A REPORT ON

LIFE INSURANCE IN BANGLADESH:

PROBLEMS AND PROSPECT

PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITY

Problems and Prospect of Life Insurance in Bangladesh
12
 LIFE INSURANCE IN BANGLADESH: PROBLEMS AND PROSPECT

Prepared For:
Muhammad Mizanoor Rahman Howlader
Lecturer
Department of Marketing
Faculty of Business Administration and Management

Prepared By:
Group: 06(Warrior)
Level- 3, Semester- II
Faculty of Business Administration and Management

Name of the students Position Roll No. Reg. No.

Md. Kamruzzaman Group Leader 001 00660

Abu Zafour Member 021 00680

K.M. Asaduzzaman Member 006 00665

Insurance and Risk Management

Course Code: FBK 324

Date of Submission: November 10, 2008

PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITY

Problems and Prospect of Life Insurance in Bangladesh
12
 Letter of Transmittal

Date: 10 November 2008

To
Muhammad Mizanoor Rahman Howlader
Lecturer
Department of Marketing
Faculty of Business Administration and Management

Subject: Submission of Report on Life Insurance In Bangladesh: Problems and

Prospect

Dear Sir,

Here we are submitting our report on “Life Insurance in Bangladesh: Problems

and Prospect” prescribed by you in your course Insurance and Risk Management.
For this Purpose, we have gone through internet, different books, articles, journals,
interview of authorities and employees of the respective organizations and class
lecture sheets for the relevant information of the assigned topic.

Please call me for any further information at your convenient time and place.

Yours truly,

Group: 06(Warrior)
Level-3, Semester-II
Faculty of Business Administration and Management
Patuakhali Science and Technology University

Problems and Prospect of Life Insurance in Bangladesh

12
 Table of Contents

Introduction
► Abstract 01
► Introduction 01
► Literature Review 02
► The Research Gap 03
► Rationale of the Study 03
► Objective of the Study 03
► Methodology of the Report 04
► Limitations of the reports 04

Problems and Prospect of Life Insurance in Bangladesh

12
Description
► Definition of life insurance 04
► Feature of life insurance 05
► Essential elements of life insurance contracts 05
► Role and importance of life insurance 07
► Classification of life insurance 10
► Rules regarding life insurance business in Bangladesh 13
► Jiban Bima Corporation (JBC) 16
► Delta Life Insurance Co. Ltd. 20

Problems and Suggesting Actions

► Problems of life insurance in Bangladesh 22
► Suggestions for resolving the problems 25
Conclusions 26
References 27

LIFE INSURANCE IN BANGLADESH:

PROBLEMS AND PROSPECT

Abstract: Insurance is one of the major risk-handling mechanisms. Life insurance provides a monetary benefit
to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured
person's family, burial and other final expenses. Life insurance policies often allow the option of having the
proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. Over the year’s large section
of people have become acquainted with the concept of life insurance. But, the amount of life insurance per
individual in Bangladesh is still extremely low, which is only less than one U.S. Dollar. On the other hand, per
capita insurance premium of life insurance is approximately U.S. $ 4000 in Japan. Low level of paying capacity
is the main reason for insignificant growth of life insurance in Bangladesh. Religion also plays a negative role in
respect of life insurance in our country. Insurance especially life insurance is considered as inconsistent with
religious faith. The entry of private companies and the significant number of players, in Bangladesh, bulk of life
and non-life business continues to remain in the hands of public sector units. This is true for life insurance where
Jiban Bima in Bangladesh continue as market leaders by varying wide margins. This report highlighted the
problems regarding the life insurance in Bangladesh and some remedies to solve the problems and also the
prospect of life insurance in Bangladesh.

Problems and Prospect of Life Insurance in Bangladesh

12
Introduction
Insurance is essentially a collective endeavor under which a large number of individuals
agree to share the loss which a few of them would incur in future. This means insurance
protects those unfortunates who suffer heavy financial impact of anticipated misfortunes
by distributing the loss among many who are exposed to the risk of similar misfortunes.
Life insurance is a type of insurance in which one person makes regular payments so that
he receives a sum of money when he is a particular age, or so that his family will receive
a sum of money when he dies. The process of life insurance has been evolved to
safeguard the interests of people from uncertainty by providing certainty of payment at a
given contingency. The insurance principle comes to be more and more used and useful
in modern affairs. Not only does it serve the ends of individuals, or of special groups of
individuals, it tends to pervade and to transform our modern social order, too.
The main function of life insurance is to provide protection against the possible
uncertainties of loss. It also contributes for the economic development of a country. Life
insurance promises a compensation of monetary loss sustained by a particular person due
to premature death. There are so many problems in life insurance in our country,
although this is true that for life insurance where Jiban Bima in Bangladesh continues as
market leaders by varying wide margins.
There are obvious reasons for this situation. These state-owned units are well-
entrenched monoliths with huge infrastructures and elaborate marketing networks. They
welcome rural and small business although it is both labor and cost-intensive, an area
that the private sector is hesitant to enter at this juncture. The private sector has,
therefore, by choice and ground realities, opted for high- wealth clientele, special
products and niche marketing focused on the larger urban centers, where growth must
necessarily be slower.
Literature Review

