Comparative Insurance Industries Overview between USA and Bangladesh

A Report on...

Comparative Insurance Industries Overview: USA and Bangladesh

Ms. Pallabi SiddiquaAssistant Professor

Department of Finance University of Dhaka

Course Name: R isk M anagem ent and Insurance

Course Title: F-210

Submitted by: Group no: 09

Sl. No. N am e ID N o :

1. Al-Amin Khandakar 20-019

2. Pantho Sarker 20-033

3. Shahriar Md. Lukman 20-047

4. Gourav Roy 20-059

5. Md. Gulam Kibria 20-075

D epartm ent o f F inance-20th Batch

U niversity o f D haka

DATE OF SUBMISSION: 19 th December, 2015

Letter of Transmittal

D ecem ber 19, 2015

M s. Pallabi Siddiqua A ssistant Professor,D epartm ent o f Finance,U niversity o f Dhaka.

Subject: Subm ission o f the report on “Comparative Insurance Industries Overview: USA and Bangladesh.”

Honorable Madam,

This is a great pleasure for us to submit the report on “Comparative Insurance Industries Overview: USA and Bangladesh.” as a partial requirement o f the BBA program in University o f Dhaka. Writing this report has been a great pleasure & an interesting experience. It enabled us to know about how managers manage his activity within an organization.

This project helped us tremendously to understand the implication o f theoretical knowledge in the practical field. It has also shaped some o f our basic views like how to manage the insurance company in Bangladesh and USA.

We have undertaken our sincere effort for successful completion o f the BBA program. If we have any unintentional error and omission that may have entered into this report will be considered with sympathy.

Therefore, we beg your kind consideration in this regard, we will be very grateful if you accept ourreport and oblige there bySincerely,Group no. 09

ID No. Name Signature20-019 A l-A m in K handakar

20-033 Pantho Sarker20-047 Shahriar M d. Lukm an

20-059 G ourav Roy20-075 M d. Gulam K ibria

2ndst year 2nd Semester (20th batch), Section: A Department o f Finance,University o f Dhaka

Acknowledgement

At first we would like to thank the mightiest and our parents. Without their blessing, we could not have been successful in completing the study. We would like to thank our honorable course teacher of Department o f Finance, Ms. Pallabi Siddiqua for providing us such an opportunity to prepare the Report on “Comparative Insurance Industries Overview: USA and Bangladesh.”. Without his helpful guidance, the completion o f this report was unthinkable. During our preparation o f the report work, we have come to very supportive touch o f different individuals & friends and professionals who lent their ideas, time & caring guidance to amplify the report’s contents. We want to convey our heartiest gratitude to them for their valuable responses.

Executive Summary

The report on " Comparative Insurance Industries Overview: USA and Bangladesh” mainly focuses on the comparative analysis between two regions o f the world which are US and Bangladesh regarding the insurance industries. There have been many things regarding the insurance issues which have been shown as a matter o f comparison between the countries.In the very inception of the report, a brief overview has been discussed relating to the factors necessary to be discussed about insurance industries to have better knowledge refreshment. Here, the types, roles, significance of different types o f insurance are shown to have a better outlook o f the whole insurance business as an industry.In the next chapters, the Bangladesh experience has been discussed in the light o f insurance development and necessary details which represent the present condition o f the insurance industries in Bangladesh.In the next chapters, the US experience has been discussed in the light o f insurance development and necessary details which represent the present condition o f the insurance industries in the US.The most important part o f this report is the comparative analysis o f the insurance industries between the region o f Bangladesh and US has been discussed. Here, five major corners have been drawn for concentration in the light o f comparative analysis to represent the position o f the US insurance industries and Bangladesh insurance industries. The factors that have been drawn for concentrating the comparison have truly become successful in showing the actual condition o f the insurance industries concerning the regions.At last, a recommendation has been shown followed by the case analysis in the aspects o f both o f the regions’ insurance industries.It’s purely hoped that the report has gained success in maintaining its authenticity in the sense of the available in formation. Again, it’s the aspiration o f the makers o f the report that the report is worth utilizing as a trustworthy source o f secondary data for further concerned research.

Table of ContentsChapter 1:................................................................................ 4Introduction............................................................................. 4

1.1 Origin o f the Report:........................................................................................................................5

1.2 Objective o f the Report:..................................................................................................................6

1.3 Methodology o f the Report:...........................................................................................................7

1.4 Limitations o f the Report:...............................................................................................................8

Chapter 2 :................................................................................ 9Brief Introduction to Insurance Business.................................9

2.1 Definition:........................................................................................................................................ 10

2.1.1 General Definition:................................................................................................................10

2.1.2 Functional Definition:........................................................................................................... 11

2.1.3 Contractual Definition:......................................................................................................... 11

2.2 Nature o f Insurance:.......................................................................................................................11

2.3 Origin o f Insurance:.......................................................................................................................13

2.5 Principles o f insurance:................................................................................................................. 14

2.6 Functions o f insurance:................................................................................................................. 15

2.7 Types o f Insurance:........................................................................................................................ 16

Chapter 3 :...............................................................................19Overview of the insurance industry of USA..........................19

3.1 Types o f Insurance Policies available in USA:....................................................................... 20

3.2 The Level o f Importance and Role Created by USA Insurance Industries:.................... 25

Chapter-4............................................................................... 27Overview of the insurance industry of Bangladesh.............. 27

4.1 Types o f Insurance Policy Available In Bangladesh.............................................................28

4.2 The Level o f Importance and Role Created by USA Insurance Industries:.................... 32

Chapter-5:.............................................................................. 35Comparative Analysis on Financial Performance and

Condition between US and Bangladesh Insurance Industries355.1: Comparative Analysis o f Households savings for Insurance Premiums in US and Bangladesh:............................................................................................................................................ 36

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5.1.1: The Households Savings Trend in Bangladesh:............................................................36

5.1.2: The Households Savings Trend in U S:............................................................................37

5.1.3: Analytical R esult:..................................................................................................................... 37

5.2: Comparative Analysis o f Total Premium between the Insurance Industries of Bangladesh and U S:............................................................................................................................. 37

5.2.1: Total Premium Analysis o f Insurance Industries over the Years in Bangladesh: . 38

5.2.2: Total Premium Analysis o f Insurance Industries over the Years in U S :................38

5.2.3: Analytical R esult:.................................................................................................................39

5.3: Comparative Analysis on Financial Performance between US Insurance Industries and Bangladesh Insurance Industries:..................................................................................................... 39

5.3.1: Economic Contribution o f Bangladesh Insurance Industries in the Economy of Bangladesh:........................................................................................................................................40

5.3.2: Economic Contribution o f US Insurance Industries in the Economy o f U S :........40


5.4: Comparative Analysis on Market Share Capture o f Self region’s Total Premium, between US Insurance Industries and Bangladesh Insurance Industries:................................. 42

5.4.1: Analysis o f Bangladesh Insurance Industries’ Market Share Capture o f Bangladesh:........................................................................................................................................42

5.4.2: Analysis o f US Insurance Industries’ Market Share Capture o f U S : ........................42


5.5: Comparative Analysis on Market Share Capture o f the Whole World’s Total Premium, between US Insurance Industries and Bangladesh Insurance Industries:................................. 43

5.5.1: Analysis o f Bangladesh Insurance Industries’ Market Share Capture o f the Whole W orld:.................................................................................................................................................43

5.5.1: Analysis o f US Insurance Industries’ Market Share Capture o f the Whole World: ...............................................................................................................................................................44

5.6: Reasons o f the Failure o f the Bangladesh Insurance Industries in Comparative Competition with the Insurance Industries o f United States:.....................................................46

5.7 Ultimate D ecision:...................................................................................................................... 47

Chapter :6.............................................................................. 48SWOT Analysis..................................................................... 48

6.1 SWOT Analysis: Theoretical Overview...................................................................................49

6.2 SWOT Analysis: Perspective o f Bangladesh Insurance Industry....................................... 55

6.3 SWOT Analysis: Perspective o f USA Insurance Industry..............................................63

6.4 Comparative SWOT Analysis Scenario between Bangladesh and USA InsuranceIndustry:..............................................................................................................................................67

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Chapter :7.............................................................................. 69Real Cases............................................................................. 69

7.1 Real Cases: Bangladesh Perspective..........................................................................................70

7.2 Real Cases: USA Perspective.................................................................................................... 71

Chapter :7.............................................................................. 73Recommendations................................................................. 73Conclusion............................................................................. 76Bibliography.......................................................................... 77

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Chapter 1:

Introduction

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Now a day’s education is not just limited to books and classrooms. In today’s world, education is the tool to understand the real world and apply knowledge for the betterment o f the society as well as business. From education the theoretical knowledge is obtained from courses of study, which is only the half way o f the subject matter. Practical knowledge has no alternative. The perfect coordination between theory and practice is o f paramount importance in the context of the modern business world in order to resolve the dichotomy between these two areas. Therefore, for the B.B.A. program we are assigned to prepare a report on “Com parative Insurance Industries O verview: USA an d B angladesh” for F-210 Insurance and risk management course.

1.1 Origin of the Report:

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The main objective o f the study is to present the comparative overview o f insurance industries in both USA and Bangladesh. Again some other objectives will be fulfilled through this study which is given below:

> To relate the theoretical view with the practical view o f insurance studies.

> To increase our experience in data collection and analysis.

> To know the comparative picture o f insurance industry in Bangladesh and USA.

> To know the role o f insurance in national savings and in national economy.

> To suggest o f the findings.

1.2 Objective of the Report:

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1.3 Methodology of the Report:To prepare this report we mainly depend on secondary data. But also take some help from our course instructor.

Procedure of collecting secondary data:

• Records and documents.

• Books, texts and publications.

• Wikipedia.

• Related Websites.

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While preparing this report, we have faced some problems. The main problem was to coordination all the group members. Moreover, during data collection we faced several problems.

• Due to limited access o f the data, this study may not be perfect to the decent percent.

• Lack o f enough experience in analyzing o f data.

• Due to inadequate information, in-depth analysis could not be done in the report.

• Lack o f using practical knowledge in the report

For that reason it was pretty much contradictory. We tried to write the report in a sequential way but there may be some problems in the sequence o f the report. But all these errors are totally unintentional. At the end we are very happy to present this report to the readers and its success will depend on the positive response o f the readers.

1.4 Limitations of the Report:

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Chapter 2:

B rief Introduction to Insurance Business

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In our day to day life, we are facing various types o f risks that ultimately lead us to financial risk o f being unable to reducing uncertainty and casualties. To guard against these types o f risk insurance is the best armor. Insurance occupies an important place in the modern world because the risks, which can be insured, have increased in number and extent owing to the growing complexity o f the present day economic system. It plays a vital role in the life o f every citizen and has developed on an enormous scale leading to the evolution o f many different types of insurance. In fact, now a day almost any risk can be made the subject matter o f contract of insurance. Now, the insurance industry is much more developing sector facing its necessity. The different types o f insurance have come about by practice within insurance companies, and by the influence o f legislation controlling the transacting o f insurance business.

2.1 Definition:Insurance is a social device for spreading the chance o f financial loss among a large number of people. Simply speaking, insurance is the means by which risks o f loss or damage can be shifted to another party (the insurers) on payment o f a charge known as premium. The party whose risk is shifted to the insurer is known as the insured. Obviously insurer is generally an organization (Insurance Company), which is willing to share the loss or damage and it is also qualified to do so.

The term insurance has been defined by different experts on the subject. The views expressed by them through various definitions can be classified in to the following three categories for the convenience o f the study.

