An Assignment On

“Role of insurance company in Bangladesh Economy”

Course Title: Management of Banking and non-Banking Financial Institutions

Course Code: FIN-424

Submitted to:

Dr. Md. Sujahangir Kabir Sarkar

Associate Professor

Department of Economics

Faculty of Business Administration and Management

Patuakhali Science and Technology University

Submitted by: Md. Al-amin

ID. No: 1203033;

Reg. No: 03578

(Level: 4, Semester: II)

BBA Program

Faculty of Business Administration and Management

Patuakhali Science and Technology University

Date of Submission: 27th 0ctober, 2016

Patuakhali Science and Technology University

Dumki,Patuakhali 8602

Table of Contents

Topics no. Head of Topics Page no.

01.

1. Introduction

1-2 1.1 Introduction

1.2 Methods of insurance

1.3 Type of insurance

02.

2. Insurance Industry In Bangladesh

3-5

2.1 History of insurance in Bangladesh

0.3

3. Top 12 Insurance Companies in Bangladesh

6-7

List of Companies name

0.4

4. Functions of insurance Company

8-10 4.1 Primary Functions

4.2 Secondary Functions

0.5

5. Role of Insurance Companies in the Economic

Development of Bangladesh. 11-14

Particulars role of Insurance Company

0.6

6. Conclusion

15

Concluding remarks

0.7

7. References

16

List of references

1. Introduction

1.1 Introduction:

Insurance is a means of protection from financial loss. It is a form of risk management

primarily used to hedge against the risk of a contingent, uncertain loss. An entity which

provides insurance is known as an insurer, insurance company, or insurance carrier. A person

or entity who buys insurance is known as an insured or policyholder. The insurance transaction

involves the insured assuming a guaranteed and known relatively small loss in the form of

payment to the insurer in exchange for the insurer's promise to compensate the insured in the

event of a covered loss. The loss may or may not be financial, but it must be reducible to

financial terms, and must involve something in which the insured has an insurable interest

established by ownership, possession, or preexisting relationship.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for

the losses that some may incur. The insured entities are therefore protected from risk for a fee,

with the fee being dependent upon the frequency and severity of the event occurring. In order

to be an insurable risk, the risk insured against must meet certain characteristics. Insurance as

a financial intermediary is a commercial enterprise and a major part of the financial services

industry, but individual entities can also self-insure through saving money for possible future

losses

1.2 Methods of insurance:

In accordance with study books of The Chartered Insurance Institute, there are the following

types of insurance:

1. Co-insurance – risks shared between insurers

2. Dual insurance – risks having two or more policies with same coverage (Both the

individual policies would not pay separately- a concept named contribution, and would

contribute together to make up the policyholder's losses. However, in case of

contingency insurances like Life insurance, dual payment is allowed)

3. Self-insurance – situations where risk is not transferred to insurance companies and

solely retained by the entities or individuals themselves

4. Reinsurance – situations when Insurer passes some part of or all risks to another Insurer

called Reinsurer

1.3 Types of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give

rise to claims are known as perils. An insurance policy will set out in detail which perils are

covered by the policy and which are not. Below are non-exhaustive lists of the many different

types of insurance that exist. A single policy may cover risks in one or more of the categories

set out below. For example, vehicle insurance would typically cover both the property risk

(theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A

home insurance policy in the United States typically includes coverage for damage to the home

and the owner's belongings, certain legal claims against the owner, and even a small amount of

coverage for medical expenses of guests who are injured on the owner's property.

Auto insurance: Auto insurance protects the policyholder against financial loss in the

event of an incident involving a vehicle they own, such as in a traffic collision.

Coverage typically includes:

Property coverage, for damage to or theft of the car

Liability coverage, for the legal responsibility to others for bodily injury or

property damage

Medical coverage, for the cost of treating injuries, rehabilitation and sometimes

lost wages and funeral expenses

Health insurance: Health insurance policies cover the cost of medical treatments. Dental

insurance, like medical insurance, protects policyholders for dental costs. In most

developed countries, all citizens receive some health coverage from their governments,

paid for by taxation. In most countries, health insurance is often part of an employer's

benefits.

Life insurance is an insurance coverage that pays out a certain amount of money to the

insured or their specified beneficiaries upon a certain event such as death of the

individual who is insured. This protection is also offered in a Family takaful plan, a

Shariah-based approach to protecting you and your family.

