Research Dholaikhal

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RESEARCH ON THE EFFECTIVENESS OF MICROINSURANCE IN BANGLADESH
Submitted to
Dr. Muhammad Ziaulhaq Mamun
Professor
Course: K301: Research Metholology
Institute of Business Administration
University of Dhaka
Submitted by
Mushreka Afroze Khan (RH-68)
Ornila Khan (RH-72)
Zeeshan Ahmed (ZR-82)
Waseem Khan (ZR-88)
Ishmam Ahmed Chowdhury (ZR-90)
Wais Al Karim (ZR-93)
Sudipta Saha Turja (ZR-95)
Hikmat Kabir (ZR-99)
Sanjir Ali (ZR-111)
Group: 1
Section: B, Batch:20th
University of Dhaka
July 6, 2014
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July 6, 2014
Dr. Muhammad Ziaulhaq Mamum

Professor
University of Dhaka
Sir:
Re: Submission of term paper
We would like to take this opportunity to present our term paper titled Research on the
Effectiveness of Micro Insurance in Bangladesh for your consideration as part of our Research
Methodology coursework. This report aims to address the effectiveness of Micro Insurance
schemes Bangladesh, including the history, issues, problems, challenges, and a survey of policy
holder to obtain an understanding whether the schemes are truly beneficial.
We have tried our level best to comply with your high standards and we sincerely hope that our
paper meets your expectations.
Sincerely
Mushreka Afroze Khan (RH 68)
Ornila Khan (RH 72)
Zeeshan Ahmed (ZR 82)
Waseem Khan (ZR 88)
Ishmam Ahmed Chowdhury (ZR 90)
Wais Al Karim (ZR 93)
Sudipta Saha Turja (ZR 95)
Hikmat Kabir (ZR 99)
Sanjir Ali (ZR 111)
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ACKNOWLEDGMENTS
In course of our research work, being completely new to the field of insurance, let alone micro
insurance, the research team required industry help and information to guide this research
properly. For this we had reached out to two distinguished individuals from the insurance
industry, who had helped us, considerably and furthermore encouraged to look at their industry
at depth.
For their immense role in helping us obtain information and understanding about the insurance
industry we would like to convey our sincerest gratitude to the following people.
1. Mr. Munir Ahmed
Executive Director
Green Delta Insurance Co. Ltd.
2. Md. Manirul Islam
Managing Director & CEO
Pragati Insurance Limited
3. Sujit Kumar Bhoumik
Executive Vice President
Prime Insurance Company Limited
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TABLE OF CONTENTS
Title page
Letter of transmittal
Acknowledgements
Executive summary
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1.0 INTRODUCTION
1.1 Issue
1.2 Problems
1.3 Objectives
1.3.1 Broad objectives
1.3.2 Specific objectives
1.4 Hypotheses
1.5 Scopes
1.6 Rationale
1.7 Limitations
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2.0 LITERATURE REVIEW

2.1 The micro-insurance industry
2.2 Types of micro-insurance in Bangladesh
2.3 Problems in insurance industry
2.4 Insurance reform program
2.5 Micro-insurance for poverty alleviation
2.6 Who provides micro insurance
2.7 Micro-insurance and SME
2.8 Micro-insurance in public health
2.9 Micro-insurance as a promising sector
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3.0 METHODOLOGY
3.1 Data collection
3.1.1 Primary source of data
3.1.2 Secondary source of data
3.2 Sample size
3.3 Sampling technique
3.4 Questionnaire development
3.4.1 Categories of questionnaire
3.4.2 Question patterns
3.4.3 Pretesting
3.5 Data collection
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3.6 Data Analysis
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4.0 RESEARCH FINDINGS

4.1 Findings regarding knowledge of policyholders
4.1.1 Knowledge regarding number of companies
4.1.2 Knowledge regarding other programs of company the
respondent is a client of
4.1.3 Knowledge regarding the chosen micro-insurance policy
4.1.4 Knowledge regarding the reason for choosing the microinsurance policy
4.1.5 Synthesis of knowledge of policyholders
4.2 Findings regarding claims of micro-insurance
4.2.1 Findings regarding background check on claims
4.2.2 Findings regarding acceptance rate of claims
4.2.3 Findings regarding denial of claims
4.2.4 Findings regarding time of claims
4.2.5 Findings regarding satisfaction of policyholders relating to
claims
4.2.6 Synthesis of micro-insurance claims
4.3 Findings regarding collection and recovery of premium
4.3.1 Findings regarding medium of premium collection
4.3.2 Findings regarding considerations during premium collection
4.3.3 Findings regarding incidence of frauds
4.3.4 Findings regarding handling of frauds
4.3.5 Findings regarding time of recovery of premium after maturity
4.3.6 Findings regarding satisfaction about amount of premium
recovered
4.3.7 Synthesis of micro-insurance premiums
4.4 Findings regarding employees of micro-insurance
4.4.1 Findings regarding instances of misbehavior by employees
4.4.2 Findings regarding perception of employee behavior
4.4.3 Findings regarding the amount charged by agents
4.4.4 Findings regarding unrecorded payments
4.4.5 Findings regarding knowledge of employees
4.4.6 Findings regarding the frequency of visits made by agents
4.4.7 Synthesis of micro-insurance employees
4.5 Findings regarding coverage of micro-insurance
4.6 Combination of findings
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5.0 CONCLUSION
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APPENDIX
Appendix 1: Questionnaires for the survey
Appendix 2:Co-ordination schema
Appendix 3: Estimated budget
Appendix 4: Time plan
Appendix 5: Hypothesis tests for the knowledge of policyholders
Appendix 6: Hypothesis tests for the claims of policyholders
Appendix 7: Bivariate correlation analysis
Appendix 8: Hypothesis tests for premium of micro-insurance
Appendix 9: Hypothesis tests for employees of micro-insurance
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REFERENCES
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EXECUTIVE SUMMARY
Micro-insurance refers to insurance products designed for the low-income individuals. The word
micro represents the relatively small transaction size or lower premiums, a concept similar to
microfinance. Micro-insurance differs from traditional insurance in terms of the size of
premiums, coverage limits and target customers. The objectives of micro-insurance also vary
amongst different stakeholders. For governments and policymakers, for instance, microinsurance is a way to ensure inclusive growth and support the livelihoods of the vulnerable
segment of the society. For social and development organizations, micro-insurance can be an
effective tool to help alleviate poverty.
For a developing country like Bangladesh, micro-insurance seems like a boom that can help
Bangladesh address its problems regarding poverty especially in the agriculture and health
sectors. Indeed, micro-insurance has seen a lot of growth since its introduction in the country
during the 1970s with a growth rate of almost 15-20 percent each year since 2006, as said by Md.
Manirul Islam, Managing Director and CEO of Pragati Life Insurance Limited. Yet, a stellar idea
such as micro-insurance may not be a proper solution to Bangladeshs problems. In order to
justify the use of micro-insurance, we came up with a plan to gauge its effectiveness by setting
up 5 parameters that tests its relevancy here in Bangladesh. These parameters and their
effectiveness are as follows:
Knowledge of the policyholders of micro-insurance 25% effective based on 4 different

tests
Claims on micro-insurance 70% effective based on 5 different tests
Premium collection and recovery of micro-insurance 25% effective based on 6 different

tests
Employees of micro-insurance 60% effective based on 7 different tests
Micro-insurance coverage 10% effective based on 11 different tests
These effective rates were then combined and weighted as per the relevance of each parameter.
The final result showed that the total effectiveness of micro-insurance in Bangladesh stands at
only 34.2%, thus making it irrelevant as a development tool for Bangladesh. However, it should
be mentioned that the scope of this survey was limited to Dhaka only and may not be sufficient
enough to cover the overall scenario in Bangladesh. More extensive research needs to be carried
out in order to truly determine the usefulness of micro-insurance.
1.0 INTRODUCTION
1.1 ISSUE
Micro-insurance can be defined as an affordable subset of a financial service that uses risk
pooling to provide compensation to low income and poor individuals, entrepreneurs, households
or groups that are adversely affected by specific risks. While there may be great variance
between different micro-insurance schemes, they generally share a number of key characteristics
(Mizan R. Khan, 2013). These characteristics are:
a) Specifically targets low income and poor individuals and households
b) Designed to pool risks faced by the insured
c) Pricing is based on willingness to pay, and is proportional to the likelihood and cost of
the risks involved
d) Products are developed in collaboration with the communities they are supposed to
benefit
e) Products must be of substantive value to the poor in terms of addressing their
vulnerability to poverty
Micro-insurance was first introduced in Bangladesh in the 1970s in the form of health insurance
by an NGO called Ganashasthya Kendra. At present, there are over 60 micro-insurance
providers within the country and the growth rate of micro-insurance has been 33% between the
years 2008 and 2009. The sector is dominated by non-government organization microfinance
institutions (NGO-MFIs). Other types of organizations which operate in this sector are private
insurance companies and a couple of state-owned corporations (Mizan R. Khan, 2013).
1.2 PROBLEMS
Bangladesh is situated in the delta formed by multiple rivers as they meet the Indian Ocean
through the Bay of Bengal. Most of these rivers (Padma, Meghna and Jamuna for instance) are
originated from the Himalayas which lie to the north of the country. The lofty Himalayas in the
north and the funnel-like shape of the Bay of Bengal in the south have made Bangladesh one of
the worst victims of the catastrophic ravages of natural disasters like floods, cyclones, storm
surges, droughts, etc. These natural disasters render Bangladesh towards many losses: loss of
agricultural production, loss of livestock, loss of livelihood and loss of lives (Sakib, 2012).
Yet another notable fact about Bangladesh is that the country is highly dependent on its
agricultural sector. A total area of 14.943 million hectares are cropped within the country, may it
be singly, doubly or triply in a year. A staggering 47.5% of the total manpower of Bangladesh
earn their livelihoods from this sector and cumulatively account for 19.29% of the countrys
GDP as of 2013 (Ministry of Agriculture, 2014).
When both of the above are combined, the consequence that natural disasters have on the
economy of Bangladesh is overwhelming. Damages to the agricultural sector are defined as full
or partial destruction of assets in the sector. This includes destruction to agricultural land,
permanent plantations, irrigation or drainage systems, storage facilities, machineries, roads, etc.
Production losses occur due to the loss of a full crop due to the calamity, or as a result of a
decline in units yielded (Global Facility for Disaster Reduction and Recovery, 2008). When
methods are looked upon on how to tackle these production and financial losses which the
farmers suffer, one of the solutions that are often mentioned is the use of micro-insurance.
The span of micro-insurance is not only limited to the poor farmers from Bangladeshs
agricultural sector. One of the major applications of micro-insurance can be in the public health
sector. Bangladesh is a country where 88% of ones health expenditure comes from out-ofpocket expenditure, 10% from non-profit institutions serving households and only a mere 0.8%
from pre-payment and risk pooling plans (Werner, 2009). This is fact enough to show what
micro-insurance is not very popular within Bangladesh.
This leads us to our research question. With so high growth in this sector and with so many
companies serving the general population, why is the micro-insurance not a common tool used
throughout Bangladesh? Is the micro-insurance sector effective?
1.3 OBJECTIVES
1.3.1 Broad objectives:
To find out the effectiveness of micro-insurance in Bangladesh
1.3.2 Specific objectives:
To find out the level of knowledge of the existing policyholders on the policies that are
being offered by the existing micro-insurance companies
To find out the coverage of micro-insurance within Bangladesh in terms of the assets that
are being insured by the existing micro-insurance policies
To find out the problems faced by the policyholders in the process of insurance claims
and settlements
To find out the problems faced by the policyholders in the process of payment of
premiums
To find out the problems faced by the policyholders in the process of recovering the
premiums following the maturity period
To find out the level of cooperation of the employees of the micro-insurance companies
1.4 HYPOTHESES
Some hypotheses have been derived out of the specific objectives based on our expectations:
The existing policyholders do not have much overall knowledge on micro-insurance.
The claiming process is not effective in the context of micro-insurance in Bangladesh
The process of collection of premium is effective, but that of recovery of premium after
maturity is not.
The coverage of micro-insurance in terms of assets is quite high in Bangladesh.
1.5 SCOPES
The research topic is only limited to micro-insurance. All the other types of insurance
policies are not within the scope of the report.
The paper only considers the opinions of surveyed policyholders from different parts of
Dhaka city and a few selected companies which provide micro-insurance policies.
For all the hypothesis testing that has been carried out in the research process, the
significance level () that has been taken into consideration for drawing a conclusion is
5%.
1.6 RATIONALE
This report was assigned as a compulsory content in Research Methodology course by our course
instructor. Alongside, there are several beneficiaries of this report.
Companies providing micro-insurance service
Insurance Development and Regulatory Authority Bangladesh (IDRA)
Institute of Microfinance (InM)
Research institutes and individual researchers
Existing and potential policyholders of micro-insurance
1.7 LIMITATIONS
The research area is only limited to the district of Dhaka, the capital city of Bangladesh.
Due to shortage of resources, other districts were not taken into account. So all the
samples taken are from the Dhaka city.
The biggest limitation faced in the process of the research was due to the fact that no self
administered questionnaire was valid. Interviews needed to be carried out personally by
the group mates, which decreased the span of the sample size covered.
Some of the respondents were reluctant to answer to some of the questions in the
questionnaires. Hence, those values were entered into the database as missing values.
Due to unavailability of data regarding some of the aspects of the research paper, some
approximate values were used in certain areas of the research.
2.0 LITERATURE REVIEW
2.1 THE MICRO INSURANCE INDUSTRY