> General Definitions

> Functional Definitions

> Contractual Definitions

2.1.1 General Definition:

The general definition are given by the social scientists and they consider insurance as a device to protection against risks, or a provision against inevitable contingencies or a cooperative device o f spreading risks.

Some o f such definitions are given below:

In the words o f John Magee, “Insurance is a plan by which large number o f people associate themselves and transfer to the shoulders, o f all risks that attach to individuals.”

In words o f Sir William Bevridges, “The collective bearing o f risk is insurance”.

In the words o f Ghosh and Agarwal, “Insurance is a co-operative form of distributing a certain risk over a group o f persons who are exposed to it”.

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2.1.2 Functional Definition:

These definitions are based on economic or business oriented since it is a device providing financial compensation against risk or misfortune.

In the words o f D. S. Hansell “Insurance may be defined as a social device providing financial compensation for the effects o f misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme”.

In the words o f Robert I, Mehr and Emerson Commack “Insurance is purchased to off-set the risk resulting from Hazards which exposes a person to loss”.

2.1.3 Contractual Definition:

These definitions consider as a contract to indemnity the losses on happening o f certain contingency in future. It is a contractual relationship to secure against risks.

Some o f such definitions are

In the words o f Justice Tindall, “Insurance is a contract in which a sum of money is paid to the assured as consideration o f insurer’s incurring the risk o f paying a large sum upon a given contingency.

In the words o f E. W. Patterson, “Insurance is a contract by which one party, for a compensation called the premium, assumes particularly risks o f the other party and promises to pay him or his nominee a certain or ascertainable sum of money on a specified contingency.

2.2 Nature of Insurance:The insurance has the following characteristics which are observed in cases o f life, marine, fire and general insurance:

(a) Sharing of risk:

Insurance is a co-operative device to share the burden o f risk, which may fall on happening of some unforeseen events, such as the death o f head o f family or on happening o f marine perils or loss o f by fire.

(b) Co-operative device:

Insurance is a co-operative form of distributing a certain risk over a group o f persons who are exposed to it (Ghosh & Agarwal). A large number o f persons share the losses arising from a particular risk.

(c) Large number of insured persons:

The success o f insurance business depends on the large number o f persons insured against similar risk. This will enable the insurer to spread the losses o f risk among large number of persons, thus keeping the premium rate at the minimum.

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(d) Amount of payment:

The amount o f payment in indemnity insurance depends on the nature o f losses occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed amount is paid on the happening o f some uncertain event or on the maturity o f the policy.

(e) Payment of Happening of Specified Event:

On happening o f specified event, the insurance company is bound to make payment to the insured. Happening o f specified event is certain in life insurance, but in the case o f fire, marine of accidental insurance, it is not necessary. In such cases, the insurer is not liable for payment of indemnity.

(f) Transfer of Risk:

Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason that may person observes, that insurance is a device to transfer some economic losses would have been borne by the insured themselves.

(g) Spreading of Risk:

Insurance is a plan which spread the risk & losses o f few people among a large number of people. John Magee writes, “Insurance is a plan by which large number o f people associates themselves and transfers to the shoulders of all, risk attached to individuals”.

(h) Protection against Risks:

Insurance provides protection against risk involved in life, materials and property. It is a device to avoid or reduce risks.

(i) Insurance is Not Charity:

Charity pays without consideration but in the case o f insurance, premium is paid by the insured to the insurer in consideration o f future payment.

(j) Insurance is Not a Gambling:

Insurance is not a gambling. Gambling is illegal, which gives gain to one party and loss to other. Insurance is a valid contact to indemnity against losses. Moreover insurable interest is present in insurance contracts it has the element o f investment also.

(k) A Contract:

Insurance is a legal contract between the insurer and insured under which the insurer promises to compensate the insured financially within the scope o f insurance policy, the insured promises to pay a fixed rate o f premium to the insurer.

(l) Social Device:

Insurance is a plan o f social welfare and protection o f interest o f the people. Rieged and Miller observe “Insurance is of social nature”.

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(m) Based upon Certain Principle:

Insurance is a contract based upon certain fundamental principles o f insurance, which includes utmost good faith, insurable interest, contribution, indemnity, cause proxima, subrogation etc, which are operating in the various fields o f insurance.

(n) Regulation under the Law:

The government o f every country enacts the law governing insurance business so as to regulate, and control its activities for the interest o f the people. In India General Insurance Act 1972 and the Life Insurance Act 1956 are the major enactment in this direction.

(o) W ide Scope:

The scope insurance is much wider and extensive various types o f policies have been developed in the country against risk o f fire, marine, accident, theft, burglary, life, etc.

(p) Institutional Setup:

After nationalization, the insurance business in the country is operation under statutory organization setup. In India, the General Insurance Companies and the Life Insurance Corporation and subsidiary companies o f General Insurance Corporation are operating the various fields o f insurance.

(q) Insurance for Pure Risk Only:

Pure risks give only losses to the insured, and no profits. Examples o f pure risks are accident, misfortune, death, fire, injury, etc., which are all the sided risks and the ultimate results in loss. Insurance Companies issue policies against pure risk only, not against speculative risks. Speculative risks have chances o f profit o f losses.

(r) Based on M utual Goodwill:

Insurance is a contract based on good faith between the parties. Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other. Utmost good faith is one o f the important principles o f insurance.

2.3 Origin of Insurance:Although insurance nowadays is a modern medium of protection o f financial losses against financial losses, the concept o f insurance developed in ancient times. We can discuss the origin of insurance under two basic things. They are:

2.3.1 Bottomry Bonds and Respondentia Bonds:

It means loan taken against the pledge o f vessel. In ancient times almost all business transactions are performed by maritime way. Sometimes the master o f the vessel used to need funds in mid ocean. In this case he is entitled to raise such fund by pledging vessel. This is called Bottomry Bonds. Similar loan could also be raised on the pledge o f cargo and this was used to be called as Respondentia Bonds.

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2.3.2 General Average:

It means sharing the loss o f one by all. It is an old custom practiced in 916 B.C during the time of Rhodians. The apportionment o f financial liability for the loss arising from the jettisoning of cargo by dividing the costs among all those whose property (ship or cargo) was preserved by the action. The law o f general average is a legal principle o f maritime law according to which all parties in a sea venture proportionally share any losses resulting from a voluntary sacrifice o f part o f the ship or cargo to save the whole in an emergency. This system is still followed in our modern insurance by sharing o f loss o f any individual by all the participating parties.

2.4 Development of Insurance in Bangladesh:

The insurance industry in the country was nationalized in 1972 and two government corporations- Sadharan Bima Corporation and Jiban Bima Corporation were set up for general and life insurance respectively. All existing companies except American Life Insurance Company (ALICO) were merged into these two corporations. The nationalized state of Bangladesh insurance market continued until 1985 when the government had change in policy and allowed setting up o f insurance company by private sector. Over the year, a good number of life and general insurance were in phases. Currently, in addition to the two government corporations, 30s life insurance and 45 general insurance companies are operating in the country.

2.5 Principles of insurance:A principle o f risk management, based on assumptions o f expected outcomes, in which the law of averages is applied in theory, or in practice to approximate those outcomes. Used by insurance companies to quantify risk factors and determine the cost o f indemnity. In the following there is a short description o f the core seven principles o f insurance:

2.5.1 Principal of Utmost Good Faith:

• Both parties, insurer and insured should enter into contract in good faith

• Insured should provide all the information that impacts the subject matter

• Insurer should provide all the details regarding insurance contract

For example - John took a health insurance policy. At the time o f taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.

2.5.2 Principle of Insurable Interest:

• Insured must have the insurable interest on the subject matter

• In case o f life insurance spouse and dependents have insurable interest in the life o f a person. Corporations also have insurable interests in the life o f it's employees

• In case o f life or marine insurance, insured must be the owner both at the time of entering o f entering into the insurance contract and at the time o f accident.

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2.5.3 Principle of Indemnity:

1. Insured can't make any profit from the insurance contract. Insurance contract is meant for coverage o f losses only

2. Indemnity means a guarantee to put the insured in the position as he was before accident

3. This principle doesn't apply to life insurance contracts

2.5.4 Principle of Contribution:

• In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once

For example - Raj has a property worth Rs.5, 00,000. He took insurance from Company A worth Rs.3, 00,000 and from Company B - Rs.1, 00,000.

In case o f accident, he incurred a loss o f Rs.3, 00,000 to the property. Raj can claim Rs.3, 00,000 from A but after that he can't make profit by making a claim from Company B. Now Company A can make a claim from Company B to for proportional loss claim value.

1.5.5 Principle of Subrogation:

After the insured gets the claim money, the insurer steps into the shoes o f insured. After making the payment insurance claim, the insurer becomes the owner o f subject matter.

For example: - Ram took a insurance policy for his Car. In an accident his car totally damaged. Insurer paid the full policy value to insured. Now Ram can't sell the scrap remained after the scrap.

2.5.6 Principle of Loss Minimization:

• This principle states that the insured must take all the necessary steps to minimize the losses to inured assets.

For example - Ram took insurance policy fo his house. In an cylinder blast, his house burnt. He should have called nearest fire station so that the loss could be minimised.

2.5.7 Principle of Causa Proxima:

• Word "Cause Proxima" means "Nearest Cause"

• An accident may be caused by more than one cause. In case property insured for only one cause. In such case nearest cause o f the accident is found out.

• Insurer pays the claim money only if the nearest cause is insured

2.6 Functions of insurance:Insurance performs multifarious functions, some o f which are incidental to the individual classes o f business and some o f which are functions o f general. There are two types o f functions of insurance. This are-

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> Primary functions

> Secondary functions

2.6.1 Primary functions:

The functions which are incidental to the individual classes o f business are called primary functions. These are:

Provide certainty: Insurance provides certainty o f payment at the uncertainty o f loss. It is a useful medium of removing the financial loss or distress arising out o f various unexpected incidents.

Provide protection: Provide protection against the probable chances o f loss. This protection is, o f course, in financial way so that he might feel protected.

Risk sharing: Loss is shared by all the persons who are exposed to the risk. This is a unique system of loss sharing where all the agreed parties are mutually consented through participation.

2.6.2 Secondary functions:

Secondary functions are those which are functions o f general. These are:

Prevention of loss: Insurance companies are joining with such companies which engaged in preventing the losses o f the society because the reduction in loss causes lesser payment to the assured and so more saving is possible which will assist in reducing the premium

Provides capital: Insurance companies provide capital to the society by investing the accumulated fund that they collect from people.

Improves efficiency: Insurance companies improve the efficiency o f insured person by eliminating worries and miseries o f losses at death and destruction o f property.

Helps for economic progress: By protecting the society from huge losses o f damage, destruction and death insurance companies help countries in economic progress.

2.7 Types of Insurance:Insurance plays a vital role in the life o f every citizen and has developed on an enormous scale leading to the evolution o f many different types o f insurance. Broadly, insurance may be classified into the following categories:

2.7.1 Classification on the basis of nature of insurance:

On the basis o f nature o f the insurance, it is classified into five types. They are:

Life Insurance: A protection against the loss o f income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact o f the death o f the insured.

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Fire Insurance: Insurance that is used to cover damage to a property caused by fire. Fire insurance is a specialized form of insurance beyond property insurance, and is designed to cover the cost o f replacement, reconstruction or repair beyond what is covered by the property insurance policy.

M arine Insurance: Marine insurance covers the loss or damage o f ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

Social Insurance: Social insurance, public insurance program that provides protection against various economic risks (e.g., loss o f income due to sickness, old age, or unemployment) and in which participation is compulsory. Social insurance is considered to be a type o f social security, and in fact the two terms are sometimes used interchangeably.

