment human resources since its inception* The effort for o! creation willcontinue in future too*

• The company has a plan to provide scholarships for the needy !rilliant students who want

to ma1e a career in the fields of technology and digital sciences*

• PICL has a plan to help the sic12aged people so that they do not consider themselves as a

!urden of our society*

3inally- the company focuses on the welfare of the employees so that they can have the

necessary s1ills and opportunities to face the challenges*



Business $ "tatistical Information since /77/

%3igures in #illion Ta1a&

@hile o!serving the financial performance of the Peoples Insurance Company Limited- it has

!een found that the company has faced different situation over years and that is why the financial performance has some nota!le changes over the time period since .//.2./,,,*

:ross Premium $ Net Premium of PICL

@ear /7** /7*7 /77+ /775 /77- /77= /77< /77, /770 /77/

:ross Premium ,77?*7 05=?/ 005?<5 0/*?/* /<-?*5 /05?=5 /<+?== /=*?0- /<=?,0 /*/?<<

Net Premium /0<?0/ //+?0, /*-?7, /7<?+- *=0?0 *0-?=/ ***?=/ *,<?+0 *<7?=* *0+?=

In .//.- PICL had a gross premium of .,.*DD million B4T which has !een increased

progressively over years and !ecame //*,/ million B4T in ./,,* $t the same time- net premium of the company also has !een increased from .//. to ./,,- !ut in .//D ) .//6- the

organization made relatively lower net premium compared to the other years*

The annual reports %.//9- .//:- ./,/)./,,& of Peoples Insurance Company show that the

amounts of gross and net claim of the company since the year of .//. to ./,/ were fluctuatednota!ly over the years*

:ross Claim $ Net Claim of PICL

@ear /7** /7*7 /77+ /775 /77- /77= /77< /77, /770 /77/

:ross Claim -0?<7 -/?,- -+?, <7?7= 05?*5 ,/0?/, <<?00 *7,?/+ ,+?5 /0?=/

Net Claim ,+?=/ //?0/ ,,?=* 07?0- /0?0< */7?05 /,?< 0-?,+ /+?,+ //?**

The company faced different gross ) net claims in different years due to the different situation

%disastersaccidentsris1s& of the policyholders* In .//6- !oth the amount of gross claim ) net

claim was significantly higher the previous and later years due to the greater num!er of policyholder=s claim in that year* The graphical presentation of the finding is shown !elow;

Under'riting Profit 1Loss4 $ In!estment $ Other Income

$ccording to the annual reports %.//9- .//:- ./,/ ) ./,,& of Peoples Insurance Company- the

amounts of underwriting profit %loss& and the investment ) other income since the year of .//.to ./,, were as follows;

Qear ./,, ./,/ .//: .//9 .//E .//6 .//D .// .//0 .//.

'nderwriting

Profit %Loss&

,D*6. ,0*: D*0: ,0*ED /*0. 2,.E*D 0,*.. 0,*99 00*/E 0.*:D

Investment ) ,,,*0 ,/:*:: 0:*DD ,*: .,E*0: .,*9: ,D*,, ,6*96 ,.*9 ,.*0D



Other Income

4ue to the greater amount of gross and net claim PICL had faced significantly higher amount of

underwriting loss in .//6 and for the same reasons the amount of investment and other incomeof the company is comparatively lower than the later years*

Net ProfitE 1loss4 both before $ after Ta

Qear ./,, ./,/ .//: .//9 .//E .//6 .//D .// .//0 .//.

7et profit

%Loss& !eforeTa8

:D*:9 ,/,*/D 66*0 0,*06 ,:0 2,*90 0*.E E*/D *. 0*:.

7et profit

%Loss& afterTa8

6:*6D E6*D: 66*0 0,*06 ,EE*:E 2,,*: 0*.E 0.* 0,*6. 0/*/.