The coverage period for life insurance is usually more than a year. So this requires

periodic premium payments, either monthly, quarterly or annually.

2. Insurance Industry in Bangladesh

The growth of insurance industry in Bangladesh has made a moderate progress in 2007. Per

capita spending on insurance is still less than $3 while insurance penetration, measured on

premium as a percentage of GDP, also below 1%. According to the Bangladesh Insurance

Association, gross premium income of the country’s insurance sector has reached at Tk 38.55

billion in 2007. Of the total premium income, general insurance company’s income was Tk.

9.39 billion while Tk. 29.16 billion generated from the life insurance business. The private

sector operators consolidated their foothold in the insurance business during the last decade.

The non- life insurance company’s gross investment stood at Tk. 8.58 billion in 2007 which

was Tk. 7.72 billion in 2006. The total assets of the private non-life insurance companies

increased to Tk. 19.83 billion at the end of December 2007 from Tk. 15.50 billion as of

December 2006. Although, no upto date statistics on insurance business for 2008 is available

so far, initial estimation shows that private insurance companies are expecting around 25%

growth in the premium income. The combined premium incomes of both the non-life and life

insurers are estimated at Tk. 48.58 billion in the 2008, of which non-life’s share is Tk. 11.26

billion. Despite, political uncertainty, natural calamities, economic slowdown and lack of major

investment and infrastructure projects, the growth of insurance premium appeared reasonable.

Intensification of marketing drive and introduction of new products (policies) helped the

Insurance Companies to attain a positive business growth.

Growing importance of the industry in the financial system and its increasing economic

significance in other developing countries highlights the fact that, the industry needs a closer

attention for its future development. As different sectors of the financial system are closely

related to each other, risks of a particular sector can easily transmit to the other sectors of the

system. Therefore effective monitoring and supervision of the insurance industry is crucial not

only to guide the industry in efficient management of risks faced by economic agents but also

to mobilize long term savings for the economy, and thereby allocate the funds to facilitate long

term investment.

2.1 History of Insurance in Bangladesh:

The origin of insurance is lost in antiquity. However, there is no evidence that insurance in its

present form was practice prior to the twelfth century. A brief chronological historical

development of the various branches of insurance is given below:

Marine Insurance:

Marine is the oldest form of insurance and came first in the list. This type of insurance probably

began in northern Italy sometime during the 12th& 13thcentury and gradually the concept was

rather transferred to or taken over by the United Kingdom. During the 13th/ 14thcentury the

Italian merchants went to UK and along with the merchandise carried with them the trading

customs including the concept of marine insurance. Marine insurance as such was not being

practiced as a separate specialized entity during that time since it were the merchants who used

to transact marine insurance business side by side with their general trading activities

Fire insurance:

After marine insurance fire insurance developed in present form. It had been observed in

Anglo-section Guild form for the first time where the victims of the fire hazards were given

personal assistance by providing necessaries of life. It15 had been originated in Germany in

the beginning of sixteenth century. The fire insurance got momentum in England after the great

fire in 1666 when the fire losses were tremendous.

Life insurance:

The third in the list of development is the life insurance business. The earliest policy of which

there is a record dates back to 1583. During this period only short term polices were used be

issued meaning that only at the death of the life assured during the term period the money was

to be paid. On survival nothing was payable. In 1693 Halley introduced the mortality table

giving a definite value to risk of death. In 1974, the life Assurance Act was passed in the British

parliament requiring the presence of insurable interest before one could effect a life policy on

the life of another. All these gradually gave life assurance a sound, systematic and scientific

basis as we see in the present day.2.3 Development of Insurance in Bangladesh Insurance is

not a new idea or proposition to the people of Bangladesh

Current pattern of Insurance in Bangladesh:

After the emergence of the People’s Republic of Bangladesh in 1971, the government

nationalized the insurance industry along with the banks in 1972 by Presidential Order No.

95.By virtue of this order, all companies and organization transacting all types of insurance

business in Bangladesh came under this nationalization order. This was followed by creation

of five insurance companies in the life and non-life sector. Further changes were brought on

14th May, 1973. Through the enactment of Insurance Corporation Act VI, 1973 which led to

creation of two corporations namely Sadharan Bima Corporation for general insurance and,

Jiban BimaCorporation for life insurance in Bangladesh. In other words Sadharan Bima

Corporation (SBC) emerged on 14th May, 1973 under the Insurance Corporation Act (Act No.