Miscellaneous Insurance: 'Miscellaneous Insurance' refers to contracts o f insurance other than these o f Life, Fire and Marine insurance. This branch o f insurance is o f recent origin and it covers a variety o f risks. Examples: Burglary, product liability, cash in safe and transit, fidelity guarantee etc.

2.7.2 Classification from business point of view:

From business point o f view insurance is only two types:

Life Insurance: In this case the subject matter will only be the human life where pays out a sum of money either on the death o f the insured person or after a set period.

General Insurance: General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance is typically defined as any insurance that is not determined to be life insurance.

2.7.3 Classification from risk point of view:

On the basis o f risk insurance is classified into four separate items. These are:

Personal Insurance: Personal insurance lines help protect individuals from potential losses they could not afford to cover on their own and make it possible to do things like drive a car and own a home without risking financial ruin.

Property Insurance: Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms o f insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance.

Liability Insurance: Liability insurance is a part o f the general insurance system of risk financing to protect the purchaser (the "insured") from the risks o f liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage o f the insurance policy.

Fidelity Guarantee Insurance: Liability insurance is a part o f the general insurance system of risk financing to protect the purchaser (the "insured") from the risks o f liabilities imposed

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by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage o f the insurance policy.

Classification of Insurance

Based on risk point o f view

Life insurance Life insurance Personalinsurance

Fire insuranceI Generalinsurance

Propertyinsurance

Marineinsurance

Liabilityinsurance

Social insurance

Miscellaneousinsurance

Figure 1: Classification o f insurance.

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Chapter 3:O verview o f the insurance industry o f U SA

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United States o f America is one o f the leading countries in the world. As a developed country the standard o f living o f the citizen o f USA is very high. United States o f America is the world’s largest nominal economy which represent 22% of nominal global GDP and its nominal GDP is $17.42 trillion. So, such a country with a huge nominal GDP must have highly developed insurance sector. The insurance sector o f USA is highly developed and the citizen o f USA cannot think their daily life without the coverage o f insurance. There are verities types of insurance policy in USA. But, the health insurance is very crucial in USA, because it is must for all citizen. They cannot think about medical treatment without insurance coverage because, the medical treatment in USA is very expensive.

3.1 Types of Insurance Policies available in USA:As the insurance industry o f USA is very developed, they provide verities type o f coverage to the insured. The insurance companies o f USA are introducing different new types o f policies based on the customers and overall socio-economic contingencies. Different types o f polices available in USA are shown in the following figure and described in details.

Life' Insurance r

Policy fm B it

Health Insurance fnsuranc%

e Policies »Available /

Marine ' Insurance

in VSA/ / / Fire kPolicy

' Insurance * Policy

/ Terrorism Insurance /

V

Figure 2 : Classification o f insurance o f USA.

3.1.1 Life Insurance

Life insurance is often considered the cornerstone o f financial plans by many individuals and their financial advisors. While the main purpose o f life insurance is to help take care o f your family in the event o f your death, policies can also serve other purposes including:

> Providing funds to pay final expenses.> Creating an inheritance for your heirs.> Making charitable contributions in the event o f your death.> Creating a source o f tax-deferred savings.

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3.1.1.1 Term Life Insurance:

Term life insurance is as basic as it gets. It’s referred to as “term” because it’s only in effect for a specific period o f time, or term. This type o f insurance is available in the most o f the insurance companies in USA. Unlike permanent life insurance, it doesn’t accumulate cash value so it’s typically the most affordable insurance. It’s designed solely to protect the insured family, home or savings should anything happen to insured. With an annually renewable term, insured’s premiums may increase each year, but with level term, premiums stay constant. That being said, the USA insurer companies managed to include life insurance policy enhancements that no other major life insurance companies offer.

3.1.1.2 W hole life Insurance:

It is also a popular type o f insurance in USA which are offered by most o f the insurance policies. A form of permanent life insurance, whole life insurance features guaranteed premiums, death benefits, and cash value. Whole life insurance policies also give you the potential to receive dividends, which can increase the value o f the policy when the insured is living or provide an increased death benefit for your beneficiaries.

3.1.1.3 Universal Life Insurance:

Now-a- day’s universal life insurance is getting more and more popular. It is permanent insurance that provides protection in case o f death, as well as a savings or cash value component. The cash value o f a universal life policy is based on the amount o f premiums you pay, the declared interest crediting rate and the policy charges.

Unlike Term Life insurance or Whole Life insurance, flexible premium universal life policies permit flexibility in the amount and timing o f premium payments (within limits), and they generally offer you the ability to vary the death benefit amount based on your circumstances.

3.1.1.4 Indexed Universal Life Insurance:

Indexed universal life insurance combines life insurance protection with equity-linked accumulation potential. It has some o f the same features as Universal Life, like premium flexibility, and offers more growth potential, but with potentially less risk than variable universal life insurance.

3.1.1.5 Variable Universal Life Insurance:

Variable universal life insurance combines insurance protection with investment opportunity. It has the same premium flexibility as Universal Life, but offers a range o f investment choices.

Premium payments are flexible. After an initial payment, you can make additional premium payments at virtually any time and in any amount (subject to certain minimums and maximums).

Your policy continues as long as there is enough cash value to cover monthly insurance charges and you can invest premiums in one or more underlying portfolios offering different levels of risk and growth potential.

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Investment portfolios provide long-term growth potential, tax-deferred earnings, and the ability to make tax-free transfers among the investment portfolios.

3.1.1.6 Survivorship Life Insurance:

Survivorship policies insure two lives, typically a husband and wife, under one life insurance policy and pays a life insurance benefit after the surviving insured has passed away. The life insurance benefit can be used to help pay estate taxes, estate settlement costs, or as a way to leave an inheritance to children and grandchildren.

3.1.1.7 Endowment Insurance:

Endowment policy is the kind o f insurance that the insured is paid a lump sum when the insurance policy contract matures, when the insured suddenly becomes critically ill, or when the insured person dies in which case the family or the beneficiary is paid. The typical maturity terms are from 5, 10, or 20 years until at a certain age.

3.1.1.8 Group Term Life Insurance:

Group life insurance is one o f the popular insurance policy in USA. Group life insurance is a type o f life insurance in which a single contract covers an entire group o f people. Typically, the policy owner is an employer or an entity such as a labor organization, and the policy covers the employees or members o f the group. Group life insurance is often provided as part o f a complete employee benefit package. In most cases, the cost o f group coverage is far less than what the employees or members would pay for a similar amount o f individual protection. So if you are offered group life insurance through your employer or another group, you should usually take it, especially if you have no other life insurance or if your personal coverage is inadequate.

3.1.2 M arine Insurance:

In a developed country like USA the marine insurance is very important type o f insurance. Marine insurance covers the loss or damage o f ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points o f origin and final destination. Different type’s marine insurance available in U SA are described below:

3.1.2.1 W orldwide M arine Cargo Insurance:

As U.S.-based companies expand into the global market, the risks that can occur while merchandise is transported between buyer and seller become more complex. Some leading insurers are industry leaders in providing innovative cargo insurance solutions for international and domestic trade. The worldwide marine cargo insurance policy protects against loss from the time cargo leaves the point o f origin until it reaches a final destination.

3.1.2.2 M arine Hull and Protection & Indemnity:

Companies in the marine transportation industry can minimize their losses with Marine Hull and Protection and Indemnity products. Insurance companies o f USA provide comprehensive marine insurance for inland and coastal commercial vessel operators. Our marine claim and

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recovery experts work with our underwriting team to identify loss trends and industry conditions to ensure the best rates and coverage for our customers.

3.1.2.3 M arine Liability Insurance:

Terminal operators, charterers, ship yards/repairers, marine contractors and stevedoring operations must protect against risks that can impact their corporate assets. Businesses can minimize their exposure with Marine Liability Insurance, designed to address the unique needs of this segment o f the U.S. marine market.

3.1.3 Health Insurance:

Health Insurance is mandatory in USA. The people o f USA cannot think about medical treatment without health insurance. Different types o f Health policies are available in USA. For the migrated people in USA and for the tourist it is must.

3.1.4 Aviation Insurance:

Aviation insurance is one o f the most important insurance in USA. Different types o f aviation insurance available is described below:

1. General Aviation2. Airline Insurance3. Airport Liability Insurance

3.1.5 Environment Insurance:

Most o f the insurance companies offer environmental risk products and services for every sector - from small business to multinationals. We distribute solutions through retail and wholesale channels for premises and services based exposures, addressing the needs o f contractors, consultants and facility owners and operators.

Premises Pollution Products: The types o f premises pollution products are discussed below:

1. Premises Pollution Liability (PPL) Policy: The insurance companies o f USA understand that environmental liabilities can impact almost any business operation. We specialize in underwriting pollution coverage with our suite o f Premises Pollution Liability (PPL) products, which can be structured to offer residential, commercial, retail, agricultural and industrial property owners, managers and operators a broad range o f pollution liability protection for gradual, as well as sudden and accidental, first-party and third-party environmental liabilities to help manage future, potentially unforeseen pollution exposures

2. Public/Educational Entity Pollution Liability Endorsement: Public/Educational Entities can access all the coverages and benefits o f Premises Pollution Liability (PPL) Policy, including specific enhanced coverages tailored to their specific industry risks. Public Entities included in the program are normally political subdivisions, agencies, authorities, and public and private schools (K-12) and colleges.

3. Premises Pollution Liability Portfolio (PPL Port) Policy: The Premises Pollution Liability Portfolio (PPL Port) Policy offers broad-based pollution coverage for owners,

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operators and managers o f commercial property, including residential, commercial, hospitality, warehousing, retail and healthcare facilities.

4. Healthcare Premises Pollution Liability Endorsement: Healthcare facilities can access all the coverages and benefits o f Premises Pollution Liability Portfolio (PPL Port) Policy, including specific enhanced coverages tailored to healthcare specific risks.

Contractor Pollution Products: The polices under contractor pollution products are discussed below:

1. Contractors Pollution Liability (CPL): The Contractors Pollution Liability (CPL) Policy offers solutions specifically developed for contractors, which prevent gaps in coverage due to pollution-related exclusions on standard commercial general liability programs. These policies are available for contractors on a practice, project or excess basis.

2. Contractor Pollution Liability Healthcare Owner-Controlled Insurance Policy:The CPL Healthcare Owner-Controlled Insurance Policy (OCIP) is designed for healthcare owners to address specific environmental exposures associated with new construction and/or renovation work.

3.1.6 Terrorism Insurance:

Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities. It is considered to be a difficult product for insurance companies, as the odds o f terrorist attacks are very difficult to predict and the potential liability enormous.

It is a newly introduced insurance in USA and it is supported by the Terrorism Insurance Act.

3.1.7 Fire Insurance:

Insurance that is used to cover damage to a property caused by fire. Fire insurance is a specialized form of insurance beyond property insurance, and is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by the property insurance policy. Insurance companies o f USA cover all risks against fire incidents, allied perils and consequential loss

Verities o f fire insurance policies are offered by the insurance companies o f USA. These policies are discussed below:

a. Property Damage All Risk Insurance Policy: Property damage all risk insurance provides insurance coverage in respect o f loss o f property caused by Fire, Lightning, Riot & Strike, Explosion, Malicious Damage, Earthquake, Flood, Cyclone & Electrical Short Circuit and Burglary. Maximum insurance companies o f USA provide property damage all risk insurance policy enormously.

b. Industrial All R isk Insurance Policy: Industrial All Risks covers accidental loss or damage to insured property at the location specified in the policy. This is a single policy, which covers loss or damage to industrial property. Many insurance companies o f USA provide Industrial all risk insurance enormously under fire insurance plan.

