AReport On Insurance & Risk Management Discussion Area Problems and Prospects of Insurance Business in Bangladesh Risk Management & Insurance (MGT-205) 1 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. 2 we have learned how to settle claim of insurance policies and how to apply the principles of insurance. 3 . we have increased our practical knowledge about real situations of insurance in our country. This report discusses about the practical application of insurance principles in problem settlement of different policies in their functional level. We have the pleasure to submit our group report on ‘Problems and prospects of insurance business in Bangladesh’ as you assigned us. Md. By this report preparation. Moreover. your time to time suggestion and advice helped us to fulfill experience as we put everything in this report. Dr. Mosharraf Hossain Professor. Sincerely yours All members of our group ………. We thank you for choosing us for working on this topic. Department of Management University of Dhaka Sir.Letter of Transmittal To Prof. Moreover by visiting the organizations. Professor. Department of Management.Md Mosharraf Hossain. We are also grateful to officials of insurance companies namely Sandhani Life Insurance company Ltd. 4 . All of the efforts ended at a desired point for the cooperation and hard work. We would like to thank them for all their support. So all of them as well as our group members are worth of pure compliment. They have provided us the required documents we needed. sincerity and seriousness of our group members. It would not be possible for us to complete the report.ACKNOWLEDGEMENT It is a great honor for us to submit this report to our respected teacher Mr. “Problems and prospects of insurance business in Bangladesh”. but for his help. Our fellow classmates supported us in every possible way. At first we want to convey our thanks and gratitude to him for assigning us to prepare report entitled. .................. 7 ORIGIN...............................................................................................................................10 Definition of Insurance:...................................................................................................................................................................................................................................................................................................................... 17 An Overview on Shandhani Life Insurance Co.................................................................................................................................................................................................................. 24 Conclusion... 21 Problems of Sandhani Life Insurance Co............................................................... 19 SLIC at a glance.............................................................................................................................. 15 Chapter 3 (A case on SLIC)........................................................ 8 METHODOLOGY & SOURCES OF DATA................................23 Recommendations:................................................... 10 History of insurance........................................................................................................................................................................................................................................................................................ 13 Different types of life insurance policies offered by the companies in Bangladesh: .......................................................................17 Commitments of SLIC:.............. 25 Bibliography....................................................................................................................................... 18 Sandhani Life's Vision & Mission:...................................................................................19 Strategic Objectives:.................... 7 BACKGROUND.......................................................................................... 10 Types of insurance................................................... 9 Chapter-2(An overview of insurance business).........................................................8 LIMITATIONS....Contents Executive Summary................................................................................... Ltd................................................................. 7 SCOPE OF THE STUDY.... 19 Ethical Principles:..... 20 Questionnaire.............................................. 26 5 ............................. 6 Chapter-1(Introduction)..................................... 7 OBJECTIVE OF THE REPORT......................................................................................................................... Ltd.................................................................................................... Again we feel a lot of uncertainty in every sphere of life. Types of insurance cover both the life and non-life things. We have tried to mention all the rules and regulations required to claim 6 . Every day new types of business are emerging.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. So we always seek for some type of assurance for ourselves and for those who are dependent on us. Our report mainly focuses on the problems and prospects of different insurance companies. Our country is a developing one. So insurance is an essential part for them. Insurance also helps us in this task. This is a little bit difficult and comprehensive tasks. Insurance is essential for the protection of business from any type of peril that may cause an end to the life of business. One of the main functions of insurance company is to settle claim of the insured. It is the main concern for every type of business. The process may vary depending on the type of 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. For this insurance is necessary for us and business. University of Dhaka. who is also the course teacher of “Risk Management & Insurance”. 