One of the most important financial performances of any company is found in the company=s net

profit* Peoples Insurance Company=s net profit !oth !efore ta8 ) after ta8 since .//. were asfollows;

@hile o!serving the net profit% loss& !oth !efore and after ta8 it has !een found that the

company faced greater amount of loss in .//6 !ecause of the greater amount of gross and net

claim PICL compared to the other years*

>arnings per "hare of PICL

Peoples Insurance Company=s >arnings per (hare over the years since .//. were "uitesatisfactory according to the sta1eholders* The company=s earnings per share since .//. up to

./,, are shown !elow;

3inancial $nalysisQear ./,, ./,/ .//: .//9 .//E .//6 .//D .// .//0 .//.

>arnings per share %>P(& .*/D .*,, 00*,E ./*:, ,,9*6 2:6*DD *06 D*/E D.*E D/*/0

>ven though the company had negative >P( in .//. due to the net loss causing !y a greater

claim settlement for the +amuna 5roup- it !ecame a!le to overcome that ust in the ne8t year in.//E !y ta1ing wise decisions and pragmatic steps*

#ar(et condition

In the ta!le !elow- it is found that Peoples Insurance Company Limited was a!le to dividend in

all the years since .//. e8cept .//6- as it has already !een discussed a!out the reason of suchoccurrence*

HighestLowest #ar1et



Qear ./,, ./,/ .//: .//9 .//E .//6 .//D .// .//0 .//.

4ividend in

Percentage

7o

4ivided

DG Cash

) DG(toc1

./G

%(toc1&

0;, B

%(toc1&

,/G 7o

4ividend

,//G

%stoc1&

.DG

%stoc1&

.DG

%cash&

.EG

%cash&

Price of

(hare

,/./,90 ,.,/E

DE/

,,9DE

99/

,D6E

D/.

D9E

,9/

6E0E .E/ 9//E

6E0

,9D/E

9//

,9D/E

9//

6:/E

D/

otes/ #ost of the analysis in this chapter is !ased on data from the annual report of PeoplesInsurance Company Limited for the year of .//9- .//:- ./,/ ) ./,,* $s the company has not

pu!lished the annual report for the year of ./,.- it was not possi!le to include and analyze the

information of ./,. due to confidentiality*

Business Performance of PICL since /77/ 1&igures in #illion Ta(a4

Qear ./,, ./,/ .//: .//9 .//E .//6 .//D .// .//0 ./

3inancial Performance

5ross

Premium

//*,/ 096*. 009*D9 0.,*., .DE*,9 .09*69 .D:*66 .6,*0E .D6*0 .,.

7et Premium .0D*0. ..:*0 .,E*/ ./D*:E ,60*0 ,0E*6. ,,,*6. ,D*:0 ,D/*6, ,0:

5ross Claim E0*D/ E.*E E:* D/*/6 09*,9 .0*. DD*00 ,/*.: :*9/ .0

7et Claim :*6. ..*0. *6, 0/*0E .0*0D ,./*09 .*D 0E*: .:* ..

'nderwriting

Profit %Loss&

,D*6. ,0*: D*0: ,0*ED /*0. %,.E*D& 0,*.. 0,*99 00*/E 0.

Investment )

Other Income

,,,*0 ,/:*:: 0:*DD ,*: .,E*0: .,*9: ,D*,, ,6*96 ,.*9 ,.

7et profit %Loss& !eforeTa8

:D*:9 ,/,*/D 66*0 0,*06 ,:0 %,*90& 0*.E E*/D *./ 0

7et profit %Loss& after

Ta8

6:*6D E6*D: 66*0 0,*06 ,EE*:E %,,*:& 0*.E 0.* 0,*6. 0/

(hare Capital ) <eserve

Paid up

Capital

6/ / .// ,D/ ,D/ ,D/ ED*// 6/*// 6/*// 6/

(hareholde 996*06 9ED*0 ..*E9 .E:*D9 .:D*:, .E:*D9 ./*D6 ..9*. .,0*9. ,:

rs= >"uity

<eserve 0:*9 09*., ,9*., ,.:*D9 ,D*:, ,.:*D9 ,.:*D6 ,69*. ,D0*9. ,09*E6

$ssets

Investment

in (hares )

(ecurities

.6D*:6 .D*/9 9*E0 .9*E: .E*6. .D*.D .D*E0 ,E*90 ,9*,/ ,E*,



Cash- 34<

) Ban1

Balance

0D*0E 0.6*.E ,.D*69 ,D:*DE ,.9*90 ,//*.9 ,.,*. ,E:*. ,E9*D0 ,60*:

