A

Report On
Insurance & Risk Management

Discussion Area
Problems and Prospects of Insurance Business in
Bangladesh

Risk Management & Insurance

(MGT-205)

SUBMITTED TO
Prof. Dr. Md. Mosharraf Hossain
Professor, Department of Management
University of Dhaka

SUBMITTED BY
Team Exotic
Name
Nobonita Roy
Shamim Sheikh

ID
002
008

Shuva Das

015

Shahria Yasmin

036

Mohammod Belal
Uddin

038

Ismail Hossain

087

Jamil Hossain

097

Al Jakaria John

099

Fahmida Nishat
Nishi
Prantika

100

Score

105

DATE OF SUBMISSION: 15th May, 2014.

Letter of Transmittal
To
Prof. Dr. Md. Mosharraf Hossain
Professor,
Department of Management
University of Dhaka
Sir,
We have the pleasure to submit our group report on Problems and prospects of insurance
business in Bangladesh as you assigned us.
This report discusses about the practical application of insurance principles in problem
settlement of different policies in their functional level. By this report preparation, we have
learned how to settle claim of insurance policies and how to apply the principles of insurance.
Moreover by visiting the organizations, we have increased our practical knowledge about real
situations of insurance in our country.
Moreover, your time to time suggestion and advice helped us to fulfill experience as we put
everything in this report.
We thank you for choosing us for working on this topic.

Sincerely yours
All members of our group .

ACKNOWLEDGEMENT

It is a great honor for us to submit this report to our respected teacher Mr.Md Mosharraf Hossain,
Professor, Department of Management. At first we want to convey our thanks and gratitude to
him for assigning us to prepare report entitled, Problems and prospects of
insurance business in Bangladesh. It would not be possible for us to complete the
report, but for his help.

We are also grateful to officials of insurance companies namely Sandhani Life Insurance
company Ltd. They have provided us the required documents we needed.

All of the efforts ended at a desired point for the cooperation and hard work, sincerity and
seriousness of our group members. So all of them as well as our group members are worth of
pure compliment. Our fellow classmates supported us in every possible way. We would like to
thank them for all their support.

Contents
Executive Summary.................................................................................................... 6
Chapter-1(Introduction).............................................................................................. 7
ORIGIN..................................................................................................................... 7
BACKGROUND......................................................................................................... 7
OBJECTIVE OF THE REPORT..................................................................................... 7
SCOPE OF THE STUDY............................................................................................. 8
METHODOLOGY & SOURCES OF DATA.....................................................................8
LIMITATIONS............................................................................................................ 9
Chapter-2(An overview of insurance business).........................................................10
Definition of Insurance:......................................................................................... 10
History of insurance.............................................................................................. 10
Types of insurance................................................................................................. 13
Different types of life insurance policies offered by the companies in Bangladesh:
.............................................................................................................................. 15
Chapter 3 (A case on SLIC)....................................................................................... 17
An Overview on Shandhani Life Insurance Co. Ltd................................................17
Commitments of SLIC:........................................................................................ 18
Sandhani Life's Vision & Mission:.......................................................................19
Strategic Objectives:.......................................................................................... 19
Ethical Principles:............................................................................................... 19
SLIC at a glance................................................................................................. 20
Questionnaire........................................................................................................ 21
Problems of Sandhani Life Insurance Co. Ltd.........................................................23
Recommendations:................................................................................................ 24
Conclusion................................................................................................................ 25
Bibliography............................................................................................................. 26

Executive Summary
Insurance is the distribution of risk from one person to many others within a group. It is an
essential thing for our day to day life. It is the main concern for every type of business. Types of
insurance cover both the life and non-life things. Insurance is essential for the protection of
business from any type of peril that may cause an end to the life of business. Our country is a
developing one. Every day new types of business are emerging. So insurance is an essential part
for them. Again we feel a lot of uncertainty in every sphere of life. So we always seek for some
type of assurance for ourselves and for those who are dependent on us. Insurance also helps us in
this task. One of the main functions of insurance company is to settle claim of the insured. This
is a little bit difficult and comprehensive tasks.
Our report mainly focuses on the problems and prospects of different insurance companies. The
process may vary depending on the type of insurance. We have tried to mention all the rules and
regulations required to claim