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. So each and every business should ensure protection of its properties and resources. Management Department at Faculty of Business Studies. Again every business also faces the risk of damage from fire. accident or other types of perils.Md Mosharraf Hossain.Chapter-1 Introduction ORIGIN The preparation of this report is a requirement of the course on “Risk Management & Insurance”. In every sphere of life we are facing risk of accident even death. Mr. 7 . We also should take some action to get assurance of financial support. OBJECTIVE OF THE REPORT The primary objective of this study is the partial fulfillment of the course requirement. Secondary sources: Secondary data have been collected from various sources like website of this companies. As corporate executive put great value on report writing as an important element in organization success. We fix our limit of the report analysis only on various cases to make the point easy and clear to the reader. The main objective of the report is to show “Problems and prospects of insurance business in Bangladesh”. news papers and magazines available on the insurance in Bangladesh. Here insurance principles used for problems and prospects of insurance business in different insurance companies are the major part of our experiment and report. The data and information collected from interviews and secondary sources have been analyzed. METHODOLOGY & SOURCES OF DATA The information for the report was collected from both primary and secondary sources. We have also visited insurance companies physically.. It will also enable us to improve our skills on report writing. We have also collected information from different journals. To meet the curiosity in this stated subject. We have taken theoretical data from our text book “Risk &Insurance” by Prof Dr Md Mosharraf Hossain. Finally the case information is based on conversation with the respective people. SCOPE OF THE STUDY This report gives a narrative overview of claim settlement process of some insurance companies namely Sandhani Life Insurance Bangladesh Limited. 8 . We could not include every data with illustration to prevent our report from verbosity. Primary sources: All the data and information that are collected from primary sources are acquired by interviewing the officials of the related company. this part of the course will prepare us to face the future challenges of corporate world.The collateral purpose of this report is to explore about insurance principles used by companies. The companies are also reluctant to give some important information for their internal privacy. 9 .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 practice of appraising and controlling risk. The second type is a more ancient form than the first. in law and economics. if a house burns down. We know of two types of economies in human societies: money economies (with markets. Risk management. markets. in exchange for a premium. For example. This type of insurance probably began in northern Italy sometime during the 12 th & 13th century and gradually the concept was 10 . Insurance is defined as the equitable transfer of the risk of a loss. we can see insurance in the form of people helping each other. financial instruments and so on) and non-money or natural economies (without money. History of insurance In some sense we can say that insurance appears simultaneously with the appearance of human society. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage. is a form of risk management primarily used to hedge against the risk of a contingent loss. financial instruments and so on). called the premium. from one entity to another. and can be thought of as a guaranteed and known small loss to prevent a large. 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. an insured or policyholder is the person or entity buying the insurance. has evolved as a discrete field of study and practice.Chapter-2 Overview of insurance Definition of Insurance: Insurance. An insurer is a company selling the insurance. In such an economy and community. money. possibly devastating loss. 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. But due to introduction of newer types of hazards arising out of industrial revolution of the 19 th century and because of the 11 . 1720 saw the granting of charter to two insurance companies. The great fire of London in 1666 practically demonstrated the necessity and urgency of fire 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 . used to take place here and gradually it became a place of shipping intelligence. Fire: Fire insurance came second in the list of development. It is in such houses that the merchants used to congregate for their business locations. The insurers who had thereto been doing marine were contemplating about starting fire insurance business also. insurance coverage etc. for transacting marine insurance business side by side with the individuals. 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. Auctions of ships. the concept of marine insurance. The bubble act. viz. 1906 and this act is followed in our country also. 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.K. 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. 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. One such was opened by Edward Lloyd in 1680 where the merchants used to frequent their visits. royal exchange and London assurance.K the present act regulating the marine insurance business is the marine insurance act.K and along-with the merchandise carried with them the trading customs including. The coffee houses have indeed played a very vital role in the development of trade and commerce in U. 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.rather transferred to or taken over by the United Kingdom. about insurance companies came forward to provide fire insurance protection. However. During the 13 th/14th century the Italian merchants went to the U. In 1601. court of arbitration was establishedthrough enactment for setting disputes on marine policies. fidelity. burglary. statistics and various technical advices to member organization.increased demand of such types of insurance. Salvage corporations etc who are directly and indirectly helping the fire insurance business on a sound scientific line. The earliest policy of which there is a record dates back to 1583. fire and life would fall under accident branch. credit guaranty schemes. uniform rating. In 1693 Halley introduced the mortality table giving a definite value to risk of death. Subsequently also developed various other bodies such as. 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. 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. bond. workmen’s compensation liability policies engineering policies. motor. systematic and scientific basis as we see in the present day. Legal backing was also not therefore sound and systematic conduct of business. 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. it is still an open branch in the new sense that any new type of insurance that is not cared foe under marine. Therefore. cattle. we see a number of various types of policies coming under accident department. there was no fix some assured and the amount payable used to vary depending on the fund available. On survival nothing was payable more so. some more companies had to come into the picture. Examples are.Personal accident. crop. In 1868 the fire offices committee (FOC) was formed which has multifarious responsibilities like. 