Land )

Building

D:*: D.*6 6,*.E E6*. :/*/6 6.:*:: 60*: :6*:/ 00*D .09*9

Other

$ssets

..6*9E ./6*EE ,6,*E0 ,:*, ,9*6: ,/0*9 :*E. ,09*./ ,.E*, ,D.*

Total $sset ,.:9*, ,.0/*E6 E:E*, 9,0*:E E:D*. 9D:*06 99D*06 90.*,E 66E*,E DE.*D

3inancial $nalysis

4ividend in

Percentage

7o

4ividend

DGCash

)

DG(toc1

./G

%(toc1&

0;, B

%(toc1&

,/G 7o

4ividend

,//G

%stoc1&

.DG

%stoc1&

.DG

%cash&

.EG

%cash

>arning pershare %>P(&

.*/D .*,, 00*,E ./*:, ,,9*6 %:6*DD& *06 D*/E D.*E/ D/*/0

HighestLowest #ar1et

Price of(hare

,/./,90 ,.,/DE/

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#aor &indings

To analyze an organizations performance it is needed to apply the (@OT analysis* (@OT

analysis is a strategic planning method used to evaluate the (trengths -@ea1nessLimitationopportunities and Threats involved in a proect or in !usiness venture *It specifying the o!ective

of the !usiness venture and identifying the internal and e8ternal factors that are favora!le and

unfavora!le to achieve that o!ective*

(@OT analysis consist of four components2

( (trength

@ @ea1ness

O Opportunity

T Threat

• Corporate identity of the Peoples Insurance company is the most positive and renowned

Insurance company in Bangladesh*

• Peoples Insurance company Limited is second Private Insurance company which giving

their service since ,:9D*

• 3rom this report we found the companys overview- its service -vision- mission )future

plans*

• @e get Insurance laws and regulatory system- and regulatory conflicts in the insurance

industry in Bangladesh along with the emergence of esta!lishing and passing the new

insurance act*

• In .//.- PICL had a gross premium of .,.*DD million B4T which has !een increased

progressively over years and !ecame //*,/ million B4T in ./,,*

• * $t the same time- net premium of the company also has !een increased from .//. to

./,,- !ut in .//D ) .//6- the organization made relatively lower net premium compared

to the other years*



$ccording to the section E%,).&- no person who is the agent or appoints agent- !ro1erage house

or directly involved in it- and surveyor or auditor can !e the director of any life or non2life

insurance company* If such happens to anyone then hisher license or certificate as agent- !ro1er-or auditor will !e void as per section E%0& and that person will !e wor1ing only as the director

of the certain company*

Lac( of guidelines $ difference in legal opinion due to time gap

@hen a new law is passed to replace the old one- the system of the old law is automaticallycancelled* In this condition- when the new insurance act of ./,/ was passed to replace the

previous one- the previous act of ,:09 was automatically cancelled ) inactive* The insurance

$ct ./,, only says what to !e done !y the insurance industry- !ut it doesn=t set the informationa!out how to do and in what amountpercentage* $ctually- these things are properly given in the

various <ules ) <egulations supporting the Insurance $ct* $t this point- many supporting rules

and regulations have not yet !een set and esta!lished* Therefore- the whole insurance industry is

suffering from lac1 of guidelines ) different legal opinion*

Delayed Circulars

#any necessary circulars separately for the life and non2life insurance companies has not yet

!een developed and pu!lished !y the Insurance 4evelopment and <egulatory $uthority which is

causing specific trou!les to the concerned insurance companies*

Lac( of some necessary changes

$ccording to section 0 %,& %ii& of the insurance amendment ./,.- the given percentage of the

management e8penses in different stages of the total gross premium is ust same as the

percentage in ,:09* Throughout the last E0 years since ,:09 to ./,.- it is very natural themanagement e8pense has !een increased- !ut the ma8imum percentage limit is constant which isnot practical*