In 1980, Grameen Bank of Bangladesh started lending to poor people without collateral security,
thereby revolutionizing finance and banking. Inspired by this scheme, a life insurance company
Green Delta of Bangladesh came forward in 1988 to provide financial security to the poor in
the form of micro insurance at a small amount of monthly premium.
After its introduction in Bangladesh, micro insurance spread among other life insurance
companies at a rapid pace. To date, almost every life insurance company in Bangladesh operates
at least more than one micro insurance project. In 2008, about two million new policies were
sold under micro insurance, compared to a million under ordinary individual life. The total micro
insurance premiums in 2008 amounted to approximately half of ordinary and other life
premiums.
For the last few years, micro-insurance portfolios of different companies have grown at an
average rate of more than 20% per annum (Ali M. K., 2009). This spectacular growth of microinsurance in such a short period reflects the necessity and acceptability of micro-insurance
among the masses in the country. Given that this trend is expected to continue in the years to
come, premium income under the micro-insurance portfolio will likely to overtake ordinary life
premium.
Currently the insurance industry has 77 insurance companies in Bangladesh, 75 private insurance
companies and 2 public insurance companies (Insurance Development and Regulatory Authority
Bangladesh, 2014).
The insurance sector in Bangladesh is relatively small. However, the sector has shown
remarkable growth in recent years. Parliament on 3rd March 2010 passed two insurance laws in a
bid to strengthen the regulatory framework and make the industry operationally vibrant. The new
laws, came into effect on 18 March 2010, are Insurance Act 2010 and IDRA 2010 (Insurance
Development and Regulatory Authority Bangladesh, 2014).
While the Insurance Act 2010 has been framed with the view to synchronize functions of the
existing Insurance Department, the IDRA 2010 aims to make an independent regulatory body
that will overlook the industry and protect customers interests. The Insurance Act 2010 now
recognizes and brings under it other than the normal insurances, Islami insurances and micro
insurance businesses.
The act is making way for the micro insurance business opportunities in the insurance sector of
Bangladesh, which has a great prospect for small and medium enterprises as well as the growing
businesses, especially in the rural areas.
2.2 TYPES OF MICRO INSURANCE IN BANGLADESH

1. General Micro Insurance
This type of micro insurance aims to provide security towards everything other than life of the
underprivileged in the economy. As a normal general insurance applies, the micro general
insurance provides the same type of security at a much lower premium. As observed through the
survey, the team recognized that this type of insurance is rare in the micro insurance scenario.
Only recently has it been started to be of use by SMEs (Small Medium Enterprises) due to
insurance being a condition for micro finance. The insurance is still limited to events of fire.
2. Micro Life Insurance
Like normal life insurances, micro life insurances provide security against the policy holders
life. The premiums are lowered to make it available for the lower income group segment of the
country. From the survey observations, this type of micro insurance is yet to be popular with the
target market.
3. Microtakaful (Islami Insurance)
This segment of micro insurance is the type of micro insurance being provided by Islami
insurance companies.
4. Deposit Pension Schemes (DPS)
This is the most popular micro insurance plan launched by the commercial life insurers. This
gained popularity not because of the benefits it provides in relation to its premium rate but
mainly because of the familiarity among the common people of a deposit scheme introduced by
some of the commercial banks with the same title. The premium rates of DPS is determined
usually by dividing the amount of sum assured with the number of premium installments payable
during the term of the insurance. A maturity, total amount of premiums paid during the term is
payable together with the accrued bonuses. A policyholder, instead of receiving the total amount
of premiums at maturity, may exercise the option of pension benefit.
2.3 PROBLEMS IN INSURANCE INDUSTRY

In Bangladesh, the term insurance is not very common. It is limited to only a certain
proportion of the urban community and almost non-existent within the rural community. This
problem arises because of a number of factors as stated by a research done on ALICO,
Bangladesh. The first and foremost of them is the fear of the public of being cheated. People
have preconceived ideas about the existing insurance policies and do not welcome the new ideas
as much as the company hopes they would. Moreover, all the documents of ALICO (and most of
the private insurance companies) are in English rather than Bengali. On the other hand, ALICO
faces an array of problems too in Bangladesh (some of which are common to other insurance
companies). The rules and regulations regarding this sector are very strict in Bangladesh. The
company itself is afraid of cheats who provide wrong information to collect claims (some cheats
have gone even to the extent of opening fraud branches). The article states that lack of planning,
lack of capital and lack of motivation are three major reasons for which the insurance industry
has not had its desirable influence over the country. (The Lawyers and Jurists, 2013)
2.4 INSURANCE REFORM PROGRAM

The government of Bangladesh is trying to improve the insurance acceptance by embarking on a
reform program. As a first step, the government has replaced the Insurance Act, 1938 with the
Insurance Act, 2010. One of the barriers for starting an insurance company is in the
unavailability of the capital. None of the private life insurance companies have been able to raise
a capital of more than Tk. 30 crore whereas the ideal amount should have been greater than
twice. A main lacking that has been pointed out is the lack of proper training in Bangladesh
Insurance Academy (BIA) and Bangladesh Institute of Bank Management (BIBM). (Ahmed,
2011)
2.5 MICRO INSURANCE FOR POVERTY ALLEVIATION

Micro-insurance is a concept which bridges the two terms micro and insurance to provide a
solution for this insurance deprived nation. Micro insurance refers to the protection of low
income people against specific perils in exchange for regular premium payment proportionate to
the likelihood and cost of the risks available. This way, the target segment becomes more
complete: the 40% of the population of Bangladesh who are stricken by major poverty. The
major cause of this poverty is the deprivation of land and non land asset, access to education,
remunerative occupation and opportunities of diversified income sources. If productivity is
increased, it will alleviate the poverty to a significant level. To aid this fact, many insurance
companies have brought out a single comprehensive micro insurance package to cover for both
life insurance and property risks. What it ensures is that the possibility that some peril may
interrupt the income of the poor household is greatly reduced. The areas in which microinsurance has a prospect are mainly: dwelling, stables, stores and shops; pump sets, harvesters,
threshers; handicrafts and household productions; and personal accident and hospitalization.
Some MFI-NGOs are now offering the service of micro-insurance in the name of self
insurance. (Ali K. M., 2011)
2.6 WHO PROVIDES MICRO INSURANCE

Micro insurance providers can be broadly divided into two categories:
a) Mainstream insurance companies (example: Delta Life Insurance Company)
b) NGOs / MFIs (example: Grameen Kalyan, Sajida Foundation, Shakti Foundation, etc.)
Among the NGO/MFIs some specialize in the provision of healthcare (example: GK), while
others provide a range of financial services as well (example: BRAC and Shakti
Foundation).(Syed M. Ahsan, 2010)
2.7 MICRO INSURANCE AND SME

In Bangladesh, there exist a huge number of small and medium enterprises. The definition of
SMEs, though poses many controversies, consistently point out that the businesses contain a
small number of employees (below 25 as per Bangladesh Bank) and a small spread of fixed
assets other than land and building (below Tk. 5,000,000 as per Bangladesh Bank) (Bangladesh
Bank, 2010).
In many cases, the assets held by these SMEs are insured by insurance firms. As per a South
African case study, it was stated that low-income entrepreneurs are particularly vulnerable to
risks. Lacking adequate financial and other assets, the poor are exposed to the smallest economic
shocks. Their vulnerability is exacerbated by the fact that low-income persons tend to live and
work in riskier environments than wealthier people, with a greater likelihood of illnesses,
accidents and thefts (Aliber, 2001).
This is also very true in case of Bangladesh. The case study also pointed out that as the family of
most of the entrepreneurs depends highly on income from this business, the insurance policies
specifically aimed towards them can also be categorized as micro-insurance.
2.8 MICRO INSURANCE IN PUBLIC HEALTH

One major prospect of micro insurance is the public health sector. It has been stated that microinsurance can lower both the ongoing, preventive health cost and also the high catastrophic
health cost for families affected by poverty in Bangladesh. The micro-insurance scheme of India
has been criticized and it has been stated that that scheme will not apply to Bangladesh. This
micro-insurance will reduce the tendency of rural people to turn to minimally-trained village
pharmacists or traditional healers. Instead they will seek professional healthcare due to risk
pooling. But to achieve all these, the initiatives must exercise adept level of professional
management, product development, management information system and re-insurance (Werner,

2009).
2.9 MICRO INSURANCE AS A PROMISING SECTOR

The concept of micro insurance stems from Dr. Mohammad Yunuss idea of micro credit lending
which initially began in 1980s. The first insurance company to offer micro insurance was Green
Delta of Bangladesh. Since then, micro insurance in Bangladesh has come a long way and
currently it constitutes on average 30% of the income generated. Over the last few years, micro
insurance growth has been at around 20% on average, which is quite commendable. In the
formal side, the most popular scheme is the Deposit Pension Scheme (DPS), which gained
popularity not because of its competitive premium rates, but because of peoples familiarity with
the term DPS as it was introduced earlier by some commercial banks. During early 2000, the
Government of Bangladesh started permitting Islamic Insurance companies; their insurance plans
are known as Takaful. The informal sector of micro insurance is dominated by NGOs. Almost
all major NGOs have micro insurance schemes which cover various factors such as outstanding
loan balance, health, disability and in some cases even provide one time monetary benefit. In
many cases, these micro insurance schemes are financed partly by donor funds. One of the major
challenges faced by micro insurance is the lack of proper regulation. While there are clear
guidelines for general insurance practices, rules and regulations are not as well put for micro
insurance plans. For a healthy growth and consistent growth in the micro insurance segment, a
proper set of rules and regulations must be set up and implemented (Ali M. K., 2009).
3.0 METHODOLOGY
3.1 DATA COLLECTION
3.1.1 Primary source of data
Existing policyholders of different micro-insurance policies have been interviewed

located within the area of Dhaka city.
Micro-insurance policymakers have been interviewed to understand the behavioral

pattern of the policyholders and how it affects the policy.
3.1.2 Secondary source of data

It includes various journals and reports on the Micro-Insurance sector of Bangladesh. By
reviewing journals and reports on the micro-insurance sector of Bangladesh, we can understand
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the key factors that are posing barriers to the effectiveness of the policies. Past reports also
present to us the dimensions that have already been ventured into by researchers, allowing us to
save time and money and the opportunity to look into new ventures ourselves.
All of the secondary sources of data used in the research process have been mentioned in the
Reference section of the report.
3.2 SAMPLE SIZE