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3.1.8 Miscellaneous Insurance Policy:

There are certain kinds o f insurance policy, which have arisen in due course to meet the specialized needs o f the people o f USA. These special policies are provided by insurance companies o f USA. These policies are given below:

Overseas Mediclaim

> 1. Health Plan Scheme> 2. Burglary & House breaking Insurance> 3. Cash in safe> 4. Cash in Transit> Cash on counter> Personal Accident Insurance> Fidelity Guarantee Insurance> Product / Public Liability> Workmen’s Compensation Insurance

3.2 The Level of Importance and Role Created by USA Insurance Industries:Insurance has evolved as a process o f safeguarding the interest o f people from loss and uncertainty. It may be described as a social device to reduce or eliminate risk o f loss to life and property. Insurance contributes a lot to the general economic growth o f the country by provides stability to the functioning o f process. The insurance industries develop enrich economic growth and reduce uncertainties by improving financial resources. The insurance industries of USA have large contribution in development o f personal, social, and economic sector. The level o f importance and role created by USA insurance industries is discussed below:

Increase Safety and Security:

Insurance industries o f USA provide financial support and reduce uncertainties in business and human life. Insurance industries o f USA provide safety and security against particular event. There is always a fear o f sudden loss. Insurance provides a cover against any sudden loss.

Generates Financial Resources:

Insurance industry o f USA generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development of a country for generating more funds and utilized for the economic development o f the country. Employment opportunities are increased by big investments leading to capital formation.

Encourage Savings:

Insurance industries do not only protect against risks and uncertainties, but also provide an investment channel too. Life insurance industries o f USA enable systematic savings due to payment o f regular premium. Life insurance industries o f USA provide a mode o f investment. Insurance industries o f USA develop a habit o f saving money by paying premium. The insured get the lump sum amount at the maturity o f the contract.

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Promotes Economic Growth:

Insurance industries o f USA generate significant impact on the economy by mobilizing domestic savings. Insurance industry turns accumulated capital into productive investments. Insurance industries o f USA enable to mitigate loss, financial stability and promote trade and commerce activities those results into economic growth and development. Thus, insurance industries o f USA play a crucial role in sustainable growth o f an economy.

Spreading of Risk:

Insurance industries o f USA facilitate spreading o f risk from the insured to the insurer. The basic principle o f insurance is to spread risk among a large number o f people. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out o f funds o f the insurer

Source of Collecting Funds:

Large funds are collected by the way o f premium. These funds are utilized in the industrial development o f a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance industries o f USA have become an important source o f capital formation

Capital Market Role:

As well as stabilizing the financials o f individuals, companies and the state. In their role as institutional investors, insurance companies contribute to the development o f a w ellfunctioning capital market thanks to the huge amount o f assets they have to invest.

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Chapter-4

O verview o f the insurance industry o f Bangladesh

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Bangladesh is the developing country in the world. As a developing country, the standard living of the citizen o f Bangladesh is medium. The economic growth o f Bangladesh is rising, and GDP growth rate o f Bangladesh is 6%. Such a country with a small global GDP growth, Bangladesh cannot develop its insurance sector enormously. The development o f insurance sector o f Bangladesh is rising day by day and the purchase rate o f insurance policy is very poor in Bangladesh.

4.1 Types of Insurance Policy Available In BangladeshAs the insurance industry o f Bangladesh is rising day by day, they provide verities type of coverage to the insured. The insurance companies o f Bangladesh are introducing different types of policies based on the customers and overall socio-economic contingencies. Different types of polices available in Bangladesh are shown in the following figure and described in details.

Figure 3: Insurance Policies Available In Bangladesh

1. Life Insurance Policy:

Life insurance is often considered the cornerstone o f financial plans by many individuals and their financial advisors. While the main purpose o f life insurance is to help take care o f your family in the event o f your death, policies can also serve other purposes including:

■ Providing funds to pay final expenses.■ Creating an inheritance for your heirs.■ Making charitable contributions in the event o f your death.■ Creating a source o f tax-deferred savings.

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Verities o f life insurance policies are offered by the insurance companies o f Bangladesh. These policies are discussed below:

a. Term Life Insurance Policy:

Term insurance is a type o f life insurance policy that provides coverage for a certain period, or a specified "term" of years. If the insured dies during the period specified in the policy and the policy is active - or in force - then a death benefit will be paid. The insurance companies o f Bangladesh provide term life insurance policy to insured.

b. Endowment Insurance Policy:

The insurance companies o f Bangladesh provide Endowment Insurance Policy with Profit and without profit. This is a fixed term policy. The premium has to be paid until the end o f the term or until the death o f the policyholder whichever is earlier. In case the policyholder dies before the end o f the policy term, the sum assured plus the accumulated bonus is paid to the nominee. If the policyholder survives until the end o f the term, he gets sum assured plus bonus. It provides family protection as well as old age provision at an affordable premium. This policy is suitable for all categories o f people.

c. Child Protection Insurance Policy:

The insurance companies o f Bangladesh provide insurance policy for child protection. Child Protection Policy o f Bangladesh Insurance Company will insure both insured and insured’s child under the same policy even if insured do not have a lot o f income. Should the child loss parents before the policy matures, all the future premiums will be waived, yet the full sum insured and Bonuses will be paid to the child on the maturity o f the policy. The child is offered a variety o f security under this plan.

d. Single Premium Insurance Policy:

Single Premium insurance plan is the popular insurance policy in Bangladesh. Single premium insurance is a simple insurance plan introduced to customer by insurance company of Bangladesh to take customer a step ahead. For those who wish to take up an insurance policy but unwilling to disburse a regular payment rather pay the total premium at a time, this has proved to be a very useful policy. In this plan, one has to pay the premium only once when accepting the policy for the whole term and after maturity or death within the term of policy, the policyholder will get double o f the sum assured.

e. W hole Life Insurance Policy:

Whole life insurance policy is the most accepted insurance policy in Bangladesh. Whole life insurance is a financial plan for the entire life is offered by insurance company o f Bangladesh in the form of Whole Life Insurance. This simple scheme asks one to pay premiums up to 85 years or until his death. The sum assured with accrued bonus is paid to the nominee after the death o f the policyholder.

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f. Pension Policy:

Pension policy is most helpful policy for retired people. Financial security is a major issue for a person at his or her late age. It is certain that to live a tension free elderly life pension insurance can definitely be a great deal o f help. Pension insurance mitigates the insecurity due to irregular income at old age as well as ensures handsome amount as death benefit to the nominee. Many insurance companies o f Bangladesh provide pension insurance policy.

2. M arine Insurance Policy:

Marine insurance covers the loss or damage o f ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points o f origin and final destination.

Verities o f marine insurance policies are offered by the insurance companies o f Bangladesh. These policies are discussed below:

a. M arine Cargo Insurance Policy:

Marine Cargo insurance plays an important role in domestic trade as well as international trade. Marine cargo insurance policy provides insurance cover in respect o f loss o f or damage to goods during transit by -rail, -road -sea -air. Marine Cargo insurance protects all goods while in transit depending upon the needs o f the client. Many insurance company o f Bangladesh provide marine cargo insurance policy to businessperson.

b. M arine Hull Insurance Policy:

Marine hull insurance policy is most accepted marine insurance policy by owners o f ship. Under the hull insurance policy, the coverage is given to comprehensive risks for the vessels and total loss o f any package. Vessels may be stranded, grounded, sunk, or capsized and any package may be lost overboard or dropped whilst loading on to, or unloading from, vessel, we pay the amount equivalent to the estimated loss. Insurance companies o f Bangladesh offer marine hull insurance to the owners o f ship and reduce uncertainty o f ship.

c. Inland Transit Insurance Policy:

Inland transit insurance is unpopular insurance policy in Bangladesh. This policy is provided under marine insurance by few insurance companies o f Bangladesh. Inland transit insurance provides insurance cover in respect o f loss o f goods during transit by rail, road, and water borne in Bangladesh.

3. Fire insurance Policy:

Insurance that is used to cover damage to a property caused by fire. Fire insurance is a specialized form of insurance beyond property insurance, and is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by the property insurance policy. Insurance companies o f Bangladesh cover all risks against fire incidents, allied perils and consequential lossVerities o f fire insurance policies are offered by the insurance companies of Bangladesh. These policies are discussed below:

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a. Property Damage All Risk Insurance Policy:

Property damage all risk insurance provides insurance coverage in respect o f loss o f property caused by Fire, Lightning, Riot & Strike, Explosion, Malicious Damage, Earthquake, Flood, Cyclone & Electrical Short Circuit and Burglary. Maximum insurance companies o f Bangladesh provide property damage all risk insurance policy enormously.

b. Industrial All Risk Insurance Policy: Industrial All Risks covers accidental loss or damage to insured property at the location specified in the policy. This is a single policy, which covers loss or damage to industrial property. Many insurance companies of Bangladesh provide Industrial all risk insurance enormously under fire insurance plan.

4. Aviation Insurance Policy:

Aviation insurance policy is very unpopular insurance policy for Bangladesh. Few insurance companies o f Bangladesh provide aviation insurance policy .Aviation insurance is insurance coverage geared specifically to the operation o f aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those for other areas of transportation and tend to incorporate aviation terminology, as well as terminology, limits and clauses specific to aviation insurance.

Verities o f aviation insurance policies are offered by the insurance companies o f Bangladesh. These policies are given below:

> Hull Insurance policy> Liability Insurance policy> War Insurance Policy

5. Engineering Business Insurance Policy:

Engineering insurance refers to the insurance that provides economic safeguard to the risks faced by the ongoing construction project, installation project, and machines and equipment in project operation. Many insurance companies o f Bangladesh provide engineering business policy.

Verities o f engineering business insurance policies are offered by the insurance companies of Bangladesh. These policies are discussed below:

a. Contractors All Risks Insurance: The basic concept is to offer comprehensive and adequate protection against loss or damage in respect o f the contract works, construction plant and equipment and/or construction machinery.

b. Contractors Plant & Machinery Insurance: This is an insurance o f contractors' plant and machinery on an annual basis. It covers any loss or damage occurring at works, at rest or during maintenance operations and is limited to a specific construction site.

c. Deterioration of Stock Insurance: Deterioration o f Stock in Cold Storage insurance is designed to meet the requirements o f those who want to insure their stocks against deterioration due to temperature rise while in cold storage as a result o f breakdown of refrigerating machinery.

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d. Electronic Equipment Insurance: This insurance provides cover for loss or damage to all electrical systems or equipment, which generally have only a moderate power requirement while such equipment is at work, at rest or during maintenance operations.

e. Machinery Insurance: It is designed to provide effective insurance cover for plant, machinery and mechanical equipment at work, at rest or during maintenance operations

6. Miscellaneous Insurance Policy:There are certain kinds o f insurance policy, which have arisen in due course to meet the specialized needs o f the people o f Bangladesh. These special policies are provided by insurance companies o f Bangladesh. These policies are given below:

> Overseas Medical claim> 2. Health Plan Scheme> 3. Burglary & House breaking Insurance> 4. Cash in safe> 5. Cash in Transit> Cash on counter> Personal Accident Insurance> Fidelity Guarantee Insurance> Product / Public Liability> Workmen’s Compensation Insurance

4.2 The Level of Importance and Role Created by USA Insurance Industries:Insurance has evolved as a process o f safeguarding the interest o f people from loss and uncertainty. It may be described as a social device to reduce or eliminate risk o f loss to life and property. Insurance contributes a lot to the general economic growth o f the country by provides stability to the functioning o f process. The insurance industries develop enrich economic growth and reduce uncertainties by improving financial resources. The insurance industries o f Bangladesh have large contribution in development o f personal, social, and economic sector. The level o f importance and role created by Bangladesh insurance industries is discussed below:

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Contributi on to GDP

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afety an securityL V

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Role

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Lgrowth

f

Figure 4: Importance and Role of Insurance Industry of Bangladesh

1. Increased safety and security:

Insurance industries o f Bangladesh provide financial support and reduce uncertainties in business and human life. Insurance industries o f Bangladesh provide safety and security against particular event. There is always a fear o f sudden loss. Insurance provides a cover against any sudden loss.