Chapter-1

Introduction
ORIGIN
The preparation of this report is a requirement of the course on Risk Management & Insurance.
Mr.Md Mosharraf Hossain, Management Department at Faculty of Business Studies, University
of Dhaka, who is also the course teacher of Risk Management & Insurance, has assigned to the
students of BBA 19th batch to select some organization doing insurance business in our country
and prepare a report on the topic Problems and prospects of insurance business in
Bangladesh "

BACKGROUND
The world of business is increasingly becoming more and more competitive. At the same time it
is becoming more and more uncertain. In every sphere of life we are facing risk of accident even
death. Again every business also faces the risk of damage from fire, accident or other types of
perils. So each and every business should ensure protection of its properties and resources. We
also should take some action to get assurance of financial support. For this insurance is necessary
for us and business.

OBJECTIVE OF THE REPORT

The primary objective of this study is the partial fulfillment of the course requirement.
The main objectives of this report are as follows:
To fulfill the partial requirement of the course Risk Management and Insurance offered
in BBA program.

The collateral purpose of this report is to explore about insurance principles used by
companies.
The main objective of the report is to show Problems and prospects of
insurance business in Bangladesh.
It will also enable us to improve our skills on report writing. As corporate executive put
great value on report writing as an important element in organization success, this part of
the course will prepare us to face the future challenges of corporate world.
To meet the curiosity in this stated subject.

SCOPE OF THE STUDY

This report gives a narrative overview of claim settlement process of some insurance companies
namely Sandhani Life Insurance Bangladesh Limited. Here insurance principles used for
problems and prospects of insurance business in different insurance companies are the major part
of our experiment and report. We could not include every data with illustration to prevent our
report from verbosity. We fix our limit of the report analysis only on various cases to make the
point easy and clear to the reader.

METHODOLOGY & SOURCES OF DATA

The information for the report was collected from both primary and secondary sources.

Primary sources: All the data and information that are collected from primary sources are
acquired by interviewing the officials of the related company.
Secondary sources: Secondary data have been collected from various sources like website
of this companies.. We have also visited insurance companies physically. We have taken
theoretical data from our text book Risk &Insurance by Prof Dr Md Mosharraf
Hossain. We have also collected information from different journals, news papers and
magazines available on the insurance in Bangladesh. Finally the case information is
based on conversation with the respective people.

The data and information collected from interviews and secondary sources have been analyzed.

LIMITATIONS
The major limitations encountered are:

The most elementary limitation of this study is the tendency of the employees to be
always alright attitude hindered us to realize the overall claim settlement process.

Time constraints of the required personnel in providing us with information.

Lack of experience also acted as constraints in the way of exploration on the topic.

The companies are also reluctant to give some important information for their internal
privacy.

Chapter-2

Overview of insurance

Definition of Insurance:
Insurance, in law and economics, is a form of risk management primarily used to hedge against
the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss,
from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and
known small loss to prevent a large, possibly devastating loss. An insurer is a company selling
the insurance; an insured or policyholder is the person or entity buying the insurance. The
insurance rate is a factor used to determine the amount to be charged for a certain amount of
insurance coverage, called the premium. Risk management, the practice of appraising and
controlling risk, has evolved as a discrete field of study and practice.

History of insurance
In some sense we can say that insurance appears simultaneously with the appearance of human
society. We know of two types of economies in human societies: money economies (with
markets, money, financial instruments and so on) and non-money or natural economies (without
money, markets, financial instruments and so on). The second type is a more ancient form than
the first. In such an economy and community, we can see insurance in the form of people helping
each other. For example, if a house burns down, the members of the community help build a new
one.
A brief chronological historical development of the various branches of insurance is given
below-

Marine:
Marine is the oldest form of insurance and came first in the list. This type of insurance probably
began in northern Italy sometime during the 12 th & 13th century and gradually the concept was
10

rather transferred to or taken over by the United Kingdom. During the 13 th/14th century the Italian
merchants went to the U.K and along-with the merchandise carried with them the trading

customs including, the concept of marine insurance. Marine insurance as such was not being
practiced as a separate specialized entity during that time since it were the merchants who used
to transact marine insurance business side by side with their general trading activities .