Currently, micro-insurance covers 6.5 million lives in Bangladesh (Werner, 2009). So, this
population size can be used to determine the number of existing policyholders that we need to
survey. In this case, the targeted sample size can be determined with the following formula:
Here,
n = Sample size
N = Population size
p = Proportion of the population who are micro-insurance policyholders
q = Proportion of the population who are not micro-insurance policyholders
z = Reliability, depending on the level of significance
do = Precision
We assume the product of p and q to be 0.25 (the maximum possible values). For a level of
significance of 5%, the value of z is 1.96. We assume a precision, do of 5%. In that case, the
sample size is:
However due to time and resource limitation, the actual sample size that could be considered for
the whole research process has been 40. For this sample size and using the same formula, the
precision of the research carried out has been calculated below.
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So, Precision = do = 15.50%
3.3 SAMPLING TECHNIQUE

For the purpose of this study, non-probability sampling was used.
Non-probability sampling represents a group of sampling techniques that help researchers to
select units from a population that they are interested in studying. The main purpose for selecting
the non-probability sampling is the limited time and workforce, lack of access to the entire target
population and practicality (easier, quicker and cheaper).
We have taken a combination of judgmental and snowball approaches in coming up with the
desired sample of the policyholders. We have employed the judgmental approach in selecting the
areas from which surveys will be taken and in selecting the companies that were interviewed
during the research process. We have employed the snowball approach in selecting individual
policyholders, since information about them is not available to public at large.
3.4 QUESTIONNAIRE DEVELOPMENT

After finalizing the co-ordination schema to etch out the variables that will be used in the
research process [Appendix 2], questionnaires were designed to carry out the survey [Appendix
1].
3.4.1 Categories of questionnaire
To reach out to the interviewees, two questionnaires were formulated:
a) Questionnaire for the existing policyholders of micro-insurance policies:
This is the main questionnaire for the research since most of the variables listed in the coordination schema are aimed at the existing policyholders of micro-insurance.
b) Questionnaire for the micro-insurance policymakers:
To cross check some of the complex variables and to check for the coverage of micro-insurance,
interviews were carried out to some of the companies providing micro-insurance services. The
names of the personnel who were interviewed are present in the Acknowledgements.
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For all the two questionnaires formulated, the respondents will be interviewed since many of the
policyholders may not know how to read or write. For their benefits, the first questionnaires
addressed towards the existing policyholders of micro-insurance will be translated into Bengali
so that the respondents understand the questions better. The interview of the micro-insurance
policymaking companies will be carried out in English.
3.4.2 Question patterns
For the questionnaire aimed towards the existing policyholders of micro-insurance, the following
answering bases were used:
a) Subjective questions
b) Yes/No questions: Here the answer of Yes has been given a value of 1 and the answer
of No has been given a value of 0
c) Checklist of items
d) 5 point Likert scale: The value of the question patterns range from -2 to +2
For the interview questionnaire aimed towards the policymakers, subjective questions were
asked to gather relevant information.
3.4.3 Pre-testing
The questionnaire aimed towards the existing policymakers was pre-tested among 7 respondents.
On carrying out the pre-test, the following changes were made:
a) For question number C1, the first option, Cash upfront was divided into two separate
options of Through office and Through agents.
b) For question number C5, the previously subjective question was changed to include the
options Fraud agents, Fraud companies, Fraud paperwork and Others for the
reason of specificity.
3.5 DATA COLLECTION:

The data collection spanned over a period of 4 weeks. During this time, several areas were
covered up in an aim to carry out interviews with probable respondents. The major limitation
faced in this process was that the group had to take interviews of the respondents instead of
handing them a self administered questionnaire.
The areas that were taken into consideration are listed below.
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Dhaka University
Kataban
Nilkhet
Uttara
Eskaton
Shahbagh
Dhanmondi
3.6 DATA ANALYSIS

For the purpose of data analysis, the collected data were entered into SPSS and different
statistical tests were administered. The tests that were carried out include:
a) One sample T-Test: Hypothesis tests were carried out for different variables where the
sample means of the data collected for those variables were used to check whether the
population means of those variables conformed to different standard values.
b) Frequency analysis: The frequency of answers as per the choices to different questions
was presented where necessary and the results were explained as to how it can be related
to the effectiveness of micro-insurance.
c) Correlation coefficients: For some variables, the correlation has been found out to see the
strength and direction in which they move.
14
4.0 RESEARCH FINDINGS
4.1 FINDINGS REGARDING KNOWLEDGE OF POLICYHOLDERS

4.1.1 Knowledge regarding number of companies
As already stated in the preceding sections of the report, the total number of insurance companies
in Bangladesh is 77 (Insurance Development and Regulatory Authority Bangladesh, 2014) of
which as high as 60 companies provide micro-insurance facilities (Mizan R. Khan, 2013).
Moreover, majority of the respondents are policyholders of micro life insurance. There are in
total 30 companies which provide life insurance (Insurance Development and Regulatory
Authority Bangladesh, 2014). Thus, for the hypothesis test carried out below, it has been
assumed that all of these life insurance companies provide micro-life insurance.
In this section, the claim that the policyholders do not know the correct number of companies has
been tested statistically. It has been assumed, as stated above, that the correct number of
companies is 30. Thus, the correct number of companies other than the company of which the
respondent is a client of is 29.
The set of hypotheses taken into consideration and the tables generated by SPSS are given in
[Appendix 5], under the subtopic of Hypothesis 1. A simpler table showing the mean of the
sample and the significance level has been given below.
Sample mean ( )
4.56
Significance level for 2 tailed test
0%
The mean perceived value of the sample (x) in this context is only 4.56 which shows, to a very
large extent, the respondents are unaware of the correct number of companies.
The significance level of the two tailed test carried out shows that the value is 0% (as underlined
in the table above). This means that at any significance level above 0%, we can reject the null
hypothesis that the mean number of companies perceived by policyholders is 29. The alternate
hypothesis that the mean number of companies perceived by the policyholders is not 29 is
accepted.
Conclusion: At a significance level of 5%, the policyholders of micro-insurance do not have the
appropriate knowledge regarding the number of companies currently in the industry.
15
4.1.2 Knowledge regarding other programs of company the respondent is a client of

In this section, we will check whether the respondents think that they have good idea about the
other insurance offers of the company that he/she is a policyholder of. One assumption that is
made here will be that even if half the respondents feel that they have a good understanding of
the other programs being offered by the insurance company that he/she is a policyholder of, we
can conclude that the micro-insurance companies are effective in this context.
The set of hypotheses taken into consideration and the detailed tables generated by SPSS are
given in [Appendix 5], under the subtopic of Hypothesis 2. A simpler table showing the
frequency distribution of the answers and the significance level has been given below.
Knowledgeable Unknowledgeable
Frequency distribution
31
Proportion of frequency
22.5%
77.5%
0%
From the tables it can be seen that the sample mean for this variable as received from the
questionnaire is 0.225. This means that only 22.5% of the respondents claimed that they had
knowledge regarding the other programs of the same insurance company.
The significance level for a two tailed test is 0% in this context. As this hypothesis testing had
been a one tail test, the significance level for two tail test is to be divided by 2 to get that of the
one tail test. Even after doing that, the significance level is 0%.
Thus, it can be concluded that for any significance level greater than 0%, the null hypothesis that
at least half the policyholders have a good about the other programs of the company that they
are the policyholder of is rejected and the alternate hypothesis that less than half the
policyholders believe they have good idea about the other programs of the company that they
are the policyholder of is established.
Conclusion: At a significance level of 5%, a proportion of less than 50% of the policyholders of
micro-insurance have the appropriate knowledge regarding the other micro-insurance programs
that the company that he/she is a client of offers.
4.1.3 Knowledge regarding the chosen micro-insurance policy
In this section, we will check whether the respondents think that they have a good understanding
of the micro-insurance program that they are currently under. In this case too, the assumption
that if half the respondents feel that he/she has good knowledge regarding the chosen program,
the micro-insurance companies can be tagged as being effective in this context.
16
The set of hypotheses to be considered for this part and the tables generated by SPSS are
included in [Appendix 5] under the sub heading of Hypothesis 3. A simpler table showing the
frequency distribution of the answers and the significance level has been given below.
Knowledgeable Unknowledgeable
Frequency distribution
24
16
Proportion of frequency
0.6
0.4
21%
From the above tables, we can see that the sample mean for this category is 0.60. This means that
60% of the respondents believe that they have good understanding of the micro-insurance policy
that he/she has taken up.
The hypothesis test carried out gives its result in the next table. The significance level being
shown in this context is 21% for a two tailed test. However, this is a one tail test for which this
level of significance must be divided by 2. Thus, the significance level for the one tail test is
10.5%.
So it can be said that for any value of significance level below 10.5%, the null hypothesis that at
most half the policyholders believe they have a good understanding of the chosen insurance
program cannot be rejected and the alternate hypothesis that more than half the policyholders
believe they have a good understanding of the chosen insurance program cannot be established.
For any value of significance level above 10.5%, the null hypothesis that at most half the
policyholders believe they have a good understanding of the chosen insurance program is
rejected and the alternate hypothesis that more than half the policyholders believe they have a
good understanding of the chosen insurance program can be established.
Conclusion: At a significance level of 5%, it cannot be concluded that a proportion more than
50% of the policyholders of micro-insurance have appropriate knowledge regarding the chosen
micro-insurance policy.
4.1.4 Knowledge regarding the reason for choosing the micro-insurance policy
In this section, the answers of the question to A5 [Appendix 1] has been arranged into two
groups: whether the respondents have taken the policy knowing its repercussions or whether they
have taken the policy by being affected by the words of another person or party.
A hypothesis test has been carried out below to check the claim whether statistically the
proportion of the population aware of the repercussions of the policy is greater than 50%. The set
17
of hypotheses to be considered for this part and the tables generated by SPSS are included in
[Appendix 5] under the sub heading of Hypothesis 4.
A simpler frequency table and the values of the significance level as per the hypothesis test has
been given in the table below.
Knowledge of the
repercussions
Influence of other
party
Frequency
28
12
Proportion
p = 0.70
q = 0.30
1%
From the above table, we can see that the significance level for two tail test is 1%. But as the
hypothesis in this context is a one tail test, this percentage must be divided by 2. So the
significance level for one tail test is 0.5%.
Thus, it can be said that for a level of significance less than 0.5%, the null hypothesis that no
more than 50% of the policyholders know the reason for choosing the policy that they are under
cannot be rejected and the alternate hypothesis more than 50% of the policyholders know the
reason for choosing the policy that they are under cannot be established. For a level of
significance greater than 0.5%, the null hypothesis can be rejected and the alternate hypothesis
that more than 50% of the policyholders know the reason for choosing the policy that they are
under can be established.
Conclusion: At a level of significance of 5%, it can be concluded that the more than half the
policyholders of micro-insurance know the reason for choosing the micro-insurance policy.
4.1.5 Synthesis of knowledge of policyholders
To combine the results from all the simple variables into the parameters, the conclusions from
the individual simple variables have been rated either 1 or 0. A value of 1 means that in
terms of that simple variable, the micro-insurance in Bangladesh.
For the knowledge of the policyholders, the simple variables and their corresponding values as
per the conclusions are listed in the table below:
Simple variable
Conclusion
Value
Knowledge regarding
number of companies
The policyholders do not have appropriate

knowledge regarding the number of companies.
18
Knowledge regarding other

programs of the company
Less than half the policyholders have appropriate

knowledge regarding other policies of the company.
Knowledge regarding the

chosen micro-insurance
policy
More than half the policyholders do not know the

reason regarding the choice of the micro-insurance
policy.
Knowledge regarding the

reason for choosing it
More than half the policyholders know the reason

for choosing the policy.
Average value
0.25
4.2 FINDINGS REGARDING CLAIMS OF MICRO-INSURANCE