Individuals unwilling or unable to handle their own funds have been pleased to find and
outlet for their investment in life insurance policies. Endowment policies, multipurpose
policies, deferred annuities are certain better form of investment. The elements of
investment i.e. regular saving, capital formation, and return of the capital along with
certain additional return are perfectly observed in life insurance. An individual from his
own capacity cannot invest regularly with enough of security and profitability. The life
insurance fulfils all these requirements with a lower cost. The beneficiary of the policy-
holder can get a regular income from the life insurer, if the insured amount is left with
him. Foreign exchange regulations governing insurance business entered into and
completed in Bangladesh are set out in this chapter. Branches and agencies in
Bangladesh of insurance companies whose head offices are situated abroad are, from

Problems and Prospect of Life Insurance in Bangladesh

12
foreign exchange regulations viewpoint, regarded as resident in Bangladesh and are
subject to the-same instructions as insurance companies registered in Bangladesh.

To help people improve their standard of livings with a saving content and create funds
for nation’s economic development Jiban Bima Corporation (JBC) is the lone state-
owned life Insurance company in Bangladesh, which started its maiden journey on May
14, 1973 with assets and liabilities worth TK. 157 million of defunct 37 life Insurance
companies. Since its inception, JBC is working among the people of Bangladesh with
two basic objectives: firstly, to cover the risks and raise savings habits among the people
and secondly, create funds for the country’s economic development through innovative
life insurance schemes.

Delta Life Insurance Co. Ltd. established mainly through the initiative of a group of
Bangladeshi professionals then working abroad along with a few enthusiastic local
entrepreneurs, started its operation in December, 1986 after the Government of
Bangladesh allowed the private sector to operate in the insurance sector in 1984 to carry
on the business of insurance in the Private Sector.

A brief explanation as to the growth of life insurance business in Bangladesh is in order

here. Bangladesh declared independence from the Pakistani rules on March 26, 1971
following which she had to witness a bloody liberation struggle with the occupation
forces lasting for 9 months before they were defeated. Insurance business which was
exclusively carried on in private sector before independence was nationalized after
liberation in 1972 primarily to address the emerging situation of eroding public
confidence in the industry that was left staggeringly short of resources in the face of huge
losses caused by the war of liberation.

Many of the existing literatures reviewed above clearly indicate that the life insurance in
Bangladesh has not yet stood on a solid footing. Many reasons are there for the
backwardness and underdevelopment of life insurance in Bangladesh.

Research Gap
Life insurance is one of the largest and most important institutions for collecting and
distributing the nation’s savings. Therefore, insurance has grown rapidly throughout the
world. It is regarded as essential to a highly industrialized nation. But in our country like
Bangladesh where premature death is very severe, natural calamities are very common;
insurance is of great importance. The literatures reviewed above clearly indicate that a
relatively little attention has been given by the professionals and researchers to the study
of life insurance. Thus the issues of life insurance products have been largely unexplored.
Problems and Prospect of Life Insurance in Bangladesh
12
As such, literatures on marketing of life insurance products throughout the world have
grown rapidly. It is a vital sector of our economy and its role in our national life is
indispensable. It has a good prospect for our country, although there are so many
problems in life insurance in Bangladesh. So smooth functioning of this sector is utmost
necessary. If we want to ensure proper operation of insurance business, the constraints
behind this field are to be identified and resolved.

Rationale of the Study

Life insurance is a very significant risk handling mechanism and it contributes a key part
of financial infrastructure of a country. It not only indemnifies the policyholders at the
occurrence of an insured event but also plays a pivotal role in saving and investment.
Therefore, a sound environment of insurance business is indispensible for a country like
Bangladesh where the rate of saving and investing are very scanty. To guarantee a sound
field of insurance business, the problems retarding the growth of insurance business
should be identified and solved. In recent time there is no mentionable study on the
growth and development in the life insurance of Bangladesh. Although this has a bright
prospect for our country. To considering this situation it is our right attempt in the
present context. This will help identify the problems of life insurance in Bangladesh, as
well as the remedial measure for the problems.

Objective of the Study

The main objectives of this study are to unveil the problems that inhibit the growth and
development of life insurance business in Bangladesh. The other objectives of this study
are to generate some suggestions to overcome the problems identified so as to ensure
smooth functioning and growth of insurance. To know about the prospect of life
insurance of Bangladesh is also another objective of this study.

Methodology of the Study

The data of this study were collected from both primary and secondary sources. The
primary data were collected through interview with aid of an interview schedule. A total
number of 20 respondents randomly selected were interviewed. The sample respondents
comprised of 5 insurers from life insurance, 10 policyholders and 5 non-policyholders.

Problems and Prospect of Life Insurance in Bangladesh

12
The secondary sources of information include related published journals, books,
newspaper, internet, and so on.

Limitations of the Study

This study faced a number of problem and complexity during the operation that
ultimately limited its purposes thoroughly. The limitations of the study were as follow:
The time frame for this study was one of the major limitations. This kind of studies
essentially needs a secondary data collecting team for the survey. Moreover such time
frame doesn’t allow the collection of all necessary data from all the respondents.
It becomes too hard for us to collect necessary information and prepare a standard report.
Without enough funds, these types of studies research cannot reach up to the desired
standard.
Lack of experience in this field
Lack of proper authority to conduct the interview program

Lack of adequate information availability.