Gradually Lombardy Street of England (named after the merchants of Lombardy of Italy) started
becoming the nerve center of marine insurance activities as it was here where the merchants used
to assemble for the purpose of trade and insurance protection. However, problems used to arise
as there were no set rules or regulations for settling disputes arising out of marine policies and it
was the Lombard Street customs that used to influence settlement of such disputes. Practices
were there to refer disputes to admiralty court but it had the drawback of not having special
knowledge of the law of merchants or of Lombard street customs. Subsequently in 1575 chamber
of assurances was established for the registration of insurance policies and the advantage it has
had in it this that the dispute were minimum because such registration was the evidence of the
contract and various terms and conditions under it. In 1601, court of arbitration was establishedthrough enactment for setting disputes on marine policies. The bubble act, 1720 saw the granting
of charter to two insurance companies, viz, royal exchange and London assurance, for
transacting marine insurance business side by side with the individuals.

The coffee houses have indeed played a very vital role in the development of trade and
commerce in U.K. It is in such houses that the merchants used to congregate for their business
locations. One such was opened by Edward Lloyd in 1680 where the merchants used to frequent
their visits. Auctions of ships, insurance coverage etc. used to take place here and gradually it
became a place of shipping intelligence. Since later part of the 17 th century and early 18th century
this coffee house virtually turns into the most famous Lloyds which has boost of being the
strongest and soundest insurance organization all over the world. The monopolies granted to two
insurance companies previously by the bubble act 1720 were subsequently repealed and now the
number of insurance companies and individual insurers are operating as marine insurers in the
U.K the present act regulating the marine insurance business is the marine insurance act, 1906
and this act is followed in our country also.

Fire:
Fire insurance came second in the list of development. The insurers who had thereto been doing
marine were contemplating about starting fire insurance business also. The great fire of London
in 1666 practically demonstrated the necessity and urgency of fire insurance, about insurance
companies came forward to provide fire insurance protection. But due to introduction of newer
types of hazards arising out of industrial revolution of the 19 th century and because of the
11

increased demand of such types of insurance, some more companies had to come into the
picture. The Toole Street fire, 1861 had an influence in improving the business of fire insurance
as it demonstrated that classification of risk was necessary for sound rating system. In 1868 the

fire offices committee (FOC) was formed which has multifarious responsibilities like, uniform
rating, statistics and various technical advices to member organization. Subsequently also
developed various other bodies such as. Joint fire research organization, Salvage corporations etc
who are directly and indirectly helping the fire insurance business on a sound scientific line.

Life:

The third in the list of development is the life insurance business. The earliest policy of which
there is a record dates back to 1583.During this period only short term policies were used to be
issued meaning that only at the death of the life assured during the term period the money was to
be paid. On survival nothing was payable more so, there was no fix some assured and the amount
payable used to vary depending on the fund available. Life insurance virtually did not have any
scientific basis at the time there was no mortality table through which the risk could be
scientifically assessed. Legal backing was also not therefore sound and systematic conduct of
business. In 1693 Halley introduced the mortality table giving a definite value to risk of death.
Subsequently, Dodson demonstrated that it was possible to charge level premium throughout the
duration of policy period in 1774, the life assurance act was passed in the British parliament
requiring the presence of insurable interest before one could affect a life policy on the life o0f
another. All these gradually gave life assurance a sound, systematic and scientific basis as we see
in the present day.

Accident:
The last in the list of development is the accident insurance business, it is still an open branch in
the new sense that any new type of insurance that is not cared foe under marine, fire and life
would fall under accident branch. Therefore, we see a number of various types of policies
coming under accident department. Examples are- Personal accident, burglary, fidelity,
workmens compensation liability policies engineering policies, erection of risk, cash in safe and
transit, crop, cattle, bond, credit guaranty schemes, motor, aviation etc.

Accident insurance basically started from personal accident insurance effect of industrial
revolution in the 19th century particularly the invention of steam power and railway, was
responsible for numbers of accidental death and bodily injuries some specialized insurance
companies started operating in the field side by side with the existing companies doing fire,
marine and life business. With the increased demand from the public for protecting themselves
12

against other various types of risk associated with rapid intra industrialization gradually
developed other types of business, already indicated.