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. cash in safe and transit.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. With the increased demand from the public for protecting themselves 12 . Life: The third in the list of development is the life insurance business. erection of risk. marine and life business. Subsequently. All these gradually gave life assurance a sound. Accident: The last in the list of development is the accident insurance business. 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. Joint fire research organization. Dodson demonstrated that it was possible to charge level premium throughout the duration of policy period in 1774. branch wise classification and interest wise classification. fire and life will be treated under accident department. 13 . Specific kinds of risk that may give rise to claims are known as "perils". The classification of insurance can be described in two ways. which will not appropriately come under marine. already indicated.against other various types of risk associated with rapid intra industrialization gradually developed other types of business. Types of insurance Any risk that can be quantified can potentially be insured. 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 n The accident department is still an open department and any new type of policies. Viz. An insurance policy will set out in detail which perils are covered by the policy and which is not. 14 . They are categorized according to their nature.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 n There are various types of insurance emerging day by day. Our report does not concern much about them. This is also known as ‘ordinary life policy’.Different types of life insurance policies offered by the companies in Bangladesh: The life insurance policies are of many types. This policy is suitable to persons who want to provide for payment of estate duty. Under the limited payment life policy premiums are payable for a selected number of years or until death. (3) Endowment policy : It runs only for a limited period or up to a particular age. The policy remains in force throughout the life of the assured and he continues to pay the premium till his death. (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 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. (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. earlier. 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 sum insured becomes payable only at the how long he lives. This is a very popular policy these days as it serves the dual purpose of family and ole age pension.e. This policy is suitable for persons with physical disability who are otherwise not acceptable for other classes of assurance at the normal tabular rates. 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. if earlier. if. the time when the policy becomes payable. The sum insured becomes payable only at the death of the insured. Premium is naturally a little higher in the case of this policy than the whole life policy. make bequeathments for charitable purposes and to provide for their families after their death. It is a suitable policy to meet the family needs. Premiums are to be paid for a selected term of years or until death. 15 . The assured knows how much he will be required to payable only at the how long he lives. i. The premium under this policy is to be paid up to the maturity of the policy. issued on the lives of husband and wife under specified circumstances. if earlier. These policies are useful to persons who wish to provide a regular income for themselves and their dependants. but in case of the educational annuity. 16 . 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. it is paid in equal half-yearly installments over a period of five years. In case of the marriage endowment. Premiums are payable for a selected term or till prior death. Policies are however. Sum assured becomes payable at the end of the selected term or on the death of either of the two lives assured.” 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. It would also enable such persons to take final decision at a later date about the plan suitable for their future needs. (6) With or without profit policies : Under the “with profit or participating policies. Premium in the first case is higher and is lower in the later case.(5) Joint Life Policy : This policy covers the risk on two lives and is generally available to partners in business. The benefits are payable only at the end of selected term. In the case of ‘without profit or non-participating policies. (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. (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 sum assured is paid in lump sum. no such profit is allowed. The benefits are payable for selected term or till prior death. (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. (9) Fixed term (marriage) Endowment policy & education annuity policy : It is a policy suitable for making provisions for the marriage or education of children. ii) Additional monthly income for a period of two years from the date of death. Bangladesh PABX : 9611197. Ltd. 34 Bangla Motor. or an increased sum payable on death. (12) Multipurpose policy : This policy meets several insurance needs of a person – like provision for himself in old age. Premiums are payable during the selected term or till death. in the form of monthly pension. as it provides : i) Regular monthly income during the unexpired term.com 17 . Chapter 3 An Overview on Shandhani Life Insurance Co.sandhanilife. 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. 9664931.com email: slic@sandhanilife. marriage or the start in life of his children. Dhaka-1000.