VI) Of 1973 as theonly state owned organization to deal with all classes of general insurance

& re-insurance business emanating in Bangladesh. Thereafter SBC was acting as the sole

insurer of general Insurance till 1984. Bangladesh Government allowed the private sector to

conduct business in all areas of insurance for the first time in 1984. The private sector availed

the opportunity promptly and came forward to establish private insurance companies through

promulgation of the Insurance Corporations (Amendment) Ordinance (LI of 1984) 1984.The

Insurance Market in Bangladesh now consists of two state-owned corporations, forty three and

seventeen private sector general & life insurance companies respectively, a total of 62insurance

companies.

Thus the insurance sector in Bangladesh has grown up substantially and deepened remarkably

with number of companies in both life and general segments. With the expansion of size of the

insurance market, the volume of assets of the industry has also increased substantially. SBC is

entitled to 50% of public sector business. Insurance Corporation (Amendment) Act

1990 provides that fifty percent of all insurance business relating to any public property or to

any risk or liability appertaining to any public property shall be placed with the SBC and the

remaining fifty percent of such business may be placed with this corporation or with any other

insurers in Bangladesh. But for practical reason and in agreement with the Insurance

Association of Bangladesh SBC underwrites all the public sector business and 50% of that

business is distributed among the existing 43 private general insurance companies equally

under National Co-insurance Scheme. In respect of reinsurance, the same act provides that fifty

percent of a company’s reinsurance business must be placed with the Sadharan Bima

Corporation and remaining fifty percent May beer insured either with this Corporation or with

any insurer in Bangladesh or abroad. At present, nearly all the company’s place 100% of their

reinsurance business with the SBC.

3. Top 12 Insurance Companies in Bangladesh:

Insurance service in Bangladesh are developing as local people have got more conscious about

the security of what they belong. Promising service of some companies has established the trust

and people of Bangladesh turn to them on and on with optimism.

American Life Insurance Co

This is one of the earliest insurance companies in Bangladesh, working from 1952. Even

though the concept as well as the company comes from America, they have successfully

adopted it to suit the needs and expectations of Bangladeshi people and have reached the top

position in the country.

More than a million Bangladeshis depend on American Life Insurance Company (Alico) with

thousands of agents working for them, which has also created local jobs. All sorts of insurance

plans are available to suit everybody’s need in the society.

Jiban Bima Corporation

The words Jiban and Bima mean Life Insurance in Bengali (official language of Bangladesh).

This is a state owned insurance company, providing life and other kinds of insurance services

to citizens. Located in Dhaka, Jiban Bima Corporation has branches all over Bangladesh and

touches millions of people every day. It has created a wide range of plans to suit people in all

economic groups, which has proved to be a big success.

Delta Life Insurance Co Ltd

In 1984, Bangladesh Government allowed private sectors in insurance industry, which led to

the creation of Delta Life Insurance Co Ltd, started by number of Bangladeshi citizens then

working abroad. They started this because they wanted their fellow citizens to get the top class

insurance services which are common in western countries.

From their first day, Delta life insurance has been working with the same goal in mind, growing

to a large organization today. They have designed plans keeping the expectations of the society

in mind, which is the primary reason for their success.

Popular Life Insurance Co Ltd

This unique organization started its journey with the goal of reaching every insurable citizen

in Bangladesh. There were many companies, but they didn’t have means to reach out to all of

them. Popular Life Insurance Co Ltd achieved this by designing unique schemes and

campaigns to bring everyone under their protection. They achieved this by providing number

of schemes which focused on the direct benefits. They indirectly provided the protection which

is the essential reason for doing insurance. Hundreds of agents are working with public directly

to ensure the movement is constantly moving forward.

Shandhani Life Insurance Co Ltd

This organization is operating for 25 years, creating a change in the society by their ‘micro

insurance’ segment. People or the general consumers may not buy insurance mainly due to

cost. Shandhani life insurance approached them with smaller policies which are a good start,

and would bring them to the regular fold, as they grow socially and economically.