Types of insurance
Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give
rise to claims are known as "perils". An insurance policy will set out in detail which perils are
covered by the policy and which is not. The classification of insurance can be described in two
ways, Viz. branch wise classification and interest wise classification.

Branch wise classification: The following table shows the branch wise
classification:

TL
yi
pf
ee
s
oI
fn
is
su
ur
ra
an
nc
ce
e

The accident department is still an open department and any new type of policies, which will not
appropriately come under marine, fire and life will be treated under accident department.
13

Subject matter wise classification: The subject matter wise classification is shown in the
following chart:

T
y
p
e
s
o
f
i
s
u
r
a
n
c
e

There are various types of insurance emerging day by day. They are categorized according to
their nature. Our report does not concern much about them.

14

Different types of life insurance policies offered by the

companies in Bangladesh:
The life insurance policies are of many types. The principal types of policies are discussed
below:
(1) Whole life Policy :

Under this policy premiums are paid throughout life and the sum insured becomes payable only
at the death of the insured. The policy remains in force throughout the life of the assured and he
continues to pay the premium till his death. This is the cheapest policy as the premium till his
death. This is the cheapest policy as the premium charged is the lowest under this policy. This is
also known as ordinary life policy. This policy is suitable to persons who want to provide for
payment of estate duty, make bequeathments for charitable purposes and to provide for their
families after their death.
(2) Limited payment life policy :

In the case of whole life policy there is one disadvantage in that the assured must continue to pay
the premium even during his old age when he is no more employed. Under the limited payment
life policy premiums are payable for a selected number of years or until death, if, earlier. The
assured knows how much he will be required to payable only at the how long he lives. The sum
insured becomes payable only at the how long he lives. The sum insured becomes payable only
at the death of the insured. It is a suitable policy to meet the family needs.
(3) Endowment policy :

It runs only for a limited period or up to a particular age. Under this policy the sum assured
becomes payable if the assured reaches a particular age or after the expiry of a fixed period
called the endowment period or at the death of the assured whichever is earlier. The premium
under this policy is to be paid up to the maturity of the policy, i.e., the time when the policy
becomes payable. Premium is naturally a little higher in the case of this policy than the whole
life policy. This is a very popular policy these days as it serves the dual purpose of family and ole
age pension.
(4) Double endowment policy :

Under this policy the insurer agrees to pay to the assured double the amount of the insured sum if
he lives on beyond the date of maturity of the policy. This policy is suitable for persons with
physical disability who are otherwise not acceptable for other classes of assurance at the normal
tabular rates. Premiums are to be paid for a selected term of years or until death, if earlier.
15

(5) Joint Life Policy :

This policy covers the risk on two lives and is generally available to partners in business.
Policies are however, issued on the lives of husband and wife under specified circumstances.
Sum assured becomes payable at the end of the selected term or on the death of either of the two
lives assured, if earlier.
(6) With or without profit policies :

Under the with profit or participating policies, the policy holder is allowed a share in the
profits of the corporation in the form of bonus and it is added to the total sum assured and paid at
the time of maturity of the policy. In the case of without profit or non-participating policies, no
such profit is allowed. Premium in the first case is higher and is lower in the later case.
(7) Convertible whole life policy :

This policy initially provides maximum insurance protection at minimum cost and offers a
flexible contract which can be altered at the end of five years from the commencement of the
policy to an endowment insurance.
(8) Convertible term assurance policy :

This policy meets the needs of those who are initially unable to pay the larger premium required
for a whole life or endowment assurance policy but hope to be able to do so within a few years.
It would also enable such persons to take final decision at a later date about the plan suitable for
their future needs.
(9) Fixed term (marriage) Endowment policy & education annuity policy :

It is a policy suitable for making provisions for the marriage or education of children. Premiums
are payable for a selected term or till prior death. The benefits are payable for selected term or till
prior death. The benefits are payable only at the end of selected term. In case of the marriage
endowment, the sum assured is paid in lump sum, but in case of the educational annuity, it is
paid in equal half-yearly installments over a period of five years.
(10) Annuities :

It is a policy under which the insured amount is payable to the assured by monthly or annual
installments after he attains a certain age. The assured may pay the premium regularly over a
certain period or he may pay the premium regularly over a certain period or he may pay a lump
sum of money at the outset. These policies are useful to persons who wish to provide a regular
income for themselves and their dependants.