4.2.1 Findings regarding background check on claims
In the Insurance industry claims turn out to be a major hurdle for the policyholders to be
applying for claims. The first stage of the claim process in micro insurance is for the policy
maker to validate the claim of the policyholder by performing a thorough background check via
independent third party.
In the case of our sample, we first tested for how many of the policyholders within the sample
have actually claimed for insurance and secondly we tested how thorough the background check
was according to the policyholders who have claimed their insurance.
In the aspect of how many insurance claims, we made a frequency table as shown below. The
table helps us understand how many of our sample has actually made a claim. Within the sample
only 7 policyholders have made a claim in the tenure of their policy, while 32 policyholders have
never applied for an insurance claim.
Made an Insurance Claim
Frequency
Percentage
Yes
17.5
No
32
80.0
Total
39
97.5
Mean
.18
19
Significance Value (two tailed)
.006
In the first part of this section we will check as to whether any of our samples have made a claim
on their insurance. An assumption here is that the sample policyholders have not yet made a
claim against their insurance scheme.
The set of hypothesis taken into consideration and detailed tables generated from SPSS are given
in [Appendix 6], under the subtopic Hypothesis 1. A simpler table of showing the frequency
distribution of the answers, the mean value and the significance value obtained above.
We can observe from the table that the sample mean for this variable as received from the
questionnaire is 0.18. This means that only 18% of the sample has made claims against their
insurance scheme.
The significance for a one tailed test is 0.06% for this simple variable. In case of a two tailed test,
the significance value would have been divided by 2 to get that of a one tailed test, and obtain
0.03%.
Hence it can be concluded that for any significance level greater than 0.03% the null hypothesis
that a significant proportion of the policyholders have not made claims is rejected and the
alternate hypothesis a significant proportion of the policyholders have made claims is
established.
In the second part of this segment we try to find out whether the claims that have been made
within the sample were validated with proper background check. The assumption we have made
for this part is that none of the claims that were made, were validated with a thorough
background check.
distribution of the answers, the mean value and the significance value obtained is given below.
Thorough Background Check
Mean
Significance Value
0.78
0.00
From the table it can be seen that the sample mean for the simple variable as received from the
questionnaire is 0.78. The significance level for the two tailed test is 0 in this context. If we turn
it into a one tailed test and divide the significance value with 2, we would still obtain a value of
zero.
20
Thus it can be concluded for any significance level greater 0%, the null hypothesis that the
policyholders perceive that the background check on claims is not thorough is rejected and the
alternate hypothesis that the policyholders perceive that the background check on claims is
thorough is established.
Conclusion:
At significance level of 5%, a significantly large number of policyholder has made a

claim against their insurance scheme.
At a significance level of 5%, the policyholders of micro-insurance perceive that the

background check on claims is thorough.
4.2.2 Findings regarding acceptance rate of claims

In this segment we will test to see whether the claims that have been made by the respondents
were accepted by the policymaker. Here again we assume that the acceptance rate of the claims
made by the respondents is equal to or less than 15. 15% is the industry standard rate of
acceptance. For which we test whether the respondents of our sample have a different rate or not.
Acceptance Rate of
Claims
Frequency
Mean
Significance Value
0.48
0.000
We can see from the table that the sample mean for the simple variable is 0.48 based on the
questionnaires. This means that 48% of the respondents have experienced their claim to be
accepted by the policymaker.
The significance level for this simple variable is 0.000 in a two tailed test. Considering a one
tailed test, we divide the significance value by 2 and still obtain 0.000. We would still have a
significance level of 0%.
We can come to the conclusion that for any significance level greater than 0.0%, we reject the
null hypothesis that acceptance rate of claims is equal to or less than zero and the alternate
hypothesis acceptance rate of claims is greater than zero is established.
Conclusion: With a significance level of 5%, majority of the respondents say that their claims
have been accepted by the policy makers.
21
4.2.3 Findings regarding denial of claims

In this section we will observe as to why there was any denial of claims amongst the
respondents.
Frequency
Percentage
Claims Made
100
Claims Denied
28.6
Reasons:
1. Claim before maturity not provided

2. Policy nullified.
As you can see in the table above, a total of 7 insurance claims were made within our sample,
while 5 of the claims were accepted, only 2 were rejected. As the reason show, one of the claims
were rejected because of the firms policy of not providing claim before maturity and another
being that the policy was made void.
If we look at the percentages we can see that 28.6% of the claims made were rejected. Although
the percentage appears to be high, we must remember that 100% means only 7 claims. So the
percentage can be said to be exaggerated.
Conclusion: The information obtained is not enough for us to measure the effectiveness in the
denial of claims of policyholders. Value of Effectiveness: 0.5
4.2.4 Findings regarding time of claims
In accordance to question number B6 [Appendix 1], this section looks into how much time is
taken for the policymakers to pay off the premium of a claim.
In the sample only four respondents have received their claim amount during the survey. Out of
five of the claims which were accepted, four claims were paid off within a maximum of 3
months and a minimum time of zero. The variation cant be used as an average amongst the
micro insurance industry as the number of claims received is low.
Time Taken for Claim to be Given
(in months)
Frequency
Percentage
0.25
0.25
0.25
22
0.25
Total
100
Conclusion: Although we can say that 4/5 or 80% of the claims were paid off, however we cant
say whether this aspect of Insurance Claim is effective or not because there are only four
samples, causing each time taken to have an equal percentage of 25. Value of Effectiveness: 0.5
4.2.5 Findings regarding satisfaction of policyholders relating to claims
We divided this section of the findings into two parts. The satisfaction of the policyholders is
firstly tested with satisfaction with the time taken for the company to evaluate the claim and
respond and the time taken for the company to provide the claimed amount. Secondly we test
and find out the satisfaction of policyholders with the claim amount they have obtained.
in [Appendix 6], under the subtopic Hypothesis 4 & 5. A simpler table of showing the
frequency distribution of the answers, the mean value and the significance value obtained are
given accordingly.
Satisfaction with B4 and B6
Mean
Significance Value
1.00
0.089
B4 = Satisfaction with time taken for claim evaluation and response.

B5 = Satisfaction with time taken for the claim amount to be given.
We can see that the sample mean for the first satisfaction related variable is 1.00.The
significance value for the satisfaction variable is 8.9% in a two tailed test. Considering a one
tailed test for this simple variable, we obtain the significance level of 4.45%.
Hence we can come to the conclusion that any significance level greater than 4.45% would mean
that we reject the null hypothesis of policyholders are not satisfied with the time taken to
evaluate and provide the claim amount and establish that claim that they are indeed satisfied
with the processes.
The second part of this segment is whether the respondents are happy with the premium amount
they receive after a claim is made. The claim for this part is that the policyholders are satisfied
with the claim amount that they receive.
23
Satisfaction the Amount of Claim Received
Mean
Significance Value
0.40
0.587
From the table we can see that the sample mean for the variable is 0.40 in this context. We can
also see that the significance level for the variable is 58.7%. Thus the significance level for a one
tail test is 29.4%.
Finally we can come to the conclusion that any significance level greater than 29.4% would
result in rejection of the null hypothesis, the policyholders are not satisfied with the claim
amount, and while establishing the alternate hypothesis that they are satisfied. For a
significance level lower than 29.4%, the null hypothesis cannot be rejected and the claim cannot
be established.
Conclusion:
With a significance level of 5%, we can say that the policyholders are satisfied with the
time taken for claim evaluation and time taken for the claim to be received.
For the significance level of 5%, we must accept the null hypothesis that respondents are
not satisfied or neutral with the claim amount they receive.
4.2.6 Synthesis of micro-insurance claims

terms of that simple variable, the micro-insurance in Bangladesh is effective. A value of 0 on
the other hand means that it is ineffective
For the aspect of claims of the policyholders, the simple variables and their corresponding values
as per the conclusions are listed in the table below:
Simple variable
Background Checks on
Claims
Acceptance Rate of Claims
Conclusion
Value
Insurance Claim Respondents have claimed

against their insurance.
Thorough Background Checks Respondents

believe that their claims have been followed by
proper background checks.
More than zero respondents have said that

acceptance rate of claims is high
24
Denial of Claims
Not enough information to make a valid value of

effectiveness
0.5
Time of Claims
Not enough information to make a valid value of

effectiveness
0.5
Satisfaction relating to
Claims
Satisfaction with B4 and B6
Satisfaction with Amount Realized from Claim
Average value
0.7
4.3 FINDINGS REGARDING COLLECTION AND RECOVERY OF PREMIUM

4.3.1 Findings regarding medium of premium collection
From the research, it has been found out that the micro-insurance policyholders usually collect
the premiums through three major ways:
a) Through their offices: The policyholders have to come over to the offices of the
respective micro-insurance company that they are the clients of and have to pay the
premium over the counter to an employee of the company. This is mostly applicable for
urban or semi-urban areas, where setting up an office appears to be useful for the
company.
b) Through agents: For mostly the rural population, the policyholders use this method of
premium collection. Independent agents holding the authorized license provided to them
by the Insurance Development and Regulatory Authority (IDRA) are appointed to go to
these particular locations on selected days and collect the premiums from the
policyholders.
c) Bank accounts: Instead of directly providing the premium to the company, on many
instances, the policyholders pay the amount through a bank. This is advantageous for the
company because this method increases their geographical reach.
A table showing the frequency of the different medium is given below.
Medium
Frequency
Percentage
Through office
15
37.5%
25
Through agents
16
40%
Through bank accounts
15%
All of the three mentioned above
2.5%
Other methods
5%
Conclusion: There are enough methods of premium collection to tackle the different
geographical locations of Bangladesh.
4.3.2 Findings regarding considerations during premium collection
In this section, two different considerations from the perspective of the policyholders while
paying the premiums were reflected upon. Hypotheses tests have been done on both of the
considerations. They are:
a) Consideration of the policyholders occupation (whether the policymakers consider the
occupation of the policyholder, during the process of premium collection)
b) Consideration of the policyholders expense patterns (whether the policymakers consider
the expense patterns of the policyholder, during the process of premium collection)
For these two variables, a bivariate correlation analysis at 1% significance level has been carried
out [Appendix 7] which shows that the correlation coefficient for these two variables is 0.884,
meaning that the correlation between these two variables is quite high.
For consideration regarding the occupation of the policyholders, a hypothesis test was carried out
(the details are in [Appendix 8] under the subheading of Hypothesis 1) where the claim that
the process of premium collection takes into consideration the occupation of the policyholders
was tested.
For that test, the findings are shown in the table below:
Sample mean ( )
0.40
6.6%
From the table above, we can see that the significance level for two tailed test is 6.6%. Thus, the
significance level for one tailed test will be 3.3%.
Thus, for any significance level higher than 3.3%, the null hypothesis can be rejected and the
claim that the process of premium collection takes into consideration the occupation of the
policyholders can be established.
26
For any significance level lower than 3.3%, the null hypothesis cannot be rejected and the claim
that the process of premium collection takes into consideration the occupation of the
policyholders cannot be established.
For consideration regarding the expense pattern of the policyholders, a hypothesis test was
carried out (the details are in [Appendix 8] under the subheading of Hypothesis 2) where the
claim that the process of premium collection takes into consideration the expense patterns of the
policyholders was tested.
For that test, the findings are shown in the table below:
Sample mean ( )
0.35
9.9%
From the table above, we can see that the significance level for two tailed test is 9.9%. Thus, the
significance level for one tailed test will be 4.95%.
Thus, for any significance level higher than 4.95%, the null hypothesis can be rejected and the
claim that the process of premium collection takes into consideration the expense patterns of the
policyholders can be accepted.
For any significance level lower than 4.95%, the null hypothesis cannot be rejected and the claim
that the process of premium collection takes into consideration the expense patterns of the
policyholders cannot be accepted.
Conclusions: At a level of significance of 5%,
It can be concluded that the process of premium collection takes into consideration that
the occupation of the policyholders.
It can be concluded that the process of premium collection takes into consideration that
the expense patterns of the policyholders.
4.3.3 Findings regarding incidence of frauds