2. Generate financial resources:

Insurance industry o f Bangladesh generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development o f a country for generating more funds and utilized for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation.

3. Life insurance industries encourage to savings:

Insurance industries do not only protect against risks and uncertainties, but also provide an investment channel too. Life insurance industries o f Bangladesh enable systematic savings due to payment o f regular premium. Life insurance industries o f Bangladesh provide a mode o f investment. Insurance industries o f Bangladesh develop a habit o f saving money by paying premium. The insured get the lump sum amount at the maturity o f the contract.

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4. Promote economic growth:

Insurance industries o f Bangladesh generate significant impact on the economy by mobilizing domestic savings. Insurance industry turns accumulated capital into productive investments. Insurance industries o f Bangladesh enable to mitigate loss, financial stability and promote trade and commerce activities those results into economic growth and development. Thus, insurance industries o f Bangladesh play a crucial role in sustainable growth o f an economy.

5. Spreading of risk:

Insurance industries o f Bangladesh facilitate spreading o f risk from the insured to the insurer. The basic principle o f insurance is to spread risk among a large number o f people. A large number o f persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out o f funds o f the insurer

6. Source of collecting funds:

Large funds are collected by the way o f premium. These funds are utilized in the industrial development o f a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance industries o f Bangladesh have become an important source o f capital formation.

7. Capital M arket Role:

As well as stabilizing the financials o f individuals, companies and the state. In their role as institutional investors, insurance companies contribute to the development o f a w ellfunctioning capital market thanks to the huge amount o f assets they have to invest.

8. Contribution of Insurance in GDP:

The insurance industries o f Bangladesh also contribute in GDP of Bangladesh. The level of contribution in GDP of insurance industries o f Bangladesh is very poor.

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Chapter-5:

Comparative A nalysis on Financial Performance and Condition

between US and Bangladesh Insurance Industries

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In this chapter, the report depicts on the key analytical facts that exist between the two concerned regions in the light o f comparison and informative statements. The chapter also focuses on the different factors that the makers o f the report have decided to be important to focus as a matter o f differential analysis among the countries with regard to insurance industries.

5.1: Comparative Analysis of Households savings for Insurance Premiums in US

and Bangladesh:

The savings nature o f the people o f Bangladesh and US are shown here in P ie C hart so that we can have a better understanding o f the consciousness level, tendency and significance level of buying coverages among the people o f the concerned zones from the income they make.

5.1.1: The Households Savings Trend in Bangladesh:

In the following chart, the household savings trend in Bangladesh can be seen:

Constitution of Household Savings inBangladesh

Others savings8%

Insurance Funds or Liquid moneyPemiums 20%

19%

Provision and Deposits in Banks

Pension Funds 47%

6%

Figure: Constitution o f H ousehold Savings in Bangladesh

Interpretation:

Here, we can see that the average savings o f the people in Bangladesh for different sort of insurance is about 19%. The source from where we got the data is IDRA (Insurance Development and Regulatory Authority in Bangladesh). Here, we see that, the analysis shows a poor standing o f the people’s buying coverage.

Source of data 1: IDRA (Insurance Development and regulatory Authority)

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5.1.2: The Households Savings Trend in US:

In the following chart, the household savings trend in United States can be seen:

The Household savings Trend in US

14% 5%

1 fm 30% ■ Liquid money

' ■ • . 1 ' W ■ Deposits in Banks33% ■ Provision and Pension Funds

' ' 1 1 18% ■ Insurance Funds or Pemiums^ 7 ■■ Others savings

Figure: The H ousehold savings Trend in US

Interpretation:

Here, in the Pie Chart, we can see that the very trifling amount o f savings the US people keep for their liquid hand cash and a very handsome amount o f their income goes to paying the premiums o f the coverage amounting to about 33%. The source o f this data is III (Insurance Information Institute).

N.B: Here, the average o f the respective reg io n ’s p e o p le ’s cases has been used to draw the mean value to represent. The standard error exists in the information represented here. A lso, the data were secondary.

5.1.3: Analytical Result:

The analytical result o f the analysis shows that, the US people are more trending in buying more coverage near to double to Bangladesh’s people. So, here, we can conclude that US is more ahead in this respect than Bangladesh.

5.2: Comparative Analysis of Total Premium between the Insurance Industries of

Bangladesh and US:

In this section o f the chapter, the comparative analysis o f total premium over the years is shown with respect to the regions already concerned.

2 National Center for Education Statistics

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Here, the chart o f the total premium charged by the whole insurance industries on the policyholders o f Bangladesh is given below:

5.2.1: Total Premium Analysis of Insurance Industries over the Years in Bangladesh:

3

Figure: Total Premium Analysis o f Insurance Industries over the Years in Bangladesh

Interpretation:

Here, the total premium analysis o f Bangladesh Insurance Industries has been shown where it is noticeable that from the Fiscal Year (FY) 2006 the premium or loading charge has been increased gradually with no negative sloping trend. In the FY 2015, the loading has been increased up to 2035 million taka which is very large amount in consideration o f FY 2006. It shows two important things side by side:

I The insurance industry in Bangladesh has developed from the very inception o f its journey till now at a very good extent.

I The Non Life insurance sector in Bangladesh is very dominant than that o f LIP.

The analysis o f the past nine years gives us the best views ever on the premium total charged as loading by the insurance industries in Bangladesh.

5.2.2: Total Premium Analysis o f Insurance Industries over the Years in US:

Here, the chart o f the total premium charged by the whole insurance industries on the policyholders o f US is given below:

Source of data 1: IDRA (Insurance Development and Regulatory Authority in Bangladesh)

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Figure: Total Premium Analysis o f Insurance Industries over the Years in US

Interpretations:

Here, in the chart the pointing focal points show a gradual development o f the US insurance industries as same as that o f Bangladesh. Because the growth o f U S’s insurance industries is almost as same as that o f Bangladesh. But the numeric figures shown are on an average more than 10 times o f the loading charged in the region o f Bangladesh. The insurance industries of US now charge a premium loading o f about $305250000 shown in the FY 2015 comparing to that o f $74700000 in the FY 2006 in case o f Non Life Sector and $132150000 in the FY 2015 and comparing to $490000 in 2006. So, also the US insurance industries have a positive trending having an upward sloping.


The analytical result shows that the US insurance industries and Bangladesh insurance industries both have a positive trending with increasing premium loading. The following points matter in this case with a backing o f strong judgments:

I In both o f the regions, the insurance industries are developing and number of policyholders is increasing.

I The comparative factors are the numerical values are more than ten times larger in the US region’s insurance industries’ premium loading factors. It shows that US insurance industries are much more in a grown stage than that o f Bangladesh.

5.3: Comparative Analysis on Financial Performance between US Insurance

Industries and Bangladesh Insurance Industries:

In this part o f the chapter, the report tends to show the financial and economic contribution of US insurance industries and Bangladesh insurance industries and after that a brief discussion on analytical result is going to be provided on the findings.

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Here, the economic contribution o f the insurance industries o f Bangladesh in the economy of Bangladesh over the past ten years has been shown. Also, the 2015-16 has been estimated by the makers o f report on the basis o f their findings from the related and relevant information and statistical analysis.

5.3.1: Economic Contribution of Bangladesh Insurance Industries in the Economy ofBangladesh:

Table: Contribution o f Insurance Sector to the Economy o f Bangladesh4

Table 1: Contribution of Insurance Sector to the Economy of BangladeshYear C ontribution of Growth of Contributi Contribution Contribution

Insurance on (as % of GDP) (% of FS)( Tk. Millio (% Growth)

2003-04 2400 14.7 0.158 10.52004-05 2840 18.3 0.178 11.82005-06 3370 18.3 0.203 13.92006-07 3810 13.3 0.217 14.42007-08 4380 14.9 0.237 15.72008-09 4960 13.5 0.256 16.92009-10 5600 13.1 0.273 18.12010-11 6360 13.5 0.295 19.52011-12 7140 12.4 0.317 20.52012-13 7880 10.3 0.332 21.22013-14 8510 9.9 0.346 22.02014-15 9220 8.3 0.341 21.32015-16

(Estimated)9910 7.4 0.347 21.3

Here, we can see that the insurance industries o f Bangladesh have a gradually increasing but reducing growth rate o f return to the economy o f Bangladesh. There have been many reasons associated with the reducing growth rate such as political turmoil, negative impact o f climatic change, demographic disorder, or other trends o f business and economic cycles etc.

Here, the makers o f the report have estimated the value o f the FY 2015-2016. By applying formula o f basic statistical techniques, on the basis o f the previous data and future financial trends, the estimation has been done.

5.3.2: Economic Contribution o f US Insurance Industries in the Economy o f US:

Here, the economic contribution o f the insurance industries o f US in the economy o f US over the past ten years has been shown. Also, the 2015-16 has been estimated by the makers of

4 Bangladesh Bureau of Statistics

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report on the basis o f their findings from the related and relevant information and statistical analysis.

Table 2: Contribution o f Insurance Sector to the Economy o f US5

Table 1: Contribution of Insurance Sector to the Economy of USYear C ontribution of Growth of Contributi Contribution Contribution

Insurance on (as % of GDP) (% of FS)( Tk. Millio (% Growth)

2003-04 1587 18% 0.118 15.52004-05 1873 12% 0.135 17.22005-06 2097 11% 0.167 18.42006-07 2349 13% 0.193 19.52007-08 2725 16% 0.253 22.42008-09 2970 9% 0.178 17.82009-10 3297 11% 0.193 18.22010-11 3693 12% 0.282 18.72011-12 3988 8% 0.168 16.42012-13 4386 10% 0.303 17.32013-14 4869 11% 0.201 17.92014-15 5843 20% 0.364 25.22015-16

(Estimate__

6894 18% 0.342 24.7

Here, we find that the contribution o f US insurance industries fluctuate on the basis o f the country’s own business cycle, trade cycle, monetary policies and other fiscal policies. Also the US chart shows that the recent trends are very positive comparing to the previous years of contributions. All the necessary details shown in this table help in the estimation that also includes a bit standard error. However, it’s in very good position to support the US economy.


The analytical results o f the previous analyses show the following points in brief:

I The insurance industries o f Bangladesh are making gradual and positive efforts over the past ten years but the US insurance industries’ show a fluctuating trend of contribution in the US economy.

I The growth rate o f contribution is reducing because o f the previously mentioned factors in Bangladesh. On the other hand, the growth rate o f contribution o f US insurance industries is fluctuation due to many reasons previously mentioned.

I There is a positive relationship between the variables given the charts both in case of US and Bangladesh insurance industries coincidentally.

5 Bureau of Economic Analysis (BEA)

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5.4: Comparative Analysis on Market Share Capture of Self region’s Total

Premium, between US Insurance Industries and Bangladesh Insurance Industries:

In this very last part o f the chapter, an ultimate analysis o f the market share capture o f the world’s total premium is going to be shown both numerically and graphically for better understanding. Here, in this part, the top ranking insurance companies o f both o f the countries are shown with their respective market values o f gross premiums and after that an analysis of the GDP estimators and at last the world’s market capture o f both o f the region’s insurance industries are shown in a sophisticated way.