16

(11) Sinking fund policy :

Such a policy is taken with a view to providing for the payment of liability or replacement of an
asset.

(12) Multipurpose policy :

This policy meets several insurance needs of a person like provision for himself in old age,
income for his family and provision for the education, marriage or the start in life of his children.
It gives maximum protection to the beneficiaries in the event of the early death of the assured, as
it provides :
i) Regular monthly income during the unexpired term;
ii) Additional monthly income for a period of two years from the date of death;
iii) Payment of a part of the sum assured on death and
iv) Payment of the balance sum assured at the end of the selected period
On maturity the assured may get the sum assured in cash, in the form of monthly pension, or an
increased sum payable on death. Premiums are payable during the selected term or till death, it
earlier.

Chapter 3
An Overview on Shandhani Life Insurance Co. Ltd.

Head Office
Sandhani Life Tower
Rajuk Plot No. 34
Bangla Motor,
Dhaka-1000. Bangladesh

PABX : 9611197, 9664931, 9661241

Cell: 01833325681-82
Fax: 88-02-9614405
web:www.sandhanilife.com
email: slic@sandhanilife.com

17

Head Office(Extended)
sandhani Life Bhaban
22/10,Bir Uttam A.N.M. Nuruzzaman Road
Shaymoli, Dhaka -1207 ,
Bangladesh

PABX : 9139134,9139189
Fax: 88-02-8130897
web : www.sandhanilife.com
e-mail :slic@sandhanilife.com

SLIC is one of the leading Life Insurance Company in Bangladesh since 1990. SLIC enlarge
its network by establishing agency offices. As a result in 31st December 2010 8.61 lac
Policyholder is now under the shade of Sandhani. SLIC provides Life Insurance coverage in
the remote area as well as within all the people of the country.
The core business activities of SLIC covers Micro Insurance for the Poor People, Ordinary
Life Policy for the General, Group Insurance for the Corporate, Education Policy for the
Students, Hajj Policy for the Religious People and so on.

Commitments of SLIC:

To build a safe and sound prospect for every Individual, Society and Community.
Policyholder:
SLIC seeks to build an ever relationship with the policyholder by providing a qualitative
service.
Employees:
SLIC seeks to enhance employees skill, efficiency and make them more innovative and
dedicative by providing effective professional training and a highly motivated remuneration
package.
Shareholders:
SLIC seeks to satisfy the shareholders by achieving consistent operating performance and by
disclosing transparent financial information.

Business Partners:
SLIC seeks to maintain excellent relationship with its business partners.
Community:
SLIC seeks to live up its responsibilities to the community by providing various types of
18

Philanthropic activities to play a supportive role to protect our social, cultural, environmental,
economical and national interest.

Sandhani Life's Vision & Mission:

1. To ensure social & family protection through Life Insurance Policy of all families of
Bangladesh.
2. To ensure highest possible services to Shareholders & Policyholders of the company with
modern technology & dedicated professionalism.
3. To settle & handover insurance claims to the doorstep of policyholders or their nominees
within quickest possible time.
4. To provide highest dividend & bonus to the shareholders & policyholders respectively.
5. To increase asset, investment & life fund with modern technology & most efficient
management.

Strategic Objectives:
In order to achieve companys long-term goal, it has maintain a number of key business
objectives which are:
Prompt claim settlement;
Improve staff-client relationship;
Enhancement of employees skill and efficiency;
Maximize shareholders wealth through a sustainable return on their investment;
Maintenance of social commitment;
Establishment of corporate governance.

Ethical Principles:
We are committed to living by the principles and practices established by our corporate and
social responsibility and business ethics, which enable us to manage effectively our impact on
the society and environment. Our core values, depends on:
Integrity & Honesty: We believe only integrated, honest and sincere employees can bring the
company in a sustainable position.
Objectivity: We are committed to serve our clients and beneficiaries and conduct all business
19

activities according to the business principles.