Definition of Life Insurance

Life insurance is a type of insurance in which one person makes regular payments so
that he receives a sum of money when he is a particular age, or so that his family will
receive a sum of money when he dies.

According to M.N. Sharma— Life insurance may be defined as a contract, where by the
insurer, in consideration of a premium, paid either in a lump-sump or in periodical
installments, undertakes to pay, an annuity or a certain sum of money, either on the
death of the insured or on the expiry of a certain number of years.

About the definition of life insurance Sir Judge Jesel said that it is a purchase of a
reversionary sum in consideration of a present payment of money or as is generally the
case of the payment of an annuity during the life of the party insuring.

Problems and Prospect of Life Insurance in Bangladesh

12
Features of Life Insurance Contract

It is recognized that every things must have some own features or characters. Every
contract must also have some features; in the same way life insurance have some
features. The features of life insurance contract are described as follows—
1. Formal as well as specialty contract
Generally a contract may be three types, such as—
a. General contract
b. Specialty contract, and
c. Contracts of record
Life insurance contract is formal or specialty contract in terms of their characteristics.
The formalities of the specialty contract is that the contract must be—

1. Specialty contract 4. Contract of utmost good

i. Written 5. Acceptance of the offer
ii. It must be signed by the proper authority 6. Amount of claim
iii. Necessarily or traditionally register 7. Nomination
iv. If necessary stamp provided 8. Assignment
v. If necessary seal provided 9. One-sided contract
vi. Transferability 10. Conditional contract
2. Subject-matter 11. Contract to be executed
3. Objective

Essential Elements of a Life Insurance Contract

There are some common elements for any contract, life insurance is also a contract so
the common elements of life insurance —
a. There must have two parties
b. Offer of one party and acceptance of that offer by another party.
Problems and Prospect of Life Insurance in Bangladesh
12
 c. Free consent of the parties
d. Competencies of the parties
e. Person of sound mind
f. Legal consideration
g. Legal object
Following are the essential elements those are too much necessary for the life
insurance contract. The elements are shown in the following figure (Next page)–

1. Insurable Interest Insurable

Interest
The insurable interest is the pecuniary interest whereby the policy- holder is
benefited by the existence of the subject matter and is prejudiced by the death or
damage of the subject matter.
Proximate Utmost
Cause Good Faith

According to Dabit L. Bickelhaupt – Essentials

an insurable interest is a right or relationship in
Elements of a
regard to the subject-matter of an insurance contract such that the insured can duffer
Life Insurance
Contract to it.
financial loss from damage, loss or destruction

Return of
The classification of Premium
Insurable interest in life insurance are shown in the following —
Warranties

Nomination
INSURABLE INTEREST
and
Assignment

Own Life Others

Proof is not required Proof is required

Business relation Family relation

Figure: Classification of Insurable Interest

2. Utmost Good Faith

Problems and Prospect of Life Insurance in Bangladesh

12
 Since insurance shifts risk from one party to another, it is essential that there must be
utmost good faith and mutual confidence between the insured and the insurer. In a
contract of insurance the insured knows more about the subject matter of the contract
than the insurer. Consequently, he is duty bound to disclose accurately all material
facts and nothing should be withheld or concealed. There should not be any
misrepresentations, non-disclosure, or fraud concerning the material facts.

3. Assignment and Nomination

The policy is freely assignable in case of life insurance for a legal consideration, love
and affection.

4. Return on Premium
Ordinarily, the premium once paid cannot be refunded. However in the following case
the paid are returnable—
For reason of equity: Equity implies a condition that the insurer shall not receive the
price of running a risk he runs. Thus, there the contract does not come into effect or it
is held to be void ab initio.

5. Proximate Cause
The efficient and effective cause which causes the loss is called proximate cause. It is
real and actual cause of loss. If the cause of loss is insured, the insurer will pay;
otherwise the insurer will not compensate. But in case of life insurance proximate
cause is not essential because the insurer is bound to pay the amount of insurance
whatever may be the reason of death. It may be natural or unnatural. But in the
following cases proximate cause is essential for life insurance contract. These are –

1. War-risk
2. Suicide
3. Accident benefit.

Role and Importance of Life Insurance

The process of life insurance has been evolved to safeguard the interests of people from
uncertainty by providing certainty of payment at a given contingency. The insurance
principle comes to be more and more used and useful in modern affairs. Not only does it
serve the ends of individuals, or of special groups of individuals, it tends to pervade and
to transform our modern social order, too. The role and importance of life insurance are
discussed in the next page.

Problems and Prospect of Life Insurance in Bangladesh

12
Life insurance provides safety and security in case of death

The life insurance provides safety and security to the individual or the family against the
loss on life or death of the insurer, because life insurance payment is made when death
occurs or the term of insurance is expired. The loss to the family at a premature death
and payment in old age are adequately provided by insurance. In other words, security
against premature death, and old age sufferings are provided by life insurance.