With this focus, Shandhani Life Insurance Co Ltd reached out to hundreds of thousands of poor

people, while keeping the focus on big customers as well. This approach has helped this

company to reach the top position with a great impact on the society.

Meghna Life Insurance Co Ltd

This company was started by many Bangladeshis who wondered if they can participate in the

growth of the nation. They decided a life insurance company would be the ideal start and with

their dream, Meghna Life Insurance Co Ltd was born in 1996. They focused on providing

services at the right price, with modern facilities. Their efforts, in the next decade, brought this

company to a great reputation in the country. They work with people from all backgrounds and

provide services to all kinds of individuals and corporate organizations.

Takaful Islami Insurance Ltd

Being an Islamic country, Bangladesh’s needs with respect to any investment may be guided

by their religious principles too. Hence, most insurance companies provide policies keeping

this in mind and Takaful Islamic Insurance Ltd specializes in providing unique schemes, which

are Islamic in nature.

This company operates in both life and nonlife sectors. It has established a very effective

network to work with the entire nation via its officers. This works particularly well in the

individual insurance policies.

Pragati Insurance Co Ltd

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

Mediclaim Insurance, Accident Insurance, Building Insurance, Factory Based Insurance,

Aviation Insurance, Home Insurance etc. Based on the type of the insurance and the way

Bangladesh culture sees it, they have designed their policies so that it is accepted well. Their

success journey is a proof to this. Today, the company has reached a top position by getting a

credible rating by number of financial analysis companies. They invest in the right areas to

improve their value to investors. As a result, it has grown to a top position in the country.

Padma Life Insurance Co Ltd

This is another Islamic insurance company in Bangladesh with a great track record and success.

It focuses on Life insurance segment, earning the confidence of Bangladeshi public from all

walks.

Their plans are designed keeping the security as well as growth aspects in mind. Depending on

the need of the customer, they will be able to choose the best one that suits them and get

maximum returns.

Sunlife Insurance Co Ltd

Started by businessmen from various fields, this company focuses on customer security and

benefits from 2000. They went public in 2012 and today, operating as one the top insurance

companies in Bangladesh.

Specialty of this company is its focus on even the smallest member of the society. Their officers

work with all kinds of people to ensure they are sufficiently protected. This has brought a social

change, as well as a successful company.

Golden Life Insurance Co Ltd

This company splits its services into two parts, macro insurance and micro insurance. Based

on the needs of its customers, it selects the right scheme. This approach has given them great

many opportunities to grow with full support of public.

Headquartered in Dhaka, Golden Life Insurance Co Ltd has branches all over the country and

the officers of the company work directly with public to educate them about their insurance

needs. This direct approach is the primary reason for Golden Life Insurance Co Ltd growing

to the top position in Bangladesh.

Rupali Life Insurance Co Ltd

Established in year 2000, this company has grown from a small position to a large success,

mainly due to its strong backbone support from investors and the passionate work from agent

officers. Their schemes are designed to suit the segments they work on, which has connected

well with the customers.

They focus on promoting local talent. This ensures that the representatives of Rupali Life

Insurance Co Ltd will never be a stranger to the potential prospects. This approach has created

jobs for the country and helped many people stay protected helping the society.

As their vision statement says, they want to be the “best life insurance company of choice

among Life Insurance Companies”. This goal is the primary motivation for their staff, resulting

in this success. On the process, they have ensured financial security for hundreds of thousands

of Bangladeshi citizens

4. Functions of insurance company:

Insurance is defined as a co-operative device to spread the loss caused by a particular risk over

a number of persons who are exposed to it and who agree to ensure themselves against that

risk. Risk is uncertainty of a financial loss. It should not be confused with the chance of loss

which is the probable number of losses out of a given number of exposures.

It should not be confused with peril which is defined as the cause of loss or with hazard which

is a condition that may increase the chance of loss.

Finally, risk must not be confused with loss itself which is the unintentional decline in or

disappearance of value arising from a contingency. Wherever there is uncertainty with respect

to a probable loss there is risk.

Every risk involves the loss of one or other kind. The function of insurance is to spread the loss

over a large number of persons who are agreed to co-operate each other at the time of loss. The

risk cannot be averted but loss occurring due to a certain risk can be distributed amongst the

agreed persons. They are agreed to share the loss because the chances of loss, i.e., the time,

amount, to a person are not known.