5.4.1: Analysis o f Bangladesh Insurance Industries’ Market Share Capture o f Bangladesh:

Here, below a table has been shown where the analytical and statistically calculated values are shown for analysis:

Table: Analysis o f Bangladesh Insurance Industries’ M arket share capture o f Bangladesh

Year Population of Bangladesh

Average Percentage of People Buying

Coverage20 1 2 1 5 8 , 5 7 0 ,5 3 5 9 %

201 3 1 6 1 , 0 8 3 ,8 0 4 12 %

20 1 4 1 6 3 ,6 5 4 ,8 6 0 15 %

20 1 5 1 6 6 ,2 8 0 ,7 1 2 19 %

Interpretation:

Here, we find that only 9% of the whole population o f Bangladesh used to remain under coverage o f any type o f insurance policy directly or indirectly. But the percentage gradually increased to 19% in the year o f 2015 which is a tremendous success for the insurance industries only in four years expansion.

5.4.2: Analysis o f US Insurance Industries’ Market Share Capture o f US:

Here, below a table has been shown where the analytical and statistically calculated values are shown for analysis:

Table: Analysis o f US Insurance Industries’ M arket share capture o f US.

Year Population Of US Average Percentage ofPeople Buying Coverage in

US2012 3 1 3 ,2 3 2 ,0 4 4 65%2013 3 1 3 ,8 4 7 ,4 6 5 66%2014 3 1 6 ,6 6 8 ,5 6 7 68%2015 3 1 8 ,8 9 2 ,1 0 3 70%

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The analytical result o f above analysis shows the following factors:

I The US insurance industries have less growth in comparison to that o f Bangladesh.

I But the US insurance industries are three times stronger than that o f Bangladesh with relevance to market share capture.

5.5: Comparative Analysis on Market Share Capture of the Whole World’s Total

Premium, between US Insurance Industries and Bangladesh Insurance Industries:

Here, the whole world is going to be concerned in comparison with our each country now for a worldwide view:

5.5.1: Analysis o f Bangladesh Insurance Industries’ Market Share Capture o f the Whole World:

The following analyses are based on the statistical calculation and some information is shown from different sources from where they have been derived.

Life Insurance Companies Gross written premiums

BDT Mn USD Mn

MetLife Alico 16,687.7 203.9Fareast Islami Life 7,031.3 85.9National Life 7,025.1 85.8Popular Life 6,617.8 80.8Delta Life 5,085.6 62.1Meghna Life 4,011.8 49.0Jiban Bima Corporation 3,199.9 39.1Sandhani Life 2,249.0 27.5Prime Islami Life 2,071.3 25.3Progressive Life 1,714.1 20.9

Table: The Top Raking Non Life Insurance Industries in Bangladesh w ith Relevance to Premium

Here, the top ranking Non Life Insurance industries in Bangladesh in the Fiscal year 2015 has been shown both in BDT and US$ to have a better comparison o f premium loading.

Here, the top ranking Life Insurance companies in Bangladesh in the Fiscal year 2015 has been shown both in BDT and US$ to have a better comparison o f premium loading.

Now, the market capture o f the insurance industries o f Bangladesh in the whole world is shown below:

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Table: Percentage o f M arket Share Capture by Bangladesh Insurance Industries

Non Life Insurance Companies Gross written premiums

BDT Mn USD Mn

Green Delta Insurance Co 2,601.4 31 8LtdSadharan Bima 2,212.0 27 0Corporation

Pioneer Insurance Co Ltd 1,701.3 20.8Reliance Insurance 1,486.3 18.2Limited

Pragati Insurance Ltd 1,151.3 14.1Rupali Insurance Co Ltd 759.5 9.3

Eastland Insurance Co Ltd 650.1 7.9Phoenix Insurance Co Ltd 614.6 7.5

Bangladesh Gen Ins Co 591.5 7.2LtdContinental Insurance Ltd 451.2 5.5

Interpretation:

From the table, it’s found that Bangladesh insurance industries have achieved altogether only 0.02% of the whole world’s market premium holdings. So, it can be said that the Bangladesh insurance industries are in a very trifling stage now in the FY 2015 but much better condition than its previous FYs.

5.5.1: Analysis o f US Insurance Industries’ Market Share Capture o f the Whole World:

The following analyses are based on the statistical calculation and some information is shown from different sources from where they have been derived.

Table: Top ranking Non Life Insurance Com panies in Us w ith Relevance to PremiumLoading

Particulars Direct premiums Written ($Mn)

Nonlife premiums (1) 2035

Life premiums 881

Total premiums 2916

Percent of total world premiums 0.02%

Here, the top ranking Non Life Insurance companies in US in the Fiscal year 2015 has been shown both in US$ to have a better comparison o f premium loading.

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Table: The Top Raking Life Insurance Industries in US with Relevance to Premium

Particulars Direct premiums Written( In Mn $)

Nonlife premiums 30525Life premiums 13215Total premiums 43740Percent of total

world27.13%

Now, the market capture o f the insurance industries o f Bangladesh in the whole world is shown below:

Table: Percentage o f M arket Share Capture by US Insurance Industries

Non Life Insurance Companies in US Direct premiums written (1)

USD Mn

State Farm Mutual Automobile Insurance

55,994.2

Liberty Mutual 28,906.3Allstate Corp. 27,583.6

American International Group 23,169.1Travelers Companies Inc. 22,842.9Berkshire Hathaway Inc. 18,284.1

Farmers Insurance Group of 18,079.5Companies (2)

Nationwide Mutual Group 17,802.7Progressive Corp. 17,562.6

USAA Insurance Group 14,562.0

Top Ranking Life Insurance Industries in Direct written premiums (1)US

USD Mn

MetLife Inc. 85,001.7

Prudential Financial Inc. 41,407.4

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Jackson National Life Group 25,728.1

AEGON 24,499.9

Lincoln National Corp. 24,274.1

New York Life Insurance Group 24,223.4

American International Group 21,698.6

Voya Financial Inc. 20,228.6

Manulife Financial Corp. 19,263.2

Principal Financial Group Inc. 18,909.4

Interpretation:

From the table, it’s found that US insurance industries have achieved altogether 27.13% of the whole world’s market premium holdings. So, it can be said that the US insurance industries are in a very dominating stage now in the FY 2015 but only a bit better condition than its previous FYs.

5.6: Reasons of the Failure of the Bangladesh Insurance Industries in

Comparative Competition with the Insurance Industries of United States:

The insurance industries o f United States (US) and those o f Bangladesh have huge differences in many sectors. The reasons o f the differences may have been many but some o f the key reasons o f the sky-earth differences are shown below:

Bangladesh’s Independence being far later than that of U S’s:

Bangladesh got its independence in the year o f 1971. Comparing to that o f the U S’s, it’s a mere child. That’s why the development o f the insurance industries in Bangladesh is also a late consequence.

The Consciousness among the People:

The consciousness among the people o f Bangladesh is also in a neglecting stage in comparison with that o f the U S’ s. As the people o f Bangladesh are not so much health or property conscious because o f many concerned reasons, that’s why, buying policy is also a matter o f superstition to them.

Difference o f Education Level between the Countries:

Where in US, more than 90% of the people on an average are educated; the people in Bangladesh are very drastically poor in education. That’s why they don’t understand the value of safety from risk and insurance. They have least idea over this issue for what buying coverage is less present in the region o f Bangladesh.

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Average Less Net W ealth among people o f Bangladesh:

On an average, the net wealth among the people o f Bangladesh is very scarce, that’s why the risk level is also very low the resultant consequence is nothing but the less enthusiasm to buy more coverage.

Income Effect:

The income effect matters a lot. When more income emerges, risk also associates with the income. Income level is very low in Bangladesh for what the people in Bangladesh also face less risk to buy more coverage.

Less Publicity and M arketing:

Less publicity and marketing among the target markets and the common people have made it difficult for the insurance industries in Bangladesh to develop to a larger extent.

Legal Bindings for the Citizens:

It’s a legal binding for the people and citizens o f the United States to purchase some specific coverages or policies for a convenient life there but in Bangladesh it’s not mandatory. Even, it’s not suggested to buy any coverage in Bangladesh for convenient and safe lifestyle.

Government Subsidy:

There is no specific government subsidy applicable to the insurance industry in the region of Bangladesh but there are lot o f subsidies and motivational packages for the insurers from the side o f government.

Financial Capacity of the Insurance Industries in Bangladesh:

The financial capacity o f the insurance industries in Bangladeshis not so much flourished to captivate the policyholders from all types o f risks and uncertainties, for what the coverage is also not enthusiasized from even the side o f the insurers.

Number o f Insurance Companies:

The number o f insurance companies in Bangladesh is not so much overwhelming in comparison with that o f the United States. That’s why the overall insurance industry is considerably in a minor stage with respect to other industries in becoming a matter o f focus to the government, people, and the foreign investors.

So, these are the reasons o f lagging behind the US insurance industries that are not so much difficult for Bangladesh to overcome if proper initiatives are taken immediately.

5.7 Ultimate Decision:

So, it can be concluded that the chapter mainly has focused on different sort o f comparative analysis among the US insurance industries and Bangladesh insurance industries from five different and major comparable factors’ viewpoints. So, it has been found that in many sectors, it is proven that US insurance industries are well accomplished but Bangladesh insurance industries, though in a very scarce position now, but still it is growing in faster mode than that of the US insurance industries.

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Chapter :6 SW OT Analysis

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6.1 SWOT Analysis: Theoretical Overview

A SWOT analysis is commonly used in marketing and business in general as a method of identifying opposition for a new venture or strategy. Acronym for Strengths, Weaknesses, Opportunities and Threats, this allows professionals to identify all o f the positive and negative elements that may affect any new proposed actions.

It is impossible to accurately map out a business's future without evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats. A SWOT accomplishes this in four straight-forward steps that even rookie business owners can understand and embrace.

6.1.1 History of SWOT Analysis:

This remarkable piece o f history as to the origins o f SWOT analysis was provided by Albert S Humphrey, one o f the founding fathers o f what we know today as SWOT analysis.

The origins o f the SWOT analysis technique is credited by Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from many top companies. The goal was to identify why corporate planning failed. While working on a research project at the Stanford University sometime around 1960s to 1970s, Albert Humphrey developed an analytical tool to evaluate the strategic plans and find out why corporate planning failed. He coined this technique as SOFT analysis where -

S stood for what things are Satisfactory at present,

O denoted what Opportunities can be explored in the future,

F meant the Faults in the present and

T signified the Threats that could surface in the future.

In 1964 Urick and Orr at a conference changed the F to a W, and it has stuck as that, soFt to sWot.

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6.1.2 The Purpose of a SWOT Analysis:

The SWOT analysis enables companies to identify the positive and negative influencing factors inside and outside o f a company or organization. The main purposes o f SWOT analysis are-

• To help decision makers and compare ideas.

• To bring a clearer and common purpose and understanding o f factors for success.

• To organize the important factors linked to success and failure in the business world.

• To analyze issues that have led to failure in the past.

• To provide linearity to the decision making process allowing complex ideas to be presented systemically.

• To revise plans to best navigate systems, communities, and organizations

• As a brainstorming and recording device as a means o f communication

• To enhance “credibility o f interpretation” to be utilized in presentation to leaders or key supporters.