Insurance protects mortgaged property

At the death of the owner of the mortgaged property, the property is taken over by the
lender of money and the family will be deprived of the uses of the property. On the other
hand, the mortgagee wishes to get the property insured because at the damage or
destruction of the property he will lose his right to get the loan repaid. The life insurance
will provide adequate amount to the dependents at the early death of the property-owner
to pay off the unpaid loans. Similarly, the mortgagee gets adequate amount at the
destruction of the property.

Life insurance eliminates dependency

At the death of the husband or father, the destruction of family needs no elaboration.
Similarly, at destruction of property and goods, the family would suffer a lot. It brings

Problems and Prospect of Life Insurance in Bangladesh

12
reduced standards of living and the suffering may go to any extent of begging from the
relatives, neighbors, or friends. The economic independence of the family is reduced or,
sometimes, lost totally. What can be more pitiable condition than this that the wife and
children are looking others more benevolent than the husband and father, in absence of
protection against such dependency. The insurance is here to assist them and provides
adequate amount at the time of sufferings.

Life insurance encourages saving

The elements of protection and investment are present only in case of life insurance. In
property insurance, only protection element exists. In most of the life policies elements
of saving predominates. These policies combine the programs of insurance and savings.

The saving with insurance has certain extra advantages —

i. Systematic saving is possible because regular premiums are required to be compulsory

paid. The saving with a bank is voluntary and one can easily omit a month or two
and then abandon the program entirely.

ii. In insurance the deposited premium cannot be withdrawn easily before the expiry of
the term of the policy. As contrast to this, the saving which can be withdrawn at any
moment will finish within no time.

iii. The insurance will pay the policy money irrespective of the premium deposited while
in case of bank-deposit; only the deposited amount along with the interest is paid.
The insurance, thus, provides the wished amount of insurance and the bank provides
only the deposited amount.

iv. The compulsion or force to premium in insurance is so high that if the policy-holder
fails to pay premiums within the days of grace, he subjects his policy to lapsation and
may get back only a very nominal portion of the total premiums paid on the policy.
For the preservation of the policy, he has to try his level vest to pay the premium.
After a certain period, it would be a part of necessary expenditure of the insured. In
absence of such forceful compulsion elsewhere life insurance is the vest media of
saving.

Problems and Prospect of Life Insurance in Bangladesh

12
Life insurance provides profitable investment

Individuals unwilling or unable to handle their own funds have been pleased to find and
outlet for their investment in life insurance policies. Endowment policies, multipurpose
policies, deferred annuities are certain better form of investment. The elements of
investment i.e. regular saving, capital formation, and return of the capital along with
certain additional return are perfectly observed in life insurance. An individual from his
own capacity cannot invest regularly with enough of security and profitability. The life
insurance fulfils all these requirements with a lower cost. The beneficiary of the policy-
holder can get a regular income from the life insurer, if the insured amount is left with
him.

Life insurance fulfils the needs of the person

Life insurance fulfills the needs of the human beings. It helps the human beings in case
of following fields—

 Family needs

 Old-age needs

 Re-adjustment needs

 Special needs and

 The clean-up needs

Classification of Life Insurance

According to M.N. Mishra life insurance policies can be divided in the basis of following
way—
1. On the basis of duration of policy
2. In accordance with the premium payment
3. In accordance with participation in profit
4. In accordance to the number of persons insured
5. In accordance to the method of payment

Problems and Prospect of Life Insurance in Bangladesh

12
1. Life insurance on the basis of duration of policy

The life insurance policies according to the duration may be in the four forms. Which
are as follows—
i. Whole life policy
ii. Term policy
iii. Endowment policy
iv. Survivorship policy

i. Whole life policy

Whole life policies are issued for life. It means that the policy amount will be paid at
the death of the life assured. The life assures, thus, he can not get the policy amount
during his life time; only his dependents will get the advantages of this policy. The
whole life policies can be affected by either by payment of single premium, continuous
premium, or limited premium. The limited premium is most popular form of premium
for the whole life policies, because it is convenient to the policy-holders to arrange the
payment of premium during his income-earning period. In continuous premium
payment, this benefit is not available because premium is payable up to the life of the
policy-holder. This is loosing its importance because only the dependence of life
assured is getting the benefit.

ii. Term policy

Term policy is for a short period of years ranging from three months to seven years. It
is the cheapest policy. Term insurance policies are useful for those people who need
extra-protection for a short duration, or who need protection for long duration but are
unable to purchase for the time-being due to ill-health or lesser income, or a young
businessman can take the policy to save the business-disaster during initial stage of the
business, or key-men’s insurances are generally on term insurance basis, or a
mortgagor of his child, and a father can take this policy during the period of education
of his child, and any such persons who are willing to provide insurance for a shorter
period.
iii. Endowment policy
Endowment policy is a type of life insurance policy in which a person regularly pays
money to an insurance company, and receives a sum of money from them at the end of
a particular period of time. The endowment policies can be several, of which important
policies are—