Anybody of them may suffer loss to a given risk, so, the rest of the persons who are agreed will

share the loss. The larger the number of such persons the easier the process of distribution of

loss, In fact; the loss is shared by them by payment of premium which is calculated on the

probability of loss.

In olden time, the contribution by the persons was made at the time of loss. The insurance is

also defined as a social device to accumulate funds to meet the uncertain losses arising through

a certain risk to a person insured against the risk.

The functions of insurance can be studied into two parts (i) Primary Functions, and (ii)

Secondary Functions.

4.1 Primary Functions:

(i) Insurance provides certainty:

Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can

be reduced by better planning and administration. But, the insurance relieves the person from

such difficult task. Moreover, if the subject matters are not adequate, the self-provision may

prove costlier.

There are different types of uncertainty in a risk. The risk will occur or not, when will occur,

how much loss will be there? In other words, there are uncertainty of happening of time and

amount of loss. Insurance removes all these uncertainty and the assured is given certainty of

payment of loss. The insurer charges premium for providing the said certainty.

(ii) Insurance provides protection:

The main function of the insurance is to provide protection against the probable chances of

loss. The time and amount of loss are uncertain and at the happening of risk, the person will

suffer loss in absence of insurance. The insurance guarantees the payment of loss and thus

protects the assured from sufferings. The insurance cannot check the happening of risk but can

provide for losses at the happening of the risk.

(iii) Risk-Sharing:

The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk

takes place, the loss is shared by all the persons who are exposed to the risk. The risk-sharing

in ancient time was done only at time of damage or death; but today, on the basis of probability

of risk, the share is obtained from each and every insured in the shape of premium without

which protection is not guaranteed by the insurer.

4.2 Secondary functions:

Besides the above primary functions, the insurance works for the following functions:

(i) Prevention of Loss:

The insurance joins hands with those institutions which are engaged in preventing the losses

of the society because the reduction in loss causes lesser payment to the assured and so more

saving is possible which will assist in reducing the premium. Lesser premium invites more

business and more business cause lesser share to the assured.

So again premium is reduced to, which will stimulate more business and more protection to the

masses. Therefore, the insurance assist financially to the health organisation, fire brigade,

educational institutions and other organisations which are engaged in preventing the losses of

the masses from death or damage.

(ii) It Provides Capital:

The insurance provides capital to the society. The accumulated funds are invested in productive

channel. The dearth of capital of the society is minimised to a greater extent with the help of

investment of insurance. The industry, the business and the individual are benefited by the

investment and loans of the insurers.

(iii) It Improves Efficiency:

The insurance eliminates worries and miseries of losses at death and destruction of property.

The carefree person can devote his body and soul together for better achievement. It improves

not only his efficiency, but the efficiencies of the masses are also advanced.

(iv) It helps Economic Progress:

The insurance by protecting the society from huge losses of damage, destruction and death,

provides an initiative to work hard for the betterment of the masses. The next factor of

economic progress, the capital, is also immensely provided by the masses. The property, the

valuable assets, the man, the machine and the society cannot lose much at the disaster.

5. Role of Insurance Companies in the Economic Development of Bangladesh

— Formation of capital & increase of investment: Insurance companies receive

premiums from insured persons. These premiums increase national capitals. By

investing these capitals, national productions increase.

— Reduce of hindrance of risk: every sorts of business consists of risks. These risks are

more hazardous in Bangladesh. Insurance companies minimize these risks by

giving privileges on loss.

— Maintenance of national wealth: insurance companies not only secure financial

facts, but also influence people to take necessary steps to avoid risks.

— Distribution of risks: insurance companies deal with lots of insured people. So risks

are being distributed among them.

— Extension of business: By taking all uncertain business risk insurance companies

extended the field of business in our country. Insurance gives the assurance of

indemnity and help to collect the capital to lunch a new business and expand the existing

business.

— Provide safety and security:

Insurance provide financial support and reduce uncertainties in business and human life. It

provides safety and security against particular event. There is always a fear of sudden loss.

Insurance provides a cover against any sudden loss. For example, in case of life insurance

financial assistance is provided to the family of the insured on his death. In case of other

insurance security is provided against the loss due to fire, marine, accidents etc.