The hypothesis tested in this section of the report deals with the incidence of fraud. The claim for
the hypothesis being tested in this scenario is the proportion of population who has been the
victims of fraudulent activities is not 0.
The set of hypothesis for the testing of this claim is given in [Appendix 8] under the subheading
of Hypothesis 3. The frequency distribution of the responses for this question along with the
significance level received through the hypothesis test is given in the table below.
27
Has faced fraud in

micro-insurance
Has not faced fraud in

micro-insurance
Frequency
33
Proportion
p = 0.175
q = 0.825
0.6%
From the table above, we can see that the significance level for two tailed test is 0.6%. Thus, for
a significance level greater than 0.6%, the null hypothesis can be rejected and the alternate
hypothesis showing the claim that the proportion of population who has been the victims of
fraudulent activities is not 0 can be accepted.
For a significance level lower than 0.6%, the null hypothesis cannot be rejected and we cannot
conclude that the claim is true.
Regarding the awareness of fraud, the following frequency table shows which types of the three
types of fraud: fraud agents, fraud companies and fraud paperwork are the respondents aware of.
Frequency
Proportion
Fraud agents
14
0.32
Fraud companies
16
0.36
Fraud paperwork
0.05
Missing values
12
0.27
Conclusions:
At a significance level of 5%, it can be concluded that the proportion of population who
has been the victims of fraud is not zero, and is thus significantly large.
27% of the respondents are not aware of any sort of fraudulent activities, which is quite
alarming.
4.3.4 Findings regarding handling of frauds

The respondents seemed to have a generic negative perception of the companies when it came to
how effectively the frauds were being handled. The claim that according to the policyholders,
the companies do not deal with frauds effectively has been tested in this section. The detailed
table generated by SPSS has been given in [Appendix 8] under the subheading of Hypothesis
4.
28
A simpler version of that table with the most important points is shown below:
Sample mean ( )
-0.16
59%
As the significance level for two tailed test is 59%, that for a one tailed test will be 29.5%. Thus,
for significance level of greater than 29.5%, the null hypothesis will be rejected and the claim
that the policyholders believe that the companies do not deal with frauds in an effective manner
will be established.
For significance level of less than 29.5%, the null hypothesis cannot be rejected and the claim
that the policyholders believe that the companies do not deal with frauds in an effective manner
cannot be established.
Conclusion: At a significance level of 5%, it cannot be concluded that the companies do not deal
with frauds effectively.
4.3.5 Findings regarding time of recovery of premium after maturity
From the managerial interviews carried out, the interviewees confirmed that the time of payment
of all the aggregated amount of the premium usually took two months after all the necessary
paperwork were completed by the policyholders subsequent to the maturity of the insurance (if
applicable).
Thus, the mean of the answer to question C8 [Appendix 1] has been tested against the value of
2. The claim being made in this case is that the actual time of recovery of premium is greater
than 2 months after the maturity.
The tables generated by SPSS for the test of this hypothesis and the set of hypotheses being
considered to test the claim made above have been included in [Appendix 8] under the
subheading of Hypothesis 5. A simpler table of the most important values is given below:
Sample mean ( )
4.11 months
0.6%
From the table above, we see that the mean from the respondents is 4.11 months. When tested
against the claim being made, the significance level for two tailed test is 0.6%, meaning that the
significance level for one tailed test is 0.3%.
So at a significance level of greater than 0.3%, the null hypothesis can be rejected and the claim
that the actual time of recovery of the premium following the maturity is more than 2 months
29
can be accepted. At a significance level of less than 0.3%, the null hypothesis cannot be rejected
and it cannot be concluded that the actual time of recovery of the premium following the
maturity is more than 2 months.
Conclusion: At a significance level of 5%, the claim that the actual time of recovery of
premium following the maturity is greater than 2 months is accepted. The micro-insurance of
Bangladesh is ineffective in context of this simple variable.
4.3.6 Findings regarding satisfaction about amount of premium recovered
The policyholders were asked to mention how satisfied they were on the amount of premium
recovered following the maturity from past experiences, if applicable. With the aggregate result,
a claim that the policyholders are satisfied regarding the amount of premium recovered after
maturity was tested.
The details of the test are present in [Appendix 8] of the report under the subheading of
Hypothesis 6. A table showing the findings of that test has been given below.
Sample mean ( )
0.16
55.7%
Thus, we can see from the above table that the significance level for two tailed test is 55.7%.
This means that the significance level for one tailed test is 27.9%.
So, at a significance level of greater than 27.9%, the null hypothesis can be rejected and the
claim that the policyholders are satisfied regarding the amount of premium recovered after
maturity can be accepted.
At a significance level of lower than 27.9%, the null hypothesis cannot be rejected and it cannot
be concluded that the policyholders are satisfied regarding the amount of premium recovered
after maturity.
Conclusion: At a significance level of 5 percent, the claim that the policyholders are satisfied
with the amount of premium that they are recovering after the maturity cannot be accepted.
Thus, in this case, the micro-insurance is ineffective.
4.3.7 Synthesis of micro-insurance premiums
terms of that simple variable, the micro-insurance in Bangladesh.
For the parameter of micro-insurance premiums, the values are given in the table below:
30
Simple variable
Conclusion
Value
Medium of premium
collection
There are three major ways of premium collection,

which is effective in context of Bangladesh.
The process of premium collection does not take into

consideration the occupation of the policyholders.
The process of premium collection does not take into

consideration the expense patterns of the policyholders.
The proportion of population who has encountered fraud

is significantly large.
A large proportion of the population is not aware of the

types of fraud that are most common.
Handling of frauds
It cannot be concluded that the companies do not handle

fraud effectively.
Time of recovery of
premiums after maturity
The time of recovery of premium after maturity is

significantly larger than 2 months (which was the
average time claimed by the companies).
Satisfaction about amount

of premium recovered
The policyholders are not satisfied regarding the amount

of premium recovered following the maturity
Considerations regarding
premium collection
Incidence of fraud
Average value
0.25
4.4 FINDINGS REGARDING EMPLOYEES OF MICRO-INSURANCE

4.4.1 Findings regarding instances of misbehavior by employees
In this section we firstly look into whether the policyholders of micro insurance have ever faced
moments where the employees of the company misbehaved. Here we assume that the instances
of misbehavior of employees are zero or less than zero.
31
Misbehavior by Employees
Mean
Significance Level
0.10
0.044
As we can see from the table, the sample mean obtained from the questionnaires for this simple
variable is 0.10. This means that only 10% of the respondents have experienced instances of
misbehavior by employees/agents of the insurance firm.
The level of significance for a two tailed test in this context is 0.044. If we consider a one tailed
test then the significance level would be divided by 2 and result in being 0.022 or 2.2%.
This means that for any level of significance greater than 2.2%, the null hypothesis the mean of
instances of misbehavior by employees/agents is zero will be rejected, while establishing the
alternate hypothesis mean of instances of misbehavior of employees is greater than zero.
Conclusion: With a significance level of 5%, we can conclude that the respondents have
experienced instances of misbehavior by employees or agents. Value of Effectiveness: 0
4.4.2 Findings regarding perception of employee behavior
In this part of the findings we test as to what the perception of policyholders is regarding the
behavior of employees of the insurance firms. For this case we assume that the level of
satisfaction is equal to or below zero signifying that it is unsatisfactory.
Perception of Employee
Behavior
Mean
Significance Level
1.08
0%
As we can observe from the table that the mean value for the variable is 1.08, signifying that the
respondents have a satisfactory perception towards the behavior of employees. Thus the claim is
that the perception of the policyholders regarding employee behavior is positive.
The level of significance for a two tailed test in this context is 0%. If we consider a one tailed
test, the significance level would be divided by 2 and result in being 0% again brining no change.
32
We can conclude here by saying that for any level of significance above 0%, the null hypothesis
the policyholders are not satisfied by the employee behavior and do not have a positive
perception, and the claim that they are indeed satisfied is established.
Conclusion: With a level of significance of 5%, we can conclude that the perception of
policyholders towards employee behavior is satisfactory.
4.4.3 Findings regarding the amount charged by agents
With this section, we test to see whether the amount being charged as commission or premium
rate is acceptable by the respondents or not. For this case we hold the industry standard of agent
commission of 15% and check whether the respondents believe the agents deserve the amount.
Perception of Acceptable
Commission Fees
Mean
Significance Level
11.50
0.209
From the table we can extract the sample mean for the variable to be 11.50. This means that
according to our respondents the average rate of commission or premium rate should be around
11.5%.
The significance level for a two tailed test in this context is 0.209. If we consider a one tailed test
for the same variable the significance value would be divided by 2 and 0.104 can be obtained.
Thus we can come to the conclusion that for a level of significance greater than 10.4%, the null
hypothesis that the deserved rate of commission for agents is 15% is rejected and the alternate
hypothesis the deserved rate of commission for agents is not 15% stands.
Conclusion: With a significance level of 5%, the null hypothesis is not rejected and we come to
the conclusion that the deserved rate of commission for agents is 15%. For such that any
significance level under 10.4% can be considered the same, so at 5% the commission of 15%
(industry standard) and the sample mean value of 11.5% can be considered the same. Value of
Effectiveness: 1
4.4.4 Findings regarding unrecorded payments
In the insurance industry, unrecorded payments can be held as the precursor for attempts at
fraudulent activities. In this section we test as to whether the respondents have ever faced
33
instances of unrecorded payment. Our assumption lies on the hypothesis that the mean of
instances of unrecorded payment is less than or equal to zero.
Instances of Unrecorded
Payment
Mean
Significance Level
0.18
0.6%
Extracting the sample mean value of 0.18 from the table above we can say the about 18% of the
respondents have faced instances of unrecorded payment. Thus, the claim that we want to test is
that the number of times there were unrecorded payments is significantly greater than zero.
The significance level for the simple variable, in this context, 0.6%. If we convert this two tailed
test into a one tailed test, the level of significance is divided by 2 and we obtain 0.3%. In the end
this means that for any level of significance higher than 0.3%, the null hypothesis is rejected and
the claim is established.
Conclusion: With a significance level of 5%, the null hypothesis is rejected and we can say that
there are instances of unrecorded payments within the policyholders. This means that there are
chances that these respondents are on the stepping stone of an attempt of fraudulent activity.
Value of Effectiveness: 0
4.4.5 Findings regarding knowledge of employees
This section of the findings understands the findings regarding knowledge of the employees. The
test of knowledge has been divided into two parts. The first part understands the perception of
the policyholders towards the knowledge of the micro insurance employees. The second part
deals with the knowledge in a subtle way, by asking as testing whether there have been instances
of failure to answer.
in [Appendix 9], under the subtopic Hypothesis 5 & 6. A simpler table of showing the mean
value and the significance value obtained is given below.
34
(a) Employee knowledge
Knowledge of Employees
Mean
Significance Level
1.16
0%
The sample mean for the variable as on the table is 1.16. This means that from the sample,
respondents believe that the employees are knowledgeable. Thus, that is the claim that we want
to prove via the hypothesis that we are testing.
The level of significance of a two tailed test in this context is 0%. If we assume a one tailed test
for the variable then the significance level would still be 0%.
We can come to the conclusion that that for any level of significance greater than 0%, we can
reject the null hypothesis the employees are not knowledgeable and establish the claim that
they are in fact knowledgeable.
Conclusion: With a significance level of 5%, we may conclude that the employees in the micro
insurance industry are knowledgeable by rejecting the null hypothesis. The more knowledgeable
the employees are, the more effective the micro insurance scheme. Value of Effectiveness: 1
(b) Failure to Answer
The perception of the policyholders can be biased and gullible, for which we did a second test
which in a subtle manner looks into the fact of knowledge of employees of the micro insurance
companies. In this case we assume that the mean of the failure to answer is equal to zero.
Failure to Answer
Mean
Significance Level
0.25
0.1%
The sample mean for the variable as shown above is 0.25. This means that 25% of the
respondents had instances where the employee was unable to answer the queries of the
policyholders.
The significance level for a two tailed test of the variable is 0.001 in this context. If we consider
a one tailed test the level of significance will become 0.05% for the variable.
We can now come to a conclusion that any level of significance above 0.05% will cause the null
hypothesis mean of failure to answer is equal to zero to be rejected and the alternate hypothesis
mean of failure to answer is greater than zero to be established.
35
Conclusion: With a significance level of 5%, we can say the null hypothesis is rejected, meaning
that there are instances of failure to answer by the employees of the micro insurance companies.
This shows as to how, the perception of the policyholders may have been wrong. This renders the
industry as ineffective.
4.4.6 Findings regarding frequency of visits made by agents
In this section we test whether the frequency of visit made by agents is high or low for those
policyholders who have to pay the premiums via agents. Here we assume that the agents do not
visit the policyholders regularly.
in [Appendix 9], under the subtopic Hypothesis 7. A simpler table of showing the mean value
and the significance value obtained is given below.
Regular Visits of Agents
Mean
Significance Level
0.87
0%
The sample mean for the variable as shown on the table is 0.87. This means 87% of the
respondents have agents who regularly visit the policyholders. Thus, the claim that we want to
test is that a significantly large proportion of policyholders believe that agents visit regularly.
The significance level for a two tailed test in this context is 0%. If we consider a one tailed test
for the variable, the level of significance would still be 0%.
Thus we can conclude that for at any level of significance above 0%, we reject the null
hypothesis and establish the alternate hypothesis that a significantly large proportion of
policyholders believe that agents make regular visits.
Conclusion: With a level of significance of 5%, rejecting the null hypothesis, we can claim that
the agents regularly visit the policyholders making the micro insurance scheme effective in
Bangladesh in this context.
4.4.7 Synthesis of micro-insurance employees
Simple variable
Conclusion
Value
Instances of Misbehavior by
Employees/Agents
The policyholders have experienced instances