Problems and Prospect of Life Insurance in Bangladesh

12
 Pure endowment policy Educational endowment policy

Double endowment policy Anticipated annuity policy

Ordinary endowment policy Joint life endowment policy

Children anticipated policy with profits Triple benefit policy

Progressive protection policy with profits Fixed term endowment policy

Problems and Prospect of Life Insurance in Bangladesh

12
 Life Insurance on the Basis of Duration
of Policy

Whole Life Term Insurance Endowment Insurance Survivorship Policy

Single premium payment Continuous premium payment Limited premium payment Convertible whole life policy

Straight term insurance Renewable term insurance Convertible term policies

Pure endowment policy Ordinary endowment policy Joint life endowment policy Double endowment policy Educational endowment policy

Anticipated endowment Children anticipated policy Progressive protection policy

Triple benefit policy Fixed endowment policy policy with profits with profits

Figure: Life Insurance on the Basis of Duration of Policy

Problems and Prospect of Life Insurance in Bangladesh

12
Rules Regarding Life Insurance Business in Bangladesh
Foreign exchange regulations governing insurance business entered into and completed
in Bangladesh are set out in this chapter. Branches and agencies in Bangladesh of
insurance companies whose head offices are situated abroad are, from foreign exchange
regulations viewpoint, regarded as resident in Bangladesh and are subject to the-same
instructions as insurance companies registered in Bangladesh.

Problems and Prospect of Life Insurance in Bangladesh

12
 Life Insurance
1. i Insurance policies on the lives of residents of Bangladesh may be Types of
issued only in Taka. policies which
may be issued

ii Existing Taka life policies may not be converted into foreign

currency policies except with the prior approval of the Bangladesh
Bank. Similarly, the records of an existing Taka policy may not be
transferred to an office outside Bangladesh.
2. i Premia on Taka policies on the lives of non-residents may be Collection of
accepted in Taka if made by cheques drawn on a non-resident Taka premium
account with an AD or if made out of funds remitted from abroad by
the policy-holder through an AD.
ii Premia collected on Taka policies must be credited to the insurance Assignments
company's resident account. The remittance of such collections by
the branches of non-resident companies to their overseas head office
or branches is not permitted.
3. Policies may not be assigned by a resident in Bangladesh to a non-
resident or by one non-resident to another non-resident in a different
country without the prior approval of the Bangladesh Bank. There
6. is, Bangladesh
however, no nationals
objection may
to technical assignments
buy life insurance of life policies
policies to
in foreign
theexchange
head offices
whileof residing
overseas abroad.
insuranceOncompanies as security
their permanent for to
return
Taka loans granted
Bangladesh theybymay
the branch in Bangladesh.
continue to pay the premia from foreign
4. i Thecurrency
maturityaccounts
proceedsmaintained
or surrender
in value of TakaRemittance
Bangladesh. policies willfacility
be
paid in Taka
may only.
also be allowed for premia payments provided:
ii(a) TheThe foreignatcurrency
proceeds maturity policy
of Takaabroad was taken
endowment while
policies the policy-Payments of
or annuities
holder
held by was resident
foreign abroad; who are temporarily resident in claims
nationals
(b)Bangladesh
Nominee or or who
assignee of the
having policy
been is a resident;
temporarily resident in Bangladesh
(c) have
Theleft
holder furnishesmay
Bangladesh, under-taking that the for
not be transferred proceeds
paymentof the policy
outside
will be received
Bangladesh in Bangladesh
without the prior approvalthrough
of the normal banking
Bangladesh Bank.channel;
and
(d) Declaration is furnished by the applicant as per proforma at
Appendix 5/52.
(e) The AD shall keep note of maturity date of the policy and inform
Bangladesh Bank about non-repatriation if proceeds of the policy at
maturity immediately in any such case.
7. Life and endowment policies which fall within the definition of Export of
securities cannot be taken or sent out of Bangladesh without the policies
prior approval of the Bangladesh Bank. Applications for export of
Problems and Prospect of Life Insurance in Bangladesh
life policies should be made to the Bangladesh Bank giving full 12
description of the policy and reasons for its export.
Government allowed private Companies to undertake both Life and General Insurance
business in the country. 58 Companies (16 for Life and 42 for General) have obtained
registration. The Chief Controller of Insurance regulates the business by supervision,
auditing and registration of the Insurance Companies, as per the Insurance Act, 1938.
The names of the selected Insurance Companies are given below:

Life Insurance Company

Jiban Bima Corporation (Public) Jiban Bima Bhaban
10, Dilkusha Commercial Area,
Dhaka 1000
Tel: 9552047-9
American Life Insurance Co. (Foreign) Alico Building
18-20, Motijheel C/A, Dhaka
Tel: 9561757, 9561791
(Private)
Delta Life Insurance Co. Ltd. Uttara Bank Bhaban
90-91 Motijheel C/A, Dhaka 1000
Tel:88-02-9565033-5
Fax: 88-02-956-2219
Express Insurance Ltd. WASA Bhaban 78,
Kazi Nazrul Islam Avenue
Kawran Bazar C/A Dhaka.
Problems and Prospect of Life Insurance in Bangladesh
12
Homeland Life Insurance Co. Ltd Eallal Chamber
11, Motijheel C/A, Dhaka 1000
Tel: 9666647
Meghna Life Insurance Co. Ltd Biman Bhaban
100 Motijheel C/A, Dhaka 1000
Tel: 9558993
National Life Insurance Co. Ltd 79, Motijheel C/A (1st floor), Dhaka 1000
Tel: 9550241