— Generates financial resources:

Insurance generate funds by collecting premium. These funds are invested in government

securities and stock. These funds are gainfully employed in industrial development of a country

for generating more funds and utilised for the economic development of the country.

Employment opportunities are increased by big investments leading to capital formation.

— Life insurance encourages savings:

Insurance does not only protect against risks and uncertainties, but also provides an investment

channel too. Life insurance enables systematic savings due to payment of regular premium.

Life insurance provides a mode of investment. It develops a habit of saving money by paying

premium. The insured get the lump sum amount at the maturity of the contract. Thus life

insurance encourages savings.

— Promotes economic growth:

Insurance generates significant impact on the economy by mobilizing domestic savings.

Insurance turn accumulated capital into productive investments. Insurance enables to mitigate

loss, financial stability and promotes trade and commerce activities those results into economic

growth and development. Thus, insurance plays a crucial role in sustainable growth of an

economy.

— Medical support:

A medical insurance considered essential in managing risk in health. Anyone can be a victim

of critical illness unexpectedly. And rising medical expense is of great concern. Medical

Insurance is one of the insurance policies that cater for different type of health risks. The

insured gets a medical support in case of medical insurance policy.

— Spreading of risk:

Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of

insurance is to spread risk among a large number of people. A large number of persons get

insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated

out of funds of the insurer.

— Source of collecting funds:

Large funds are collected by the way of premium. These funds are utilised in the industrial

development of a country, which accelerates the economic growth. Employment opportunities

are increased by such big investments. Thus, insurance has become an important source of

capital formation.

Others Contribution

Increase of awareness:

As the maximum people of our country are illiterate so they have not much knowledge about

the future life and what will do to enhance the living standard. Different types of advertisement,

publicity and others awareness activities of insurance company which helps to increase the

awareness of general people

Reinsurance Services:

Sadharan Bima Corporation in its role as a re-insurer has lent support to the private insurance

companies in Bangladesh in a big way. In view of the huge networth and retention capacity,

SBC has accepted both treaty and facultative businesses from the private insurance companies.

SBC also accepts reinsurance business from overseas market through its intermediaries and as

well as directly.

Industrial development through equity participation:

SBC plays a vital role in the industrial development of Bangladesh. SBC is the sponsor

shareholder of Investment Corporation of Bangladesh, Industrial Development and Leasing

Company, National Tea Company Limited, National Housing Finance and Investment Ltd,

Aramit Ltd, Central Depository BD Ltd.etc. SBC has huge amount of fixed deposit reserve

with various commercial banks in Bangladesh.

Risk Improvement Services:

SBC would always endeavor to deliver the best customer services for the fulfillment of

insurance, reinsurance and risk management needs and problems to the insurance market in

Bangladesh. On the other hand, SBC provides risk improvement services to its valued clients

through Pre-underwriting inspection services. SBC has the opportunity to take the necessary

help and advice from the foreign reinsurer regarding risk improvement techniques.

Human resources development for insurance industry:

To develop the human resource for the insurance industry in Bangladesh. SBC has

arranged professional training for its officers & staffs both within the country and

abroad. SBC also arranged professional training for the officers of the private insurance

companies operating in Bangladesh.

Obtaining financing. Consumers cannot obtain a loan to purchase a home, car, boat or

airplane without proof of insurance. Likewise, business owners and would-be

entrepreneurs cannot obtain financing to buy a commercial building or commercial

equipment, or to otherwise invest in their business, without proof of insurance. Lenders

won’t lend without proof of insurance, because the risk would be too high. Without

financing, businesses are unable to expand, and when businesses are unable to expand,

they do not create jobs. In fact, they may lay off some of their employees. Without jobs,

consumers have less money to spend and the economy stagnates. Over time, peoples’

quality of life suffers because their income decreases.

Expanding business. Whether businesses are launching a new product, signing a new

sales contract or purchasing a new company, the business needs assurances that the

other party is conducting business in good faith. Insurance provides the necessary

protection, in case business doesn’t proceed as planned. Likewise, businesses would be

reluctant to hire new employees if not for workers’ compensation insurance, which

protects the employer while providing the employee with income when an accident

temporarily puts the employee out of work.