Pro!ision for Re.Insurance

(BC has long !een the sole reinsures in Bangladesh and the private insurance companies of the

country were statutorily compelled to place ,//G of their reinsurance !usiness with (BC* In,::/ the government amended the relevant provisions of the insurance $ct allowing D/G of all

reinsurance of general insurance !usiness to !e placed forci!ly with (BC and the rest to private

reinsurance companies *$!out E/G of premium income from general insurance !usiness in

Bangladesh is retained locally and the rest 0/G goes to reinsures a!road*

Recommendations

I want to remind !oth the insurance regulatory authorities and the insurance !usiness authorities

concerned a!out the poor state of the entire insurance sector in Bangladesh- which is to !e

a!olished following the enactment of the Insurance 4evelopment and <egulatory $uthority $ct./,/* @hile wor1ing on the report I have developed some recommendations and suggestions



!oth for the insurance authorities and for the insurance companies in Bangladesh specifying the

Peoples Insurance Company Limited*

Recommendations to the Regulatory 2uthority%

$fter analyzing the findings of my report I would li1e to place the following recommendations tothe insurance authority of Bangladesh2

• The new Insurance $ct ./,/ introduced many essential features that were missing in the

previous Insurance $ct of ,:09 !ut the implementation process were too slow- the

independent Insurance <egulatory Body %I<$& is not yet fully functional* It was not yet properly esta!lished and many of features are yet to !e implemented* (o- the 3inance

#inistry should focus on the pro!lems regarding it and should ta1e pragmatic steps to

solve those pro!lems as soon as possi!le- !ecause this is already too late and we don=twant to !e more lagged !ehind*

•

To !ring a real change and in the Insurance Business (ector in Bangladesh- the proposedchanges !rought !y the Insurance $ct ./,/ should !e implemented prudently and as soon

as possi!le* In this purpose- the concerned authorities need to !e stronger and more activeas well as accounta!le enough*

• $ll the insurance companies in the insurance industry need to !e responsive e"ually and

very actively* (o- the concerned insurance authority should focus on spreading necessary

awareness among the insurance companies as well* To ma1e it possi!le- regular seminars-meetings with the !usiness authorities and proper auditing may !e conducted*

• The percentage of management e8penses should !e at least dou!le to cope up with the

current price hi1e* In order to ensure maintaining proper e8penditure accounts !y theinsurance companies- the regulatory authority should ta1en this issue into consideration

with due importance*

• The total power that has !een given to the regulatory authority to deal with the different

opinions over insurance claims should !e reconsidered*

• Transparency and accounta!ility should !e ensured in each and every step to ensure the

full implementation of the new Insurance $ct ./,/ in the insurance sector in Bangladesh*

3or this- every single person associated with the implementation have to !e honest andconscious* In this regard- everyone should come forward to ma1e the associated

procedure smoother*

• $s one of the !asic re"uirements for the insurance industry to have sustained growth is to

enhance training facilities- BangladeshInsurance$cademy is providing training facilities

and professional education to those engaged in insurance !usiness in the country* The

sylla!us- curriculum and training programs of the academy %BI$& should !e modified andupdated to meet the modern needs of the insurance industry and to ensure the proper

implementation of the Insurance $ct ./,/*



• To esta!lish the act relia!le to the sta1eholders and to ma1e its implementation process

!endy- the regulatory authority should 1eep the Insurance $ct ./,/ as fle8i!le as

possi!le- so that any essential amendment can !e made and imposed in order to adustwith the rapid growing and changing situation when necessary*

Recommendations to Peoples Insurance Company Limited

@hen there is an emergence to cope up with the time- o!viously something need to !e changed*

@ith the changes and additions !rought !y the Insurance $ct ./,,- there a lot more changes andmodifications have to !e !rought in the individual insurance companies* (o- even it is true that

there are some pro!lems created due to the implementation of the new act at Peoples Insurance

Company Limited- the company should focus more on the prospects and the pragmatic solutionsof the pro!lems* Therefore- I also have come out with some recommendations to the company

which is as follows;