where agents/employees misbehaved with them.
Rendering the insurance ineffective.
36
Perception of Employee
Behavior
The policyholders believe that the employees

behavior is satisfactory
Amount of commission
charged by Agents
The mean commission suggested by policyholders

is the same as the 15% being charged currently in
the industry causing this section to be effective.
Instances of Unrecorded
Payments
Policyholders have faces instances where the firm

or its agents have not recorded the payments. This
renders this section as ineffective.
Policyholders believe that knowledge of

employees regarding micro insurance schemes is
satisfactory.
However there have been several instances of

failure to answer queries by the agents which
causes this section to be ineffective.
87% of the policyholders have agents who visit

regularly to collect the premiums.
Knowledge of Employees
Frequency of Visits made by

Agents
Average value
0.60
4.5 FINDINGS REGARDING COVERAGE OF MICRO-INSURANCE

In this part of the report, we try to find out as to whether micro insurance is able to cover most of
the variety of insurance needs of the people of Bangladesh.
The table below shows how the different items need to be insured, are already insured, or both,
in the perspective of our sample respondents.
Assets that need
to be insured
(Frequency)
Assets that are

insured
(Frequency)
Both
(Frequency)
1) Hospitalization
2) Primary health care
3) Maternity
Items
Value of
Effectiveness
37
4) Life Insurance
15
19
5) Retirement savings plans
6) Against weather
7) Against rising cost of

cultivation
8) Against pest attacks and

diseases
9) Livestock
10) Housing
11) Vehicles
Total
37
22
24
Average Value of Effectiveness
0.1
From the table above we can see that out of the items that already fall under present micro
insurance schemes, life insurance is the most common. Most people use micro insurance
schemes for having the security of life. 15 respondents out of 22 have micro life insurances.
Security against housing, vehicles, hospitalization, retirement savings plans, and weather take a
back seat when it comes to micro insurance. Very little people have made micro insurance
against these items.
While items like cultivation, pest attacks and diseases, livestock, primary health care, maternity
do not even appear in the picture. Due to the sample frame and lack of awareness amongst the
consumer market, micro insurances are not taken against these items.
However out of these items primary health care and maternity is seems to have a potential
demand in the market. Micro insurance companies need to educate its consumer market and
accommodate such flexible or varied micro insurance schemes.
In terms of effectiveness, we may safely claim that micro life insurance is being certainly
effective looking at the number of people who have insured their life by a micro insurance plan.
However in terms of the other items in the table, micro insurance has a long way to go. If we
look at the value of effectiveness we can see that the average value of effectiveness came about
to 0.1.
38
Conclusion: In terms of coverage of micro insurance, the effectiveness value comes to 0.1,
signifying that the coverage of micro insurance is not that effective. In order for micro insurance
to be effective in terms of coverage, companies have to first educate the target market and then
accommodate variety of micro insurance schemes for these different items. Only after this, can
the coverage of micro insurance be effective.
4.6 COMBINATION OF FINDINGS

In this segment, all the five parameters taken into consideration have been combined to get a
generic idea about the effectiveness of micro-insurance in Bangladesh. The table below shows
the scores that the parameters have received in the previous sections and the final value that the
industry receives. Different weights have been given to the parameters as per how many different
analyses were done for each parameter.
Parameters
Weight
Values
Knowledge of the micro-insurance policyholders
4/33
0.25
Claims of micro-insurance
5/33
0.70
Premiums of micro-insurance
6/33
0.25
Employees of micro-insurance
7/33
0.60
Coverage of micro-insurance
11/33
0.10
Weighted average value
0.342
Thus, from the whole analysis, we can conclude that the micro-insurance in Bangladesh is only
34.2% effective.
39
5.0 CONCLUSION
Micro-insurance cant be said to be a stand-alone industry in the insurance sector of Bangladesh.

Currently dependent on the micro finance industry to force clients to their market, the Dhaka
market of micro insurance consists majorly of clients who have made insurance plans in their
villages, or has been made by their spouse or children. The reason of making the insurance plan
revolves around factors such as family security and future planning.
The report in order to measure the effectiveness of micro insurance divided it into 5 parameters,
16 complex variables, and 44 simple variables. Each simple variables effectiveness has been
measured in order to measure the effectiveness of the complex variable and ultimately the
effectiveness of the parameter. With the weighted average of the parameters effectiveness we
came to answering the big question as to whether micro insurance is truly effective in
Bangladesh.
The first parameter that has been tested is knowledge of the policyholders of microinsurance and it has been seen to be 25% effective by 4 different tests. The parameter deals
with knowledge on the companies and the policy being used by the policyholder as complex
variables.
The second parameter, the micro-insurance claim was tested with 5 different statistical tests
and was found that it was 70% effective in the insurance industry of Bangladesh. With complex
variables of acceptance rate of claim, amount of claim, and the time required for the claim,
respondents gave us a holistic idea of the claim scenario in the micro insurance industry.
The third parameter of premium collection and recovery of micro-insurance was tested
with a total of 6 statistical tools and was found to be 25% effective in the micro-insurance
industry. Starting from the method of collection, timing and frequency of collection, fraudulent
activities during collection, and recovery of premium, these complex variables show us in details
as how this segment of the micro insurance industry is lacking behind in terms of effectiveness.
The fourth parameter, the employees of micro-insurance was tested with 7 statistical tools
and gave us an effective rate of 60%. The complex variables taken into consideration while
dealing with this parameter include the perception of the policyholders on the behavior of the
employees of different micro-insurance firms, whether the policyholders faced any sort of
misbehavior, whether there were instances of unrecorded payments, etc.
The fifth and final parameter, the coverage of micro-insurance deals with the variety of
insurance schemes available in the micro insurance industry. Although tested with 11 items, this
40
has the lowest effectiveness rate, of a mere 10%. This basically means that there is a gap
between the demand of the policyholders of micro-insurance in Bangladesh and the policies
provided by the policymaking companies in this industry.
All the individual rates of effectiveness of these parameters were then combined as per the
weights to give the weighted average of the effectiveness rate for the micro-insurance sector of
Bangladesh. The value for this analysis came out to be 0.342, meaning that this sector is only
34.2% effective in context of Bangladesh.
41
APPENDIX
APPENDIX 1: QUESTIONNAIRES FOR THE SURVEY
Questionnaire 1: For the existing policyholders
Name of the respondent: ______________________________
Contact No._______________
Address: ______________________________________________________________________
Part A: Knowledge of existing policyholders
Question
Response
1) How long have you been covered by micro-insurance program?

2) How many companies, according to you, provide similar programs?
3) Do you know about other programs provided by your company?
Yes (1)
No (0)
4) Do you believe you have a good understanding of the insurance program you chose?
Yes (1)
No (0)
5) Why did you take this program?
Response here:
Part B: Insurance claim

Question
Response
1) Have you ever made an insurance claim?
Yes (1)
2) How thorough is the background check on

an insurance claim, according to you?
Highly
thorough (2)
3) What is the acceptance rate of the claims

made, according to you?
Very high
(2)
Thorough
(1)
High (1)
Neutral
(0)
Neutral (0)
4) How much time is taken by the company to evaluate claim and respond?
If claims were denied,
5) On what grounds were the claim denied?
Respond Here
If claims were accepted,
6)
How much time is taken to provide the amount claimed?
Respond here:
Careless
(-1)
Low (-1)
Respond here:
No (0)
Highly
careless (-2)
Very low
(-2)
42
7) How satisfied were you with the time taken to
evaluate and provide claim?
Highly
satisfied (2)
Satisfied
(1)
Neutral
(0)
Dissatisfied
(-1)
Highly
dissatisfied (-2)
8)
Highly
satisfied (2)
Satisfied
(1)
Neutral
(0)
Dissatisfied
(-1)
Highly
dissatisfied (-2)
How satisfied were you with the amount of

insurance claim provided?
Part C: Insurance premium collection and recovery

Question
Response
Through
office (1)
Through
agents (2)
Mobile (3)
Bank
accounts (4)
2) How much do they consider your

occupation while collecting premium
payments?
Highly
considerate
(2)
Considerate
Neutral
Inconsiderate
(1)
(0)
(-1)
3) How much do they consider your

expenses patterns while collecting
premium payments?
Highly
considerate
(2)
Considerate
Neutral
Inconsiderate
(1)
(0)
(-1)
Highly
inconsiderate
(-2)
Yes (1)
No (0)
1) How is the premium collected?
4)
Were there instances of fraud?
5)
What types of fraud are you aware of?
Fraud
paperwork (3)
Others:
(5)
Highly
inconsiderate
(-2)
Fraud agents
(1)
Fraud
companies (2)
6) How effectively does the company handle

frauds?
Highly
effective (2)
Effective
(1)
Neutral
(0)
Ineffective
(-1)
Highly
ineffective (-2)
7) How satisfied are you with the amount of

premium you have recovered?
Highly
satisfied (2)
Satisfied
(1)
Neutral
(0)
Dissatisfied
(-1)
Highly
dissatisfied (-2)
8) How long does it take to recover the premium amount following the maturity?
Others:
(4)
Respond Here:
Part D: Agents of micro-insurance companies

Question
Response
1) Were there instances of misbehavior by the employees or agents?