Accuracy and In Timely Manner: We are very much aware about the accuracy of all the
calculation and evaluation by using the report of the expertise and serve to the valued clients
in timely manner.
Performance in due care: To maintain the professional competence, it requires a continuing
awareness and an understanding of relevant technical professional and business
developments, so as a public service provider we exercise a sound judgment in applying
professional
knowledge and skill in the performance of such service.
Safety & Confidentiality: According to the principles of safety and confidentiality we are
alert to the possibility of inadvertent disclosure of information of a prospective client or
employer and the identification, evaluation and elimination of hazards that could cause harm
to our employees, property and the environment.
Respect and Trustiness: We earn the trust and respect of our shareholders, employees, clients
and business partners by being honest, fair & open and honoring our commitments.
Accountability & Transparency: We are in practice of highest level of accountability and
transparency regarding our product, business activities, performance and financial results to
meet the expectation of all the valued users and beneficiaries.

SLIC at a glance

20

Date of Incorporation
Obtained certificate for commencement of business
Registered with the Controller of Insurance
Prospectus issued for floatation of public shares
Subscription opened
Subscription closed
Listed with Dhaka Stock Exchange
First trading of shares on Dhaka Stock Exchange Floor
First A.G.M of public shareholders

January 23, 1990

March 28, 1990
April 25, 1990
January 01, 1996
January 08, 1996
January 14, 1996
April 06, 1996
April 06, 1996
August 25, 1996
November 20,
First election of Directors from public subscribers
1997
Settlement of SLIC shares in Demate mode in the CDS April 27, 2004
Number of Directors
19
Life fund at the end of the year 2012
816.51 Crore
30 shares for
Bonus Share for the year 2012
every 100 shares
(30 :100)

Questionnaire
We are team exotic, students of Management Dept. of Dhaka University.
This questionnaire is a result of the partial requirement of the course (Insurance & Risk
Management ) under B.B.A program at Dhaka University. The data which is collected by this
questionnaire will only be used only in academic and statistical purpose. The information will be
kept confidential.

General information:
Name:
Occupation:
Age:

Specific information:
21

Please answer the following question with check () mark.

1. Do you have an insurance policy?
o Yes
o No
2. What type of policy have you taken?
o Life insurance
o Fire insurance
o Marine insurance
o Health insurance
3. Do you think insurance is useful?
o Yes
o No
4. Are insurance companies reliable?
o Yes
o No
5. Do you feel risk free by taking the insurance policy?
o Yes
o No

6. Will your family be benefited by this insurance policy?

o Yes
o No

7. Is the behavior of insurer good enough?

o Yes
o No
8. Do you get payment properly?
o Yes
o No
9. Will you suggest others to have an insurance policy?
o Yes
o No
10. Are you satisfied with the overall performance of insurance companies in Bangladesh?
o Yes
22

No

Thank you

Problems of Sandhani Life Insurance Co. Ltd.

Insufficient fund
Less innovative marketing system
Illegal Interference
Incorporate Culture
Lack of Transparency
Lack of safe investment
Lack of Reward and Punishment System to the employees
Dullness in Management Audit
Job Dissatisfaction of employee

23

Political Instability

Recommendations:
The following are the recommendations of the problems that are mentioned above.

Ensure sufficient fund

Ensure innovative marketing strategy
Reduce Illegal Interference
Ensure Corporate Culture
Ensure Transparency
Make some room for safe investment around the country
Ensure reward and punishment system to the employees
Regular Managerial Audit
24

Ensure Job Satisfaction

Political Stability

Conclusion
Insurance is a key mechanism to handle the risk. It is also a core component of financial
infrastructure of a country. As people are exposed to new type of risks in everyday life, they
increasingly feel the importance of insurance. But insurance in Bangladesh failed to occupy a
dominant place not only as a risk handling mechanism but also as a financial institution.
Insurance in Bangladesh is facing multidimensional problems. As a consequence of problems,
the pace of development of insurance business in this country is very slow. Insurance products
could not achieve significant acceptance to the mass people. Therefore, currently identified
problems should be solved to accelerate the growth of insurance industry.

25

Bibliography

Annual Report of SLIC

www.google.com
The financial express
www.bing .com
Insurance & Risk Management by Dr. Md. Mosharraf Hossain
Conversation with the policy holders.
www.sandhanilife.com

26