• PICL should provide e8tensive training to its employees especially to the !usiness

development ) mar1eting e8ecutives in order to ma1e them a!le to cope up with thechanges !rought !y the Insurance $ct ./,,* Through proper training to the employeesand agents the company should practice and ensure mar1eting through the use of

promotional tools such as advertising- sales promotion- pu!lic relation and pu!licity-

personal selling and direct mar1eting*

• The company should raise awareness among all the employees and staffs a!out the

implementation of the new law to ma1e the implementation process much smoother* In

order to do so- regular wee1lymonthly meetings and seminars can !e arranged after the

office hours*

•

$s one of the most important tas1s- client awareness needs to !e increased in theinsurance sector in Bangladesh* In this purpose- PICL should ta1e the necessary steps

through its large sales and !usiness development force to ensure a level of awareness

among their clients throughout the country*

• >ven though it is "uite difficult- the company should try its !est to reduce the

management e8penses as well as commission e8penses to cope up with the rules

regarding these issues under the new Insurance $ct ./,,* In this regard- each ) every

employee should wor1 as cost saver* $t the end it will certainly !e !eneficial for them*

• The company should consider the rules and regulations for the non2life insurance

companies in Bangladesh under the Insurance $ct ./,, !efore and during setting anyfuture plan regarding operation and e8pansion of its !usiness- so that there doesn=t arise

any conflicting situation* It will ma1e their way of !usiness operations much smoother as

well as easier and less pro!lematic*

• Transparency and accounta!ility should !e ensured in each and every step in the

implementation of the new Insurance $ct ./,, in the entire departments of PICL* To



ensure a transparent environment in the company- the employees along with the

management and authorities should come forward with their !est fle8i!ility*

• The company should plan to ta1e the opportunity of micro insurance !usiness and Islamic

Insurance !usiness as their service diversification tool !y providing responsive services

and esta!lish efficient departments to perform such tas1* This will allow them to e8pandtheir !usiness among a large num!er of populations of Bangladesh- which will also helpthem to distinguish themselves from their competitors* 3or !usiness e8pansion- PICL can

introduce Islamic Insurance where they can capture a large portion of the population

since the maority people of the country are #uslim*

Concluding Remar(s

To conclude- I would li1e to mention that the whole internship period was a significantly1nowledgea!le ourney for me which allowed me to learn and improve my s1ills and I hope the

significant e8perience will allow and help me to !uild a !etter career in future* I thin1 Insurance

Industry is playing a significant role in the economic improvement of Bangladesh through its ris1sharing operations which motivate investment in many important !usinesses* The government

has now em!ar1ed on a reform program me in the insurance sector to promote a vi!rant

insurance sector in our country* $s a first step towards achieving the o!ective- the Insurance$ct- ./,, in replacement of the previous Insurance $ct- ,:09- and the Insurance 4evelopment

and <egulatory $uthority $ct- ./,, also has !een passed for esta!lishing a stronger insurance

sector in Bangladesh* I am up!eat that the new laws will help the entire insurance industry of

Bangladesh to face the challenges of the time and thus !ring dynamism in this sector* @hile I amgenuinely oyous- I also would li1e to say that the proper implementation of the new act is

e8tremely important* $s the Insurance $ct ./,, is for the insurance industry- the concerned

authority should consider the interests of the insurance companies of Bangladesh as well as the

sta1eholders =interests* (trict transparency and discipline need to !e there where around 0*/million people are involved* In this regard I support the stand of the Bangladesh Insurance

$ssociation that has stressed the need for formation of the Insurance 4evelopment and<egulatory $uthority and formulate necessary rules and regulations to ma1e the new laws

effective and purposeful*

In the era of glo!alization- domestic mar1et should !e well organized while the legal framewor1

should !e effective to address the changed circumstances in the !usiness and socio2economicentities* In order to meet the challenges caused !y changes- the Insurance Ordinance ./,, should

!e 1ept as fle8i!le as practica!le so that any change in the operational procedure- accounting-

actuarial standard that would !e needed in future inline without change in the international and

domestic environment could !e made without further amendment to the Ordinance* The newInsurance $ct ./,, promised to !ring the positive changes and I am loo1ing forward for the

!eginning of a 5lo!ally Competitive #odern Insurance (ector in Bangladesh*

Peoples Insurance Co.

Documents

Transcript of Peoples Insurance Co.