2) If yes, what type of misbehavior did you face?
3) How do you perceive the behavior
of the employees or agents?
Highly
satisfactory (2)
Yes (1)
No (0)
Respond Here:
Satisfactory
(1)
4) How much money do you think the agents should charge?
Neutral
(0)
Respond here:
Unsatisfactory
(-1)
Highly
unsatisfactory (-2)
43
5) Were there instances of unrecorded payments?
Yes (1)
No (0)
Uninformed
(-1)
Highly
uninformed (-2)
7) Were there instances when the employees failed to answer questions?
Yes (1)
No (0)
8) Do the agents make visits regularly?
Yes (1)
No (0)
6) How knowledgeable do you

think are the employees?
Highly
knowledgeable (2)
Knowledgeable
(1)
Neutral
(0)
Part E: Coverage of micro-insurance

Tick the asset(s) that you have insured and the assets that need to be insured in your daily life.
Question
Assets that need

to be insured
Assets that are

insured
12) Hospitalization
13) Primary health care
14) Maternity
15) Life Insurance
16) Retirement savings plans
17) Against weather
18) Against rising cost of cultivation
19) Against pest attacks and diseases
20) Livestock
21) Housing
22) Vehicles
Age: __________________________________
Gender: __________________________
Occupation: ____________________________
Income: __________________________
44
Questionnaire 2: For the interview of the policymaking companies

Name________________________________ Contact no._______________________________
Designation________________________ Company name_______________________________
1. How do you define your policyholders?
2. What are the types of programs or policies available?
3. What sort of background checks are done to check the validity of a claim?
4. What are some of the reasons for denial of claims?
5. How much time is taken to evaluate the claim and respond?
6. What are some of the methods in which premium is collected?
7. What sort of frauds is common in this industry? How does the company tackle with them?
8. How much commission do the agents charge? What does it depend upon?
9. In which areas in Dhaka are the policyholders usually found?
10. Which of these assets are insured by the company?
Assets
Hospitalization
Primary health care
Maternity
Life Insurance
Retirement savings plans
Against weather
Against fire
Against rising cost of cultivation
Against pest attacks and diseases
Livestock
Housing
Vehicles (rickshaws for example)
Insured by the company
45
APPENDIX 2: CO-ORDINATION SCHEMA

Parameters
Knowledge
of
policyholders
Complex
Variables
Knowledge on
companies
Knowledge on
particular insured
policy
Acceptance
criteria of claim
Insurance
claim
Amount of claim
Time of claim
Simple Variables
Values
Perceived number of companies

providing similar programs
Explanatory
Types of programs available
Yes / No
Perceived understanding of the

policy that they are under
Rationale behind choosing the policy
they are under
Yes / No
Explanatory
Acceptance rate of claim
Checklist of
ranged
percentages
Perceived extent of background

check done on the claim
Likert scale
Reasons for denial of a claim
Checklist
Handling of challenges to the denial

of a claim
Judgment criteria to determine
amount
Satisfaction level of policyholders on
the received amount
Time taken to evaluate claim and
respond
Time taken to pay the claim if
acceptance criteria is met
Satisfaction level of policyholders on
the time of claim
Likert scale
Explanatory
Likert scale
Checklist of
ranged time limit
Checklist of
ranged time limit
Likert scale
Through office
Insurance
premium
collection and
recovery
Medium of
premium
collection
Through agents
Checklist
Through mobile
Through bank accounts
46
Parameters
Insurance
premium
collection and
recovery
Complex
Variables
Timing and
frequency of
premium
collection
Fraud during
premium
collection
Recovery of
premium
Behavior of
agents
Agents of
microinsurance
companies
Money charged
by the agents
Quality of agents
Simple Variables
Values
Consideration of policyholders' job
Likert scale
Consideration of policyholders'
expenses
Likert scale
Instances of fraud
Yes / No
Types of fraud
Checklist of items
Effectiveness in handling the fraud
Likert scale
Time of recovery of premium
Checklist of
ranged time
Satisfaction level on the amount of

recovered premium
Likert scale
Instances of misbehavior
Yes / No
Types of misbehavior
Checklist
Perception on the behavior of agents
Likert scale
Perceived right amount
Checklist
Instances of unrecorded money
Yes / No
Perception on knowledge of agents
Likert scale
Instances when an agent failed to

answer a question
Yes / No
Regularity of agents
Yes / No
Hospitalization
Health care
Coverage of
microinsurance in
terms of
assets
Primary health care

Maternity
Life Insurance
Life
Checklist of items
Retirement savings plans
Against weather
Crop
Against rising cost of cultivation

Against pest attacks and diseases
47
Complex
Variables
Parameters
Simple Variables
Values
Against fire
Coverage of
microinsurance in
terms of
assets
Livestock
Property
Housing
Checklist of items
Vehicles (rickshaws for example)
APPENDIX 3: ESTIMATED BUDGET

BDT
Conveyance
Communication1
3,000
Transportation2
6,000
Total Conveyance Cost
9,000
Stationary
Printing
3,500
Binding
150
Papers
100
Adjustment Costs3
300
Total Stationary Costs
4,050
Refreshments
2,000
Sub-Total
15,050
Contingency (7% of sub total)
1,053.5
Total Cost
16,104
Expected Finance
Excess
18,0004
1,897
1. Communication is estimated at 3000 taka as a significant portion of the communication will

be done in person or via telephone.
48
2. Transportation cost is estimated to be higher as the research team has to go to different areas
in the Dhaka district. We believe our population is highly scattered in the region, causing us
to visit many areas to obtain information.
3. Adjustments costs have been kept in mind in case any changes or adjustments have to be
made to the draft and the final report.
4. Each member of the research team has consented to financing the research by contributing
2000 taka. This provides us with a total of 18,000 taka (2000x 9 members) for financing the
research paper. We believe by the end of this research there will be an excess of 1897 taka.
This excess will enable us to increase the cost of any of the segments given in the budget,
and avoid any budget crunch.
APPENDIX 4: TIME PLAN
49
APPENDIX 5: HYPOTHESIS TESTS FOR THE KNOWLEDGE OF POLICYHOLDERS

Hypothesis 1:
Ho :
The mean number of companies perceived by policyholders is 29.

= 29
Ha :
The mean number of companies perceived by the policyholders is not 29.

29
One-Sample Statistics
N
Mean
Std.
Deviation
No. of other
firms
No. of other
firms
-28.795
34
4.56
4.949
One-Sample Test
Test Value = 29
Sig. (2Mean
tailed)
Difference
df
33
.000
-24.441
Std. Error
Mean
.849
95% Confidence Interval of

the Difference
Lower
Upper
-26.17
Hypothesis 2:
Ho :
At least half the policyholders believe they have good idea about the other
programs of the company that they are the policyholder of.
0.5
Ha :
Less than half the policyholders believe they have good idea about the other
programs of the company that they are the policyholder of.
< 0.5
-22.71
50
N
Mean
Std.
Deviation
Other programs of the
same firm
40
.23
Std. Error
Mean
.423
.067
One-Sample Test
Test Value = 0.5
t
df Sig. (2Mean
95% Confidence Interval
tailed) Difference
of the Difference
Other programs of the same firm
-4.113
39
.000
-.275
Lower
-.41
Upper
-.14
Hypothesis 3:
Ho :
At most half the policyholders believe they have a good understanding of the
chosen insurance program.
0.5
Ha :
More than half the policyholders believe they have a good understanding of
the chosen insurance program.
< 0.5
N
Mean
Std.
Deviation
Understanding of the
chosen program
Understanding of the
chosen program
1.275
40
.60
Std. Error
Mean
.496
.078
One-Sample Test
Test Value = 0.5
df
Sig. (2Mean
tailed)
Difference
of the Difference
Lower
Upper
39
.210
.100
-.06
.26
51
Hypothesis 4:
Ho :
No more than 50% of the policyholders know the reason for choosing the
policy that they are under.
0.5
Ha :
More than 50% of the policyholders know the reason for choosing the policy
that they are under.
> 0.5
N
Mean
Std.
Deviation
Reason for the
program
Reason for the

program
40
.464
.073
One-Sample Test
Test Value = 0.5
Sig. (2Mean
tailed)
Difference
of the Difference
Lower
Upper
df
2.726
.70
Std. Error
Mean
39
.010
.200
.05
.35
APPENDIX 6: HYPOTHESIS TESTS FOR THE CLAIMS OF POLICYHOLDERS

Hypothesis 1:
Frequency
Valid
Total
Percent
No
32
80.0
Yes
17.5
Total
39
40
97.5
100.0
52
Ho :
A significant proportion of the policyholders have not made any claim.

=0
Ha :
A significant proportion of the policyholders have made claims.

>0
N
Mean
Made an Insurance Claim
Made an Insurance
Claim
39
Std.
Deviation
.18
Std. Error
Mean
.389
.062
One-Sample Test
Test Value = 0
df
Sig. (2Mean
tailed)
Difference
the Difference
Lower
Upper
2.883
38
.006
.179
.05
Hypothesis 2:
Ho :
The policyholders perceive that the background check on claims is not

thorough.
0
Ha :
The policyholders perceive that the background check on claims is thorough.

>0
N
Mean
Thorough Background Check
37
.78
Std.
Deviation
1.158
Std. Error
Mean
.190
.31
53
Thorough
Background
Check
One-Sample Test
Test Value = 0
Sig. (2Mean
tailed)
Difference
df
4.117
36
.000

of the Difference
Lower
Upper
.784
.40
1.17
Hypothesis 3:
Ho :
The mean number of acceptance rate of claim is less than or equal to 15

15
Ha :
The mean number of acceptance rate of claim is more than 15

> 15
N
Mean
Std.
Deviation
Acceptance Rate of
Claim
21
df
.48
Std. Error
Mean
1.078
.235
One-Sample Test
Test Value = 15
Sig. (2Mean
95% Confidence Interval of the
tailed)
Difference
Difference
Lower
Acceptance Rate
of Claim
-61.745
20
.000
-14.524
-15.01
Upper
-14.03
54
Hypothesis 4:
Ho :
The mean number of satisfaction with claims in terms of B4 and B6 is less

than or equal to zero
0
Ha :
The mean number of satisfaction with claims in terms of B4 and B6 is

greater than zero.
>0
N
Mean
Std.
Deviation
Satisfaction with B4
and B6
Satisfaction with B4
and B6
2.236
1.00
1.000
df
.089
1.000
The policyholders are not satisfied with the claim amount

0
Ha :
The policyholders are satisfied with the claim amount.

>0
.447
One-Sample Test
Test Value = 0
Sig. (2Mean
tailed)
Difference
the Difference
Lower
Upper
Hypothesis 5:
Ho :
Std. Error
Mean
-.24
2.24
55
N
Mean
Std. Deviation
Satisfaction with Claim Amount
.40
Std. Error Mean
1.517
One-Sample Test
Test Value = 0
df
Sig. (2Mean
tailed)
Difference
of the Difference
Lower
Satisfaction with
Claim Amount
.678
.590
.587
.400
Upper
-1.48
2.28
APPENDIX 7: BIVARIATE CORRELATION ANALYSIS

Correlations (at = 1%)
Consideration Consideration
of Occupation
of Expense
Pattern
Consideration of
occupation
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Consideration of expense
pattern
Sig. (2-tailed)
N
.884
40
.000
40
.884
.000
40
40
56
APPENDIX 8: HYPOTHESIS TESTS FOR PREMIUM OF MICRO-INSURANCE

Hypothesis 1:
Ho :
Process of premium collection does not take into consideration the

occupation of the policyholders.
0
Ha :
Process of premium collection takes into consideration the occupation of the

policyholders.
>0
N
Mean
Std.
Deviation
Consideration of
Occupation
Consideration of
Occupation
1.894
40
.40
Std. Error
Mean
1.336
.211
One-Sample Test
Test Value = 0
Sig. (2Mean
95% Confidence Interval of the
tailed)
Difference
Difference
Lower
Upper
df
39
.066
.400
-.03
Hypothesis 2:
Ho :
Process of premium collection does not take into consideration the expense
patterns of the policyholders.
0
Ha :
Process of premium collection takes into consideration the expense patterns

of the policyholders.
>0
.83
57
N
Mean
Std.
Deviation
Consideration of
Expense Pattern
40
.35
Std. Error
Mean
1.312
One-Sample Test
Test Value = 0
Df
Sig. (2Mean
tailed)
Difference
.207

of the Difference
Lower
Consideration of
Expense Pattern
1.688
39
.099
.350
-.07
Upper
.77
Hypothesis 3:
Ho :
The proportion of population who has been the victims of fraudulent

activities is 0.
=0
Ha :
The proportion of population who has been the victims of fraudulent

activities is not 0.
0
N
Mean
Std.
Deviation
40
.18
.385
Instances of Fraud
Instances of Fraud
2.876
One-Sample Test
Test Value = 0
Sig. (2Mean
tailed)
Difference
df
39
.006
Std. Error
Mean
.061

the Difference
Lower
Upper
.175
.05
.30
58
Hypothesis 4:
Ho :
According to the policyholders, the companies deal with frauds effectively.