Sandhani Life Insurance Co. Ltd Taranga Complex (3dr floor) 19,Rajuk
Avenue, Motijheel, Dhaka 1000

The Jiban Bima Corporation (JBC) is the lone state-owned life Insurance company in
Bangladesh, which started its maiden journey on May 14,1973 with assets and liabilities
worth TK. 15.70 crore (157 million) of defunct 37 life Insurance companies. Since its
inception, JBC is working among the people of Bangladesh with two basic objectives:
firstly, to cover the risks and raise savings habits among the people and secondly, create
funds for the country’s economic development through innovative life insurance
schemes.

Meanwhile, the life fund of Jiban Bima Corporation has shot up to TK. 577.3 crore (5773
million), the highest in industry, which was only TK. 21.83 crore (218.3 million) in 1973.
JBC has paid TK. 755.4 crore (7554 million) against various claims, the highest such
payments in the country’s life Insurance business. The JBC’s investment has reached TK.
578.25 crore (5.78 billion) from only TK. 19.7 crore (197 million) in 1973.

The JBC has the largest network all over the country with 6 regional, 10 zonal, 61 sales
and 365 branch offices.

Problems and Prospect of Life Insurance in Bangladesh

12
 Jiban Bima Corporation (JBC) Tower

Objectives

 Provide life insurance benefit to the people at a competitive cost.

 Mobilize savings through various schemes and create funds for economic
development of the country.
Problems and Prospect of Life Insurance in Bangladesh
12
  Offer products for maximum returns at minimum cost.
 Create awareness among the people to develop savings habits.
 Develop suitable schemes to meet the need of all classes of people.

Vision

A business organization that covers risks and offers profits to make life a matter.

Mission

To help people improve their standard of livings with a saving content and create funds
for nation’s economic development.

Head Office and its Concerned Divisions

The Head Office of Jiban Bima Corporation (JBC) is located at 24, Motijheel,
Commercial Area, Dhaka, Bangladesh with twelve storied own premise. The activities of
regional, zonal. Sales and branch offices of JBC is conducted through eight divisions.
The following table shows the concerned divisions of Head Office.

Serial No. Name of the Division

1 Administration Division
2 Development Division
3 Computer Division
4 Accounts and Finance Division
5 Group Insurance Division
6 Technical Affairs Division
7 Assets and Engineering Division
8 Internal Audit and Inspection Division

Problems and Prospect of Life Insurance in Bangladesh

12
 Figure 1: Various Office Grades of Corporation

Policy Statistics
Serial Policy In force Insurance Amount
No. (TK. in Million)
1 Individual Insurance
i. No. of Policies:- 3,95,947 30,985.20
2 Group Insurance
i. No. of Institutions: - 231 17
ii. No. of Members:- 1,72,110

Existing Schemes

Problems and Prospect of Life Insurance in Bangladesh

12
Serial No Schemes
Individual Schemes
1 Anticipated Endowment Insurance With Profit Plan-05
2 Anticipated Endowment Insurance Without Profit Plan-25
3 Child Endowment Insurance Without Profit Plan-47
4 Child Protection Policy With Profits Plan-09
5 Double Protection Insurance With Profit Plan-10
6 Endowment Assurance With Profit Plan-03
7 Endowment Assurance Without Profit Plan-23
8 Grameen Jiban Bima With Profit Plan-91
9 Granted Bonus Endowment Insurance Plan-48
Group Schemes
10 Group Endowment Assurance
11 Group Term Insurance
Individual Schemes
12 Joint Life Endowment Insurance With Profit Plan-08
13 Marriage Endowment Policy Plan-07
14 Money Back Term Insurance Policy Plan-50 (Without Profit)
15 Multiple Payment Policy With Profit Plan-06
16 Pension Policy Plan-12
17 Progressive Premium Policy With ProfitPlan-04
18 Single Premium with Profit Plan-17
19 Swanirber Bima (Single Premium Policy) Plan-52
20 Term Insurance Without Profit Plan-51
21 Whole Life Assurance With Profits Plan-01
22 Whole Life Assurance Without Profits Plan-21

Delta Life Insurance Co. Ltd. established mainly through the initiative of a group of
Bangladeshi professionals then working abroad along with a few enthusiastic local
entrepreneurs, started its operation in December, 1986 after the Government of
Bangladesh allowed the private sector to operate in the insurance sector in 1984 to carry
on the business of insurance in the Private Sector. A brief explanation as to the growth of
Problems and Prospect of Life Insurance in Bangladesh
12
life insurance business in Bangladesh is in order here. Bangladesh declared independence
from the Pakistani rules on March 26, 1971 following which she had to witness a bloody
liberation struggle with the occupation forces lasting for 9 months before they were
defeated. Insurance business which was exclusively carried on in private sector before
independence was nationalized after liberation in 1972 primarily to address the emerging
situation of eroding public confidence in the industry that was left staggeringly short of
resources in the face of huge losses caused by the war of liberation.