(11) Sinking fund policy : Such a policy is taken with a view to providing for the payment of liability or replacement of an asset. It gives maximum protection to the beneficiaries in the event of the early death of the assured. it earlier. income for his family and provision for the education. Head Office Sandhani Life Tower Rajuk Plot No. 9661241 Cell: 01833325681-82 Fax: 88-02-9614405 web:www. Society and Community. SLIC provides Life Insurance coverage in the remote area as well as within all the people of the country. SLIC enlarge its network by establishing agency offices. The core business activities of SLIC covers Micro Insurance for the Poor People. Group Insurance for the Corporate. Employees: SLIC seeks to enhance employees skill.com SLIC is one of the leading Life Insurance Company in Bangladesh since 1990. Dhaka -1207 . efficiency and make them more innovative and dedicative by providing effective professional training and a highly motivated remuneration package. Commitments of SLIC: To build a safe and sound prospect for every Individual.M. Education Policy for the Students. Bangladesh PABX : 9139134. As a result in 31st December 2010 8. Community: SLIC seeks to live up its responsibilities to the community by providing various types of 18 .sandhanilife. Nuruzzaman Road Shaymoli. Ordinary Life Policy for the General.61 lac Policyholder is now under the shade of Sandhani. Business Partners: SLIC seeks to maintain excellent relationship with its business partners. Shareholders: SLIC seeks to satisfy the shareholders by achieving consistent operating performance and by disclosing transparent financial information. Policyholder: SLIC seeks to build an ever relationship with the policyholder by providing a qualitative service.Head Office(Extended) sandhani Life Bhaban 22/10.9139189 Fax: 88-02-8130897 web : www.Bir Uttam A. Hajj Policy for the Religious People and so on.com e-mail :[email protected]. cultural. To settle & handover insurance claims to the doorstep of policyholders or their nominees within quickest possible time. honest and sincere employees can bring the company in a sustainable position. Our core values. economical and national interest. depends on: · Integrity & Honesty: We believe only integrated. · Maximize shareholders’ wealth through a sustainable return on their investment. Strategic Objectives: In order to achieve company’s long-term goal. 4. · Maintenance of social commitment. environmental. To ensure highest possible services to Shareholders & Policyholders of the company with modern technology & dedicated professionalism. 3. · Enhancement of employees’ skill and efficiency. 5. Ethical Principles: We are committed to living by the principles and practices established by our corporate and social responsibility and business ethics.Philanthropic activities to play a supportive role to protect our social. investment & life fund with modern technology & most efficient management. Sandhani Life's Vision & Mission: 1. · Establishment of corporate governance. · Improve staff-client relationship. To increase asset. To provide highest dividend & bonus to the shareholders & policyholders respectively. it has maintain a number of key business objectives which are: · Prompt claim settlement. · Objectivity: We are committed to serve our clients and beneficiaries and conduct all business 19 . 2. which enable us to manage effectively our impact on the society and environment. To ensure social & family protection through Life Insurance Policy of all families of Bangladesh. performance and financial results to meet the expectation of all the valued users and beneficiaries. business activities. · 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. SLIC at a glance 20 . evaluation and elimination of hazards that could cause harm to our employees.activities according to the business principles. Accountability & Transparency: We are in practice of highest level of accountability and transparency regarding our product. property and the environment. employees. 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. it requires a continuing awareness and an understanding of relevant technical professional and business developments. · Performance in due care: To maintain the professional competence. clients and business partners by being honest. fair & open and honoring our commitments. · Respect and Trustiness: We earn the trust and respect of our shareholders. of Dhaka University.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. 2004 Number of Directors 19 Life fund at the end of the year 2012 816.M of public shareholders January 23.B. 1996 January 14. 1996 April 06. The data which is collected by this questionnaire will only be used only in academic and statistical purpose. 1996 November 20.A program at Dhaka University. 1996 January 08. 1996 April 06. The information will be kept confidential.51 Crore 30 shares for Bonus Share for the year 2012 every 100 shares (30 :100) Questionnaire We are team ‘exotic’. First election of Directors from public subscribers 1997 Settlement of SLIC shares in Demate mode in the CDS April 27. students of Management Dept. This questionnaire is a result of the partial requirement of the course (Insurance & Risk Management ) under B. General information: Name: Occupation: Age: Specific information: 21 . 1990 April 25. 1996 August 25. 1990 January 01. 1990 March 28.G. Please answer the following question with check (√) mark. Will your family be benefited by this insurance policy? o Yes o No 7. What type of policy have you taken? o Life insurance o Fire insurance o Marine insurance o Health insurance 3. Are you satisfied with the overall performance of insurance companies in Bangladesh? o Yes 22 . Will you suggest others to have an insurance policy? o Yes o No 10. Do you get payment properly? o Yes o No 9. Do you feel risk free by taking the insurance policy? o Yes o No 6. Do you have an insurance policy? o Yes o No 2. 1. Is the behavior of insurer good enough? o Yes o No 8. Are insurance companies reliable? o Yes o No 5. Do you think insurance is useful? o Yes o No 4. o No Thank you Problems of Sandhani Life Insurance Co. Ltd. ①Insufficient fund ②Less innovative marketing system ③Illegal Interference ④Incorporate Culture ⑤Lack of Transparency ⑥Lack of safe investment ⑦Lack of Reward and Punishment System to the employees ⑧Dullness in Management Audit ⑨Job Dissatisfaction of employee 23 . ①Ensure sufficient fund ②Ensure innovative marketing strategy ③Reduce Illegal Interference ④Ensure Corporate Culture ⑤Ensure Transparency ⑥Make some room for safe investment around the country ⑦Ensure reward and punishment system to the employees ⑧Regular Managerial Audit 24 .⑩Political Instability Recommendations: The following are the recommendations of the problems that are mentioned above. ⑨Ensure Job Satisfaction ⑩Political Stability Conclusion Insurance is a key mechanism to handle the risk. But insurance in Bangladesh failed to occupy a dominant place not only as a risk handling mechanism but also as a financial institution. 25 . Insurance in Bangladesh is facing multidimensional problems. As people are exposed to new type of risks in everyday life. It is also a core component of financial infrastructure of a country. they increasingly feel the importance of insurance. the pace of development of insurance business in this country is very slow. As a consequence of problems. 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. Md. www.bing .Bibliography Annual Report of SLIC www.google. Mosharraf Hossain Conversation with the policy holders.com 26 .com The financial express www.com Insurance & Risk Management by Dr.sandhanilife.