=0
Ha :
According to the policyholders, the companies do not deal with frauds

effectively.
0
N
Mean
Company Effectiveness in Handling Fraud
Company Effectiveness
in Handling Fraud
-.547
25
-.16
Std.
Deviation
1.463
Std. Error
Mean
.293
One-Sample Test
Test Value = 0
df
Sig.
Mean
(2Differenc
of the Difference
tailed)
e
Lower
Upper
24
.590
-.160
-.76
.44
Hypothesis 5:
Ho :
The actual time of recovery of premium following the maturity is less than or
equal to 2 months.
2
Ha :
The actual time of recovery of premium following the maturity is greater

than 2 months.
>2
59
N
Mean
Time of recovery of premium
after maturity (months)
Time of recovery of
premium after maturity
(months)
3.056
23
Std.
Deviation
4.11
Std. Error
Mean
3.310
.690
One-Sample Test
Test Value = 2
df
Sig. (2Mean
tailed) Difference
of the Difference
Lower
Upper
22
.006
2.109
.68
3.54
Hypothesis 6:
Ho :
The policyholders are not satisfied regarding the amount of premium

recovered after maturity.
0
Ha :
The policyholders are satisfied regarding the amount of premium recovered

after maturity.
>0
N
Mean
Std.
Deviation
Satisfaction of
Recovered Premium
25
.16
1.344
Std. Error
Mean
.269
60
Satisfaction of
Recovered Premium
One-Sample Test
Test Value = 0
df
Sig. (2Mean
tailed)
Difference
.595
24
.557

of the Difference
Lower
Upper
.160
-.39
.71
APPENDIX 9: HYPOTHESIS TEST FOR EMPLOYEES

Hypothesis 1:
Ho :
The mean number of instances of misbehavior by employee is zero.

=0
Ha :
The mean number of instances of misbehavior by employee is greater than

zero.
>0
N
Misbehavior by
Employees
Mean
40
.10
Std. Deviation
Std. Error
Mean
.304
.048
One-Sample Test
Test Value = 0
t
Misbehavior by
Employees
2.082
df
Sig. (2tailed)
39
.044
Mean
Difference
.100

of the Difference
Lower
Upper
.00
.20
61
Hypothesis 2:
Ho :
The policyholders are not satisfied by the employee behavior and do not
have a positive perception.
0
Ha :
The policyholders are satisfied with employee behavior and have a positive
perception.
>0
N
Mean
Std.
Deviation
Perception of employee
Behavior
40
1.08
.944
Std. Error
Mean
.149
One-Sample Test
Test Value = 0
T
Perception of employee
behavior
7.200
df
39
Sig.
Mean
(2- Differenc
tailed
e
)
.000
1.075
95% Confidence
Interval of the
Difference
Lower
Upper
.77
1.38
Hypothesis 3:
Ho :
The policyholders feel that the acceptable commission rate of agents should
be 15%.
= 15
Ha :
The policyholders feel that the acceptable commission rate of agents should
not be 15%.
15
62
N
Mean
Perception of acceptable Commission Fee (%)
12
Std.
Deviation
11.50
9.090
One-Sample Test
Test Value = 15
df
Sig. (2Mean
tailed)
Difference
Std. Error
Mean
2.624

the Difference
Lower
Perception of acceptable
Commission Fee (%)
-1.334
11
.209
-3.500
Upper
-9.28
2.28
Hypothesis 4:
Ho :
There has been no instance of unrecorded payments.

0
Ha :
The number of times there were unrecorded payments is significantly greater

than zero.
>0
N
Mean
Std.
Deviation
Instances of
Unrecorded paymnt
40
.18
.385
Std. Error
Mean
.061
One-Sample Test
t
Instances of Unrecorded payment
2.876
df
39
Test Value = 0
Sig. (2Mean
tailed)
Difference
the Difference
Lower
Upper
.006
.175
.05
.30
63
Hypothesis 5:
Ho :
The employees of micro-insurance are not knowledgeable.

0
Ha :
The employees of micro-insurance are knowledgeable.

>0
N
Mea
Std.
n
Deviation
Employee
Knowledge
Employee
Knowledge
8.348
38
1.16
.855
One-Sample Test
Test Value = 0
Sig. (2Mean
tailed)
Difference
df
37
Std. Error
Mean
.000
.139

the Difference
Lower
Upper
1.158
.88
1.44
Hypothesis 6:
Ho :
The mean number of instances Agent failed to answer is equal to zero

=0
Ha :
The mean number of instances Agent failed to answer is significantly greater

than zero
>0
N
Mean
Employee failed to Answer
40
.25
Std.
Deviation
.439
Std. Error
Mean
.069
64
One-Sample Test
Test Value = 0
df
Sig. (2Mean
tailed) Difference
the Difference
Lower
Upper
39
.001
.250
.11
.39
Employee failed to Answer
3.606
Hypothesis 7:
Ho :
A significantly small proportion of policyholders believe that agents visit

regularly
=0
Ha :
A significantly large proportion of policyholders believe that agents visit

regularly
>0
N
Mean
Std.
Deviation
Agents Visit
Regularly
Agents Visit
Regularly
16.075
39
.87
.339
One-Sample Test
Test Value = 0
Sig. (2Mean
tailed)
Difference
df
38
.000
.872
Std. Error
Mean
.054

the Difference
Lower
Upper
.76
.98
65
REFERENCES
Ahmed, M. S. (2011). The state of insurance industry in Bangladesh. Retrieved March 2014,
from Economic Observer: http://www.economic-observerbd.net/details.php?news=252
Ali, K. M. (2011). Landscape of microinsurance in Bangladesh- Poverty alleviation and need for
mutual microinsurance. Retrieved March 2014, from ICMIF Microinsurance:
http://www.microinsurance.coop/technical-information/landscape-of-microinsurance-inbangladesh
Ali, M. K. (2009, July). Microinsurance in Bangladesh:A Promising Sector. Retrieved March
2014, from Me Insurance Review:
http://www.primeislamilifebd.com/aritcle/MicroInsBd.pdf
Aliber, M. (2001). Social Finance Programme and InFocus Programme on Boosting
Employment through Small Enterprise Development. International Labour Organization,
Employment Sector. Johannesburg: International Labour Organization. Retrieved May
29, 2014, from
http://www.ilo.org/wcmsp5/groups/public/@ed_emp/documents/publication/wcms_1179
77.pdf
Bangladesh Bank. (2010). SME Credit Policies and Programmes. Bangladesh Bank, SME &
Special Programmes Department. Dhaka: Bangladesh Bank. Retrieved May 29, 2014,
from http://www.bangladesh-bank.org/sme/smepolicye.pdf
Bangladesh Bureau of Statistics. (2014). Bangladesh Bureau of Statistics. Retrieved May 27,
2014, from Bangladesh Bureau of Statistics: http://www.bbs.gov.bd/Home.aspx
Global Facility for Disaster Reduction and Recovery. (2008). Disaster, Damage, Loss and Needs
Assessment: Training Guidelines. Global Facility for Disaster Reduction and Recovery.
Retrieved April 2014, from
http://www.preventionweb.net/files/13019_530020WP0P110410Box345586B01PUBLIC
1.pdf
Insurance Development and Regulatory Authority Bangladesh. (2014). Index. Retrieved June 15,
2014, from Insurance Development and Regulatory Authority Bangladesh:
http://www.idra.org.bd/idra-org/index.htm
Insurance Development and Regulatory Authority Bangladesh. (2014). List of Insurance
Companies in Bangladesh. Retrieved June 15, 2014, from Insurance Development and
Regulatory Authority Bangladesh: http://www.idra.org.bd/idra-org/Ins-Com.htm
66
Ministry of Agriculture. (2014). Bangladesh Agriculture at a Glance. Retrieved March 2014,

from Ministry of Agriculture, Government of the People's Republic of Bangladesh:
http://www.moa.gov.bd/statistics/bag.htm
Mizan R. Khan, S. R. (2013, June). Assessing Microinsurance as a Tool to Address Loss and
Damage in the National Context of Bangladesh. Loss and Damage. Retrieved April 2014,
from http://www.lossanddamage.net/download/7078.pdf
Sakib. (2012, February 3). Natural Disasters in Bangladesh. Retrieved April 2014, from Water
Resource Energy Forum: http://wreforum.org/nsakib520/blog/2564
Syed M. Ahsan, S. B. (2010). Toward an Efficient and Sustain: The Regulatory Perspective.
Dhaka: Institute of Microfinance.
The Lawyers and Jurists. (2013, March 5). Problems and prospect of insurance Business in
Bangladesh. Retrieved from The Lawyers and Jurists:
http://www.lawyersnjurists.com/business/bank-and-financial-institutes/problemsprospect-insurance-business-bangladesh/
Werner, W. J. (2009, August). Micro-insurance in Bangladesh: Risk Protection for the Poor?
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RESEARCH ON THE EFFECTIVENESS OF MICROINSURANCE IN BANGLADESH

Dr. Muhammad Ziaulhaq Mamum

Re: Submission of term paper

Mushreka Afroze Khan (RH 68)

Ornila Khan (RH 72)

Zeeshan Ahmed (ZR 82)

Waseem Khan (ZR 88)

Ishmam Ahmed Chowdhury (ZR 90)

Wais Al Karim (ZR 93)

Sudipta Saha Turja (ZR 95)

Hikmat Kabir (ZR 99)

Sanjir Ali (ZR 111)

2.0 LITERATURE REVIEW

3.6 Data Analysis

4.0 RESEARCH FINDINGS

Knowledge of the policyholders of micro-insurance 25% effective based on 4 different

Claims on micro-insurance 70% effective based on 5 different tests

Premium collection and recovery of micro-insurance 25% effective based on 6 different

Employees of micro-insurance 60% effective based on 7 different tests

Micro-insurance coverage 10% effective based on 11 different tests

The existing policyholders do not have much overall knowledge on micro-insurance.

The claiming process is not effective in the context of micro-insurance in Bangladesh

The coverage of micro-insurance in terms of assets is quite high in Bangladesh.

Companies providing micro-insurance service

Insurance Development and Regulatory Authority Bangladesh (IDRA)

Institute of Microfinance (InM)

Research institutes and individual researchers

Existing and potential policyholders of micro-insurance

2.0 LITERATURE REVIEW

2.1 THE MICRO INSURANCE INDUSTRY

2.2 TYPES OF MICRO INSURANCE IN BANGLADESH

2.3 PROBLEMS IN INSURANCE INDUSTRY

2.4 INSURANCE REFORM PROGRAM

2.5 MICRO INSURANCE FOR POVERTY ALLEVIATION

2.6 WHO PROVIDES MICRO INSURANCE

2.7 MICRO INSURANCE AND SME

2.8 MICRO INSURANCE IN PUBLIC HEALTH

management, product development, management information system and re-insurance (Werner,

2.9 MICRO INSURANCE AS A PROMISING SECTOR

Existing policyholders of different micro-insurance policies have been interviewed

Micro-insurance policymakers have been interviewed to understand the behavioral

3.1.2 Secondary source of data

3.2 SAMPLE SIZE

So, Precision = do = 15.50%

3.3 SAMPLING TECHNIQUE

3.4 QUESTIONNAIRE DEVELOPMENT

3.5 DATA COLLECTION:

3.6 DATA ANALYSIS

4.0 RESEARCH FINDINGS

4.1 FINDINGS REGARDING KNOWLEDGE OF POLICYHOLDERS

Significance level for 2 tailed test

4.1.2 Knowledge regarding other programs of company the respondent is a client of

Significance level for 2 tailed test

Significance level for 2 tailed test

Significance level for 2 tailed test

The policyholders do not have appropriate

Knowledge regarding other

Less than half the policyholders have appropriate

Knowledge regarding the

More than half the policyholders do not know the

Knowledge regarding the

More than half the policyholders know the reason

4.2 FINDINGS REGARDING CLAIMS OF MICRO-INSURANCE