After a series of experimentation, a state-owned body, namely Jiban Bima Corporation

(JBC), established in May, 1973 for transacting the life insurance business, took over the
assets and liabilities under life portfolios of all erstwhile private insurance companies and
started business in its own name. However, things did not improve; rather, in many
respects became more exacerbating and the Government then thought it better to allow
private sector participation in insurance business.

Since inception, Delta Life set before itself a high standard of all round performance
coextensive with professional soundness and proficiency. It soon made a mark in the life
insurance arena by not only being the leader among the private sector indigenous
companies, but by undertaking and successfully implementing innovative and welfare
oriented life insurance schemes. It introduced an array of conventional life and group
insurance products - many of which were the first in Bangladesh. For the first time,
health insurance products were also introduced by Delta Life.

But more importantly, in fulfillment of the avowed commitment towards social

development, Delta Life for the first time not only in Bangladesh but probably in the
World, devised and introduced micro-life insurance-cum-savings products specially
suited to the needs and pockets of poor people of the country who constitute more than
80% of the people of Bangladesh.

Two projects of the company namely Grameen Bima for the rural people and Gono Bima
for the poor and marginal savers of the urban areas were initiated to devote them slave
exclusively to marketing and management of these innovative products. We are happy to
report that we have achieved a good measure of success although there is a long way to
go.

These schemes that we have introduced have created great stir and enthusiasm among the
general mass who, before these projects started functioning, could not even dream of
owning a policy that provides the much needed life insurance coverage along with
facility of regular savings on a long-term basis. At a later stage i.e. in the year 2002, the
projects were merged into a division of Delta Life, namely, Gono Grameen Bima
Division. The GNGRB Division has been growing at a first rate of more than 25% p.a.

Problems and Prospect of Life Insurance in Bangladesh

12
for the last couple of the years and is poised to maintain this growth rate at least in the
next five years or so.

Delta Life can take pride in moulding the saving habits of the lower and middle class
people and transforming them into prospective policyholders. The potential is now so
strongly perceived that all life insurance companies - old and new alike - operating in the
country have started their own micro insurance products.

Cover Map

Figure 2: Districts covered by Delta Life Insurance Company

Problems of Life Insurance in Bangladesh

Problems and Prospect of Life Insurance in Bangladesh
12
There are so many problems of life insurance in Bangladesh. The significant problems
of life insurance in Bangladesh are discussed in the following—

Lack of confidence
Lack of confidence upon insurers in one of the fundamental reasons for which
insurance business cannot a strong position in Bangladesh. Out of the total sample
about 65% opined that insurance in Bangladesh could not achieve the fullest faith of
people.

Non-settlement of claims
It is a complementary problem of the preceding one, 40% respondents mentioned that
the policyholders are suspicious about claim settlement at the maturity of their policies.
It is an indication of little faith on insurers, while focusing on claim settlement.

Insignificant return on policy

Life insurance is basically a business entity. Therefore, even though insurers give
certainty of indemnification at the uncertainty of loss, profit earning is their prime
motive. Return paid to the policyholders and profit of the owners is inversely related. A
higher rate of return to the policyholders reduces the volume of profit and vice-versa.

Inability to continue premium

Inability to continue acts as a deterrent particularly, for the lower income group. It is
unfortunately true that majority of our countrymen live from hand to mouth. About 48%
interviewee therefore, opined that people are worried and are discouraged to take
insurance policy because they may fail to continue premiums.

Lack of interest about insurance

Major problems of life insurance in our country are the lack of interest of people about
insurance. About 45% respondents opinioned that they have no intention of buying
insurance policy. The rest of the respondents 55% have opinion that they are not
completely non-insurance minded, rather they are unaware about the utility of
insurance. The emphasized that insurance provides certainty of payment against the

Problems and Prospect of Life Insurance in Bangladesh

12
uncertainty of losses. But this fundamental service of insurance is not clear to the mass
people.

Economic adversity
Our country’s economy is low investing economy; people have low income, so their
saving is also poor. The per capita income is only USD-598 (2007). For this economic
adversity is the most significant problem for life insurance for our country.

Inconsistent rules for public and private companies

Over the last few decades private sector has emerged as the key economic player.
Growth and development of private sector is correlated with national development. As a
result government of Bangladesh has allowed operation of private insurance companies
in 1984. However, still the rules of insurance business are not congenial for the private
owners. About 80% of the insurers blamed the government for inconsistent policy.

Insufficient investment opportunity

Insurance is a financial institution. It collects premiums from the insured against the
protection of risks. The aggregate premiums is not kept idle rather is invested in various
productive channels to generate income. Profit earned by the insurer on their
investment influences rate of dividend, bonus declared to policyholders and the
financial soundness of investment. But 40% insurers opined that they don’t have
attractive channels of investment. Thus, life insurers are at a great problem with huge
amount of life fund in their hands.

Inadequate government support

A good number of respondents about 80% held the government responsible for its little
support for the enrichment of insurance company. Since the majority of people is
uneducated and is unaware about the benefits of insurance, the government has to take
the responsibility for wide publicity.

