Assignment

On

Role of Insurance companies in

Bangladesh economy

Course Code:BUS 3113

Submitted to:
Sohana Siddique
Lecturer
Fareast International University

Submitted by:
Asif Imtiaz
Id:19301014
Faculty:B.B.A

Date Of Submission:28/08/2021
Topics Head of Topics Page no.
no.

1 1.1. Introduction 1-5

1.2 Methods of insurance
1.3 Type of insurance

2 Insurance Industry In 6-9

Bangladesh
2.1 History of insurance in
Bangladesh

3 Top 12 Insurance 10-14

Companies in Bangladesh

List of Companies name

4 Functions of insurance 14-16

Company
4.1 Primary Functions
4.2 Secondary Functions

5 Role of Insurance 17-21

Companies in the Economic
Development of
Bangladesh.
Particulars role of Insurance
Company

6 Conclusion 22-23
Concluding remarks

7 References 25-26
List of references
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 the only state owned organization to deal with all classes of
general insurance & reinsurance 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 62 insurance
companies.
Thus the insurance sector in Bangladesh has grown up substantially and
deepened remarkably with number of companies in both life and general
segments. With the expansion of size of the insurance market, the volume of
assets of the industry has also increased substantially. 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 socioeconomic 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