Paying claims. The U.S. insurance industry pays out more than $300 billion a year in

policy benefits and claims. These funds help insured consumers and businesses recover

from their losses, whether it’s a loss of property, the loss from a lawsuit or the loss of a

loved one. Funds paid out by insurers enable people to rebuild, maintain their lifestyle

after a breadwinner dies or becomes disabled, and replace property that is stolen or

damaged. For businesses, payment from claims may be necessary for a business to

continue operating, but insurance is also used to plan for succession, protect intellectual

property and pay damages from unanticipated liability. As just one example of the

benefit of insurance, consider the rebuilding taking place in New York and New Jersey

as a result of damage caused last year by Superstore Sandy. While some claims are still

being worked out, insurance companies will end up contributing $10 billion to $20

billion toward the damages caused by Sandy.

Funding development. Funds from premiums that are not used to pay claims and

operating expenses are invested by insurance companies. Insurers have $1.4 trillion

invested in the U.S. economy, according to the Insurance Information Institute (III).

Insurance companies invest in bonds that are used to finance major projects, both in the

public sector and the private sector. They invest in commercial and retail development,

apartment buildings and other projects. They also invest in stocks, which increases

prices, to the benefit of all investors.

The International Association of Insurance Supervisors (IAIS) noted that by

investing in bonds and other securities issued by financial institutions, insurance

companies provide “an important contribution to the financial soundness of banks and

more broadly to financial stability. In a similar fashion insurers are also allocating

capital to the real economy by purchasing debt securities of industrial companies or

through real estate investments.”

Paying taxes. Insurance companies and their employees pay taxes, which fund

government programs that help needy people, contribute to education, protect the

country, and maintain and expand the infrastructure.

Managing their business. The III notes that there are 6,115 insurance companies in

the United States, and they accounted for 2.6 percent ($398 billion) of the country’s

gross domestic product (GDP) in 2011. The U.S. insurance industry employed 2.3

million people in 2012, including 1.4 million who worked directly for insurance

companies.

6. Concluding Remarks:

To conclude, I would like to mention that the whole internship period was a significantly

knowledgeable journey for me which allowed me to learn and improve my skills and I hope

the significant experience will allow and help me to build a better career in future. I think

Insurance Industry is playing a significant role in the economic improvement of Bangladesh

through its risk sharing operations which motivate investment in many important businesses.

The government has now embarked on a reform program me in the insurance sector to promote

a vibrant insurance sector in our country. As a first step towards achieving the objective, the

Insurance Act, 2011 in replacement of the previous Insurance Act, 1938, and the Insurance

Development and Regulatory Authority Act, 2011 also has been passed for establishing a

stronger insurance sector in Bangladesh. I am upbeat that the new laws will help the entire

insurance industry of Bangladesh to face the challenges of the time and thus bring dynamism

in this sector. While I am genuinely joyous, I also would like to say that the proper

implementation of the new act is extremely important. As the Insurance Act 2011 is for the

insurance industry, the concerned authority should consider the interests of the insurance

companies of Bangladesh as well as the stakeholders ‘interests. Strict transparency and

discipline need to be there where around 3.0 million people are involved. In this regard I

support the stand of the Bangladesh Insurance Association that has stressed the need for

formation of the Insurance Development and Regulatory Authority and formulate necessary

rules and regulations to make the new laws effective and purposeful.

In the era of globalization, domestic market should be well organized while the legal

framework should be effective to address the changed circumstances in the business and socio-

economic entities. In order to meet the challenges caused by changes, the Insurance Ordinance

2011 should be kept as flexible as practicable so that any change in the operational procedure,

accounting, actuarial standard that would be needed in future inline without change in the

international and domestic environment could be made without further amendment to the

Ordinance. The new Insurance Act 2011 promised to bring the positive changes and I am

looking forward for the beginning of a Globally Competitive Modern Insurance Sector in

Bangladesh.

7. Reference:

01. Dhaka stock exchange ltd/Sector wise company list/ insurance company

02. Google.com/search-insurance definition & insurance overview.

03. Investopedia.com/terms/i/insurance.asp

04. AftabMulla/functions-of-insurance/slideshare.net

05. pwc.com/../insurance/../insurance-risk-co..

06. toptenbrandlist.blogspot.com/2012/history-of-insurance-business

07. en.wikipedia.org/wiki/insurance