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Lack of qualified agent
Usually insurance agents propose insurance policy to the mass people and persuade
them to buy it. The agents therefore, must have insurance know-how. They need to be
familiar with insurance functions and must know the art of convincing. The convincing
art is the key element to allure people in a positive way. But about 80% of the
respondents believe that the insurance agents are not capable enough to motivate the
potential customer.

Incompetent insurance officers

Another widely recognized problem of insurance business in Bangladesh is the
incompetent officers. There is an acute shortage of qualified personnel in the public
insurance corporations.

Undue promotion
A very commonly noticed problem in every employment area of Bangladesh is the
undue promotion. Life insurance sector is also not free from this infamy. 40% of the
respondents answered in favor of undue practice with regard to promotion.

Fabricated information given by the agents

A large number of agents act for different insurance companies in the remote areas of
the country. The agents usually perform on a commission basis. But sometimes the
agents become successful in furnishing wrong information that ultimately brings drastic
problem for the organization.

Limited operational areas

Another unambiguous problem of life insurance business is that insurance companies
operate only in the big cities for their operational benefits.

Inadequate legal constitution

25% of the respondent thought that the laws of insurance are inadequate in our country.
According to this responded the provisions are old and fail to cope with the modern
complex.

There are so many other problems for life insurance in Bangladesh. Some of these are
as follow—
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12
Lack of training, licensing difficulty, corruption, inadequate evaluation of performance
by the government, inflation, rapid premium payment system, delay in claim
settlement, illiteracy, work economic base, low rate of industrialization, backwardness
of mentality, ignorance about claim settlement procedure, non-disclosure of material
fact, and anti- religious.

Suggestions for Resolving the Problems

The suggestions for resolving the problems are as follows —

Increased role of government

The government should monitor the functions of insurance companies, appraise their
performance, and seize the license of companies that are engaged in corruption. In
evaluating the performance it, is essential to consider the condition of reserve or life
fund, premium on various policies, claims and outstanding claims, lapses and
surrenders, profit and surplus, bonus, tax returns, workers’ benefit etc. the government
must take controlling responsibility in its own hands and must ensure proper application
of law.

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Training of officers
Insurance companies lack skilled and qualified people. Therefore, training must be
given to concerned offers and employees given to concerned officers and employees to
impart insurance know-how to them and to enhance their efficiency. Adequate and
effective efforts should be made by the insurance Academy to train-up all levels of
employees of insurance industry.

Introducing new insurance products

Life insurer should adequately cover the health and disability insurance where as, the
general insurers should intensity their efforts towards non-traditional business such as
crop insurance, cattle insurance etc.

Expanding the operational location

The benefits of insurance should not be concentrated only in the urban areas. For the
sake of intergraded and balanced development, companies should wxpand their
operations in the rural areas.

Improving the quality of service

There is no alternative of quality service. Insurance being a service rendering entity
must provide quick service.

Training to the policyholders

Companies should step up its training program. The insurance academy is used for
training the officers and insurance personnel but it has so far neglected the training of
policyholders for which claim submission becomes complex and problematic resulting
in delays in claim settlement.

Easy and transparent licensing procedure

To government should eliminate the difficulty in licensing procedure and should not
delay in the approval of new companies if all the requirements are fulfilled. It will help
not only to increase volume of business but also solve the problems of unemployment.

Problems and Prospect of Life Insurance in Bangladesh

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Quick settlement of claims
The policyholders are very much worried about the settlement of claims. Therefore, life
insurance companies should settle the claims as quickly as possible to create a healthy
public image.

Clear opportunity
The responsibility and authority of the employees should be made clear. In many cases
the private owners locks the information and necessary documents in their own hands.
Instead of this practice, the concerned officers should be given adequate freedom to
discharge their duty.

Special attention should be given to the industrial workforce

Since life insurance business is not among popular among low income groups, the life
insurers should pay special attention to industrial labor force, which ultimately will
have greater mobility among rural people.

Conclusion

Insurance is a key mechanism to handle risk. This means insurance protects those
unfortunates who suffer heavy financial impact of anticipated misfortunes by
distributing the loss among many who are exposed to the risk of similar misfortunes. It
is 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 life
insurance. Life insurance in Bangladesh is facing multidimensional problems. As
consequences of these problems, the pace of development of life insurance in our
country is very slow. Therefore, currently identified problems should be solved to
accelerate the growth of life insurance in our country. In this regard, proper, fair, and
quick settlement of claims, wide publicity, and diversification of insurance products,
customer responsiveness, and cost control trained personnel, dedication and honesty of
employees and positive steps from the government are required.

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12
References

N. Mishra M, Insurance-Principles and Practice, Thoroughly Revised Edition 2003, S.

Chand & Company Ltd., Ram Nagar, New Delhi-110055, pp 49-147.

W. W. Cohen. Fast effective rule induction. In Life Insurance: Proceedings of the

Twelfth In- ternational Conference (MLg5), 2006.

D.H. Fisher. Knowledge acquisition via incremental conceptual clustering. Life

Insurance, 2(2):139- 172, 2007.

www.deltalife.bd.com

www.jibanbima.org.bd.com

www.bia.org.com

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