6.1.3 Scope of Using SWOT Analysis:

SWOT is meant to be used during the proposal stage o f strategic planning. It acts as a precursor to any sort o f company action, which makes it appropriate for the following moments:

• Exploring avenues for new initiatives

• Making decisions about execution strategies for a new policy

• Identifying possible areas for change in a program

• Refining and redirecting efforts mid-plan

The SWOT analysis is an excellent tool in organizing information and presenting solutions, identifying roadblocks and emphasizing opportunities.

Besides, the above mention fields here are some examples o f when a SWOT analysis can be used to assess:

• A company (its position in the market, commercial viability, etc)

• A method o f sales distribution

• A product or brand

• A business idea

• A strategic option, such as entering a new market or launching a new product

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• A opportunity to make an acquisition

• A potential partnership

• Changing a supplier

• Outsourcing a service, activity or resource

• Project planning and project management

• An investment opportunity

• Personal financial planning

• Personal career development - direction, choice, change, etc.

• Education and qualifications planning and decision-making

• Life-change - downshifting, relocation,

• Relationships, perhaps even family planning

6.1.4 The elements of a SWOT analysis

A SWOT analysis is a common strategic business planning tool that involves composing a list of four elements related to a new business project: strengths, weaknesses, opportunities and threats.

-I- Strengths

In a SWOT analysis, strengths describe the core competencies o f a business, strategic factors that may make a certain project more likely to succeed and areas where the business may have advantages over other similar businesses. Strengths are resources and capabilities that can be used for competitive advantage. For example, if an established cereal company plans to launch a new product, brand recognition might be listed as strength. Examples o f strengths that are often cited include:

• Strong brand names

• Good reputation

• Cost advantages o f proprietary

• Proprietary technology / Patents

• Consistent / growing revenue streams

• Strong customer base across multiple vertical industries

• Experienced Management Team

• Organizational expertise field

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• Financial Resources / investor relationships

• Strong brand awareness in the marketplace

• Partnerships with industry leaders

• Refined operations process

• Strong company culture

Businesses that are aware o f their strengths are better able to improve and exploit them to their advantage.

-I- W eaknesses

Weaknesses are things that can make a certain project less likely to succeed and areas where a company is particularly lacking. Weaknesses can derail a project before it even begins. For instance, a brand new company might be unknown to most consumers; low brand recognition and lack o f customer loyalty could be weaknesses. Other Weaknesses include:

• Weak brand name

• Poor reputation

• Ineffective and high cost structure etc.

• Poor financial position (debt, declining revenue, etc.)

• Unskilled workforce in critical areas

• Unfavourable perception o f brand in marketplace

• No proprietary technology / patents in critical areas

• Out o f date equipment / machinery / technology

• High costs o f doing business

• Poor location for access to customers / partners / talent

• Scalability issues with core products / services

• Poor relationships with customers

• Unresolved litigation, other legal issues

Once weaknesses are identified, a business takes steps to lessen the impact or turn them into strengths.

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-I- Opportunities

Opportunities are things that have the potential to increase profits, productivity or benefit a business in some other way. These factors could involve vendors who wish to work with the company to help achieve success, the positive perception o f the company by the general public, and market conditions that could make the project desirable to the a segment o f the market. Additional Opportunities include:

• Arrival o f new technology

• Unfulfilled customer needs

• Taking business courses (training)

• New technology in development / beta testing

• New markets for existing products

• Partner product bundles

• Partner co-marketing

• Access to skilled workforce

• Competitors facing problems (bankruptcy, lawsuits, etc.)

• New sales tools to penetrate existing markets

• Diversification into new markets with new products

• International distribution partnerships• Favorable impacts o f new legislation

Recognizing and taking advantage o f opportunities are important aspects o f running a successful business.

-I- Threats

Threats are the final element o f a SWOT analysis; they have the potential to harm a business. For instance, if you run the only pizza shop in town, the possibility that a new competitor will open a shop and take some o f your business is a threat. Unfavorable changes to laws, higher taxes and changes in consumer preferences other possible threats. Some other threats include:

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• Trend changes

• New regulations

• New substitute products

• Competitors getting stronger

• Market trends moving away from core products

• Pressure from supply chain squeezing margins

• Rising costs o f doing business

• Consumer ability to shift to substitute products

• Slow market growth / decline in market size

• Change in customer needs

• Key employees leave (to competitors, family reasons, etc.)

• Threat o f lawsuits (employees, customers, partners)

• Local economic / political climate inhibiting growth

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6.2 SWOT Analysis: Perspective o f Bangladesh Insurance Industry

Observing different aspects o f Bangladesh insurance industry, we have performed SWOT analysis. While performing SWOT analysis we detected various strengths, weakness, opportunities and threats in the perspective o f Bangladesh insurance industry.

-I- Strengths:

1

New business’sindividualinsurance;

1Micro insurance;

1Increasedpopulation;

1Emerging middle income groups;

-I- Explanation:

There are so many new businesses starting every day and manufacturing sector is booming with global demand. Every business is insured under an insurance company to protect its company from any kind o f accident. Therefore growing industry, mill, factories are creating better scope for the insurance companies to flourish their business.

Micro insurance can be a great prospective area for the insurance business in our country. Most of the people o f our country are unable to have costly and long term insurance policies. Micro insurance can be provided to individual personnel or to small business owners against little

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insurance premiums and with easy terms and conditions. When they will afford to minimize their risks at a lower price, they will take that opportunity and they will become to get used to it. This can cover a huge portion o f the society who can be a prospective target market for this business.

The emergence o f middle income group has a positive impact on the insurance industry of Bangladesh.

Although most o f people o f our country live under extreme poverty level and want to avoid insurance policy number o f potential policy holders in Bangladesh is growing with growth o f the population. There is somewhat relationship between growing populations with the number of public vehicle. As we know all public vehicle must have an insurance policy. So growing population also increase the motor insurance too. That is growth in population opens greater scope for every kind o f insurance business that results in growing prospect for insurance companies.

4- Opportunities:

1_____

Development of new policy;

1

Scope in non-traditional sector;

1

Service diversification;

i_____

Business sector;

Higher GDP;

i________________________

Scope of investment;

i________________________

Agriculture sector;

i________________________

Education sector;

4- Explanation:

Shadharan Bima Corporation (SBC) has long been the sole reinsures in Bangladesh and private insurance companies were statutorily compelled to place 100% of their reinsurance business with SBC. In 1990 the government amended the relevant provisions o f the insurance Act allowing 50% of all reinsurance o f general insurance business to be placed compulsorily with SBC and the rest to private reinsurance companies .About 70% of premium income from general insurance business in Bangladesh is retained locally and the rest 30% goes to reinsures abroad. Permissions to private insurance companies to act as reinsures will open up new opportunities to them. This will initiate open competition between the SBC and the private reinsures within the country and will reduce the reinsurance cost and increase efficiency. This amendment o f the existing rules can be another important policymaking that will facilitate the

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insurance business in Bangladesh. The private insurance companies can argue in favors o f their capability to act as reinsures on the basis o f the fact that the total capital belonging to the government owned general insurance companies is Tk. 550million while the private sector insurance companies ownTk.2500 million.

The GDP of our country is increasing than the previous year’s which results in increase o f per capita income. So this growing GDP and income holds bright prospects for insurance companies. The major problem is the incapability o f our people to pay the premium charged by the insurance companies. . With the growth in the income more and more people are now willing to take an insurance policy for safeguarding themselves from any danger.

Nowadays, along with traditional insurance services, they can offer various non-traditional insurance services to their customer. Target market o f insurance company may expand and they can offer different types o f non-traditional insurance services such as health insurance, personal accident insurance, travel insurance, burglary insurance and pension scheme.

Insurance companies can usually make more profit from investment activities than from their regular insurance business. The private insurance companies are realizing this fact and playing role in the financial market. Insurance companies are making large investment in government bonds, ICB projects and in private sector business. There are opportunities to enhance profit through effective and efficient money management by employing capable and experienced personnel. Scope o f investment expansion persists in the areas leasing, housing, health and money market.

Insurance is not just a tool o f risk coverage. It is also an attractive instrument o f savings. The mixture o f risk coverage with savings gives the opportunity for innovative product designing which means service diversification. In a dynamic insurance market one can expect to see new products being promoted at regular intervals. So far very little efforts have been taken to innovative and introduce need oriented insurance services in response to existing threats. The prospect o f the insurance business in various sectors that affect our economy can be differentiated in the following way.

The economy o f Bangladesh is predominantly an agrarian one, with most people engage in farming and fishing. The uncertainty o f agriculture due to crop failure caused by climate variation, drought, cyclone, flood and pests affects farmer income as well as government revenue. Furthermore, in the last few years commercialization has occurred in some sections of the agricultural sector. Increase in investment in the agricultural sector is creating a new opportunity for insurance industry. Various agricultural insurance services are becoming common these days. Demand for insurance protection against crop loans, livestock loans, fisheries loans and equipment loans are also increasing day by day.

Nowadays in Bangladesh the SME plays a important role in the economic development. But they are deprived from taking loans from bank for large amount. If insurance business focuses this section in Bangladesh they are able to contribute more in the economy .Thus insurance business has a bright prospect in business sector in a developing country like Bangladesh.

Insurance companies can provide different types o f scheme to expand education plan insurance.

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-I- Weaknesses:

1

Poor financial position of the insurance companies;

1

Centralization;

1

Too much complexity;

1

Traditional insurance act;

1

Traditional method;

1

Lack of information technology;

1____

Absence of business ethics;

■ The discrepancy between

customer expectations and employees’ perceptions;

Higher cost of business;

Problem of planning and administration;

Licensing difficulties;

Lack of qualified officials;

Inadequate training;

Insufficient service;

Low attractive offerings;

1____

Ignorance about claim settlement procedure;

-I- Explanation:

Most o f the insurance companies o f our country are facing financial problems. Recently government is trying to take initiative to close some o f the insurance companies because they are not maintaining the minimum standards. They are investing their money in poor securities and business which is vulnerable regarding getting back the money with profit. As a result most

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o f the insurance companies are suffering from loss years after years and for poor financial condition the insurance companies are also unable to expand their branch which is a barrier for the growth o f insurance business in Bangladesh.

Growing cost o f business is another problem that insurance companies are facing now a day. They urge that government tax, house rent, utility, commission fee, stationeries are growing day by day. But their businesses are not growing so fast with that rate. Besides this the policy holders are not willing to pay too much premium with growing.

Most o f the insurance companies in our country are located in urban areas and there are few branches in rural areas. They think that they might have better scope for performing their business as the economic condition o f the urban is better than the rural areas. They don’t think that the large number o f our population reside in rural areas and if branches are expanded in rural areas then the business can thrive if proper motivation policy is taken to aware the mass people o f the rural areas. Thus this centralization policy acts as an obstruction for the growth of insurance business in our country.

After the change o f the government, the whole planning and administrative measures are changed which is the main constraint for long term plans. Without long term planning any permanent development or solution o f existing problems are impossible.

To take an insurance policy there are great number o f rules and regulations which must be compelled by the insured person. And into those rules a vast number o f complexities is present there. Therefore the people are discouraged to take insurance policy because they think that the complexities will create extra pressure on their mind which may hamper other jobs.

Almost all the insurers and policyholders criticized the licensing system for insurance companies. They identified it as a major constrain behind the commencement o f new insurance business. Insurance companies opined that the government does not evaluate their documents of application with due consideration and unnecessarily delays o f approval. In many cases the government in all regimes gives restriction to those applicants who have political relationship or maintain liaison. This dirty role o f government not only encourages corruption but also hinders proper growth o f insurance business.

The present insurance act was enacted more than half a century back. Many amendments have been made though since then but the basic character o f the act has remained virtually unchanged. This act does not suit the needs o f life insurance in the present day in Bangladesh. The all-pervasive stringent regulatory functions carried and exercised by the office o f the controller o f Insurance (CI) is not consisted with the market liberalization policy o f the government. In its present form, the act is obstructing, rather than helping, healthy growth o f life insurance in the company.

Insurance companies perform their activities by recruiting marketing agent and they try to convince the people to take a policy. Most o f the cases the agents are not properly trained and they don’t know the right process make their policy holders. Therefore these field level agents are unable to fulfill their target and act as a constraint in the insurance business.

Still Bangladesh insurance company using or follows traditional methods on insurance policy. Whereas foreign companies are using modern systems like computerized system. Our local company does not want to change themselves.

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Spread o f insurance business in Bangladesh failed for lack o f proper training by the employees specially the field employees o f insurance companies. Still there are not enough training center to provide proper training regarding insurance activities for the officials o f insurance company. Though there is one insurance training center in Bangladesh it totally failed to achieve its target in insurance field.

Another problem is that most o f the time many o f them do not use any web address, which is essential for a large Leasing company. They can provide more information to its client by using web site

In Bangladesh insurance company people failed to provide better service to the mass people that’s why the people who want to take the insurance policy they loss their interest from insurance. At same time in foreign country insurance workers goes to customer’s house and offices regularly to aware themselves and influence them to take insurance policy. In that’s case Bangladesh insurance company people are not that much expert. Lack o f marketing policy one o f the major problems in insurance company is lack o f marketing policy. Management is not taking initiative to increase their marketing expansion. They provide tiny amount advertisement, which is not sufficient for increasing business development.

Some insurance companies create harassment on the policy holders or sometimes on the dependents o f the policy holders when they want back their money after death or maturity. The insurance companies show different causes in order to make delay to return back the money at expected time. Sometimes they are eager to pay less than the desired amount by creating various circumstances such as they try to say that the disaster o f the subject matter o f the policy is not responsible due to their activities. Besides this some field officials also create some illegal acts. They often try to give false information to the people for buying a policy. And these kind o f illegal acts create bad reputation to the insurance companies and hindrance the overall insurance business. Those who are harassed by the insurance companies discourage other not to take an insurance policy.

The offerings o f much o f the insurance companies are not so much attractive that they can allure people to buy a life policy.

As a result o f the differences in the understanding o f customer expectations by front- line service providers. The discrepancy between employee’s perceptions and management perceptions As a result o f the differences in the understanding o f customer expectations between managers and service providers

In life insurance, for the sales personnel particularly, importance o f training cannot be overemphasized. But unfortunately the present facilities for training, despite what the Insurance academy is doing, are meager and not sufficient.

Ignorance about claim settlement procedure creates a drastic problem for the insurance companies. Insurers viewed that many policyholders don’t know the way o f making the claim. The only abuse the insurer for instant claim settlement. They also don’t know the requirements to be submitted to the insurers. But the insurers have to comply with the formalities before settling the claim. The process usually delays due to the ignorance o f policyholders even though the policyholders hold the insurance companies responsible for this delay.

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-I- Threats:

Less public awareness;1_________

1

Illiteracy;

1

Low Savings;

1

Lack of exposure;

1_________

Undue promotion;

Low skilled workers;1_________

1

Poor economic conditions;

1

Political instability;

1

Inadequate Government Support;

1_________

Lack of supervision from the government;

■ Lack of motivation program towards public;

-I- Explanation

A vast majority o f people especially in rural areas are left outside the insurance coverage. This mainly results from the unawareness among the people. Even a large portion o f people don’t have the minimum idea o f insurance. People are not aware o f the benefits from the insurance policy and a great number o f people believe that insurance business is nothing but cheating and assume that insurance policy is quite unnecessary. This negative attitude from the people is lessening the importance o f absorbing insurance policy in a large extent.

Insurance awareness is poor. Agents are not skilled enough. These agents cannot perform their job properly to make the people aware o f life insurance.

Mass illiteracy is another factor that adversely affects the marketing o f insurance. About 70% of the population is floating in the sea o f ignorance. Illiteracy leads one to think that the insurance is deception; it is no value in life. They cannot think rationality because they do not know what is insurance and what its importance as security for future.

Bangladesh is one o f the poorest countries in the world and most o f the people in this country live under extreme poverty level. All o f these people fight hard to earn their livelihood and are marginal in relation to the expenditure with the income. It is quite impossible for them to save some money for future need. Therefore they are quite unable to give the amount to the insurer

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which is called as premium and regarded as safety or precautionary measures against any accident. The number o f people who can bear the premium to the insurance company is very few in regard to those mentioned above. Therefore the overall poor economic condition is creating obstacle to flourish the insurance business in Bangladesh.

People o f Bangladesh have a very small saving potentially and thus have less or no disposable income. Almost the whole o f the income is exhausted in the process o f maintaining the day-today life. Thus they are left with little amount, which may not deemed to sufficient for the payment o f premiums. This factor discourages many to buy life insurance policy

Political instability is a major problem in Bangladesh. For the instability in politics, many disruptive situations are often created which are bad for any businesses. The people who operate various businesses in our country often experience various types o f inconvenience in running their business. Insurance business is not an exception 0of this. Political instability and inconsistency o f political courses are a serious problem for the insurance business.

Another main problem in the country is that the media is unconcerned to send the right message regarding insurance to the people. As a result a large portion o f population is completely unaware about the insurance policy. Another problem is that the insurance company does not provide adequate information in the company’s websites which can fulfill the queries o f their potential customers and satisfy themselves to buy an insurance policy.

A good number o f respondents held the government responsible for its little support for the enrichment o f insurance industry. Since the majority o f people is uneducated and is unaware about the benefits o f insurance, the government has to take the responsibility for wide publicity. But the government hardly performs this responsibility.

A very commonly noticed problem in every employment area o f Bangladesh is the undue employment and promotion. Insurance sector is also not free from this infamy. A significant number o f respondents answered in favor o f undue practice with regard to promotion. Since majority o f the insurance companies are in the hands o f private owners, the promotions sometimes depend on their willful decision. The performance o f the job holders is not properly appraise

Lack o f surveillance from government ministry encourages many insurance companies to follow some unethical practices like make harassment to policy holder and showing less in the financial statement. This not only destroying the reputation o f the well-known insurance companies but also creates negative impact in the mind o f the people about insurance. Besides this government sometimes impose some conflicting rules and regulation without discussing with insurance companies governing body. It creates conflict among insurance companies with government and act as one o f the main hindrances o f growing insurance business.

According to Green Delta Life Insurance Company the people o f our country are not much motivated by the company to take insurance policy for safeguarding themselves against any kind o f risk. Almost every time they failed to understand the people that insurance policy makes their life risk free all time. For lack o f motivation among the mass people insurance companies are always lagging behind from their expected target.

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Scrutinizing different aspects o f USA insurance industry, we have performed SWOT analysis. While performing SWOT analysis we detected various strengths, weakness, opportunities and threats in the perspective o f USA insurance industry.

-I- Strengths:

6.3 SWOT Analysis: Perspective of USA Insurance Industry

1

Higher per capita income;

1Developedtechnology;

1Huge demand;

1

Maintaining network both in urban and rural areas;

1

Maintainingcustomersatisfaction;

11____

Favorable political environment;

-I- Explanation:

In USA per capita income is high compared to other countries. As a result, life standard is also high. Consequently people are very much interested in taking insurance policies.

The development o f IT sector has added a new dimension in the insurance industry in USA. Online system have put a great influence in the development o f insurance business.

The demand o f insurance in individual life and business sector has played an importance role in the development o f insurance industry. The demand for insurance is also increasing rapidly.

Insurance companies o f USA maintain a stable network both is rural and urban areas. That means insurance industry in the USA is not centralized. This decentralization is very important for the flourish o f insurance industry.

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Insurance claim payment is the key to success in the field o f insurance. The good practice in claim payment has developed customer satisfaction in the insurance industry.

Political stability is very needed for any kind o f development. In the USA, political stability and good political environment has played a vital role in the development o f insurance industry.

4- Opportunities:

■ Development of new

polices;

i____________________________

Strong future growth;

i____________________________

■ Increase in the number of

users;

i____________________________

Service diversification;

i____________________________

■ Rising of 'middle class',

and an elite group of extremely ‘wealthy Americans’;

4- Explanation:

Though the insurance industry in USA is developed, there are also opportunities where more development is possible.

The more favorable insurance policies can be exercised. Favorable policies can accelerate the development o f insurance sector. Insurance companies can designed more and more new policies considering the demand o f the customers.

The USA has a great potentiality o f future growth. This can create a favorable environment in the insurance industry.

With the passage o f time, population is increasing. This increased population will also allow additional demand o f insurance. Side by side, increased population will also demand various miscellaneous general insurance policies.

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Insurance sector has a great potentiality. So, service diversification o f the insurance companies can be fruitful for the success o f insurance sector.

Emergence o f the middle class families and wealthy Americans can also be a great opportunity for the insurance sector.

-I- Weaknesses:

Insurance frauds;

l_____________________________________________________

■ Low investment compared to other

industries;

l_____________________________________________________

Dominance of entrenched players;

-I- Explanation:

The insurance industry has a very little weaknesses. Among the weakness, insurance frauds, low investment, dominance o f entrenched players etc. are the most mentionable weaknesses.

In the history o f insurance industry o f USA, insurance frauds have also seen but not usually it is found. According to a survey, fraud accounts for 5-10 percent o f claims costs for U.S. and Canadian insurers.

In the USA, established insurance companies o f USA, have a great dominance in the market. As a result, new companies often shrinks. \

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-I- Threats:

■ US recession and weakening of

financial market;

Mounting insurance fraud;

■ Increased competition from

banks;

■ Legal framework and

bureaucracy;

4- Explanation:

The insurance industry o f the USA is facing some threats that can be harmful for the development o f insurance industry.

The recent US recession can play a great influence in the USA economy. As a result, the insurance industry o f USA may also be affected.

The increase in the insurance frauds may become a great threat for the insurance industry of the USA. In addition, banks have also started to provide similar schemes that insurance companies provide. As a result, the demand o f insurance may also be hindered. So, increased competition from banks is also posing a great threat in the insurance industry.

Strict legal framework and the complexity o f bureaucracy also harmful for the development of insurance industry. Bureaucracy may worsen the environment o f insurance industry.

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Now we will proceed to demonstrate the comparison between the insurance industry of Bangladesh and USA based on the SWOT analysis that we presented before.

6.4 Comparative SWOT Analysis Scenario between Bangladesh and USA InsuranceIndustry:

Elements ofInsurance Industry Scenario

PositionBangladesh Perspective USA PerspectiveSWOT

Strengths

W eaknesses

Opportunities

1. New business’s individual insurance;2. Micro insurance;3. Increased population;4. Emerging middle income groups;

Threats

1. Poor financial position o f the insurance companies;2. Higher cost o f business;3. Centralization;4. Problem of planning and administration;5. Too much complexity;6. Licensing difficulties;7. Traditional insurance act;8. Lack o f qualified officials;9. Traditional method;10. Inadequate training;11. Lack o f information technology;12. Insufficient service;13. Undue promotion;14. Low attractive offerings;15. The discrepancy between customer expectations and employees’ perceptions;16. Ignorance about claim settlement procedure;17. Absence o f business ethics;1. Development o f new policy;2. Higher GDP;3. Scope in non-traditional sector;4. Scope o f investment;5. Service diversification;6. Agriculture sector;7. Business sector;8. Education sector;1. Less public awareness;2. Low skilled workers;

1. Higher per capita income;2. Developed technology;3. Huge demand;4. Maintaining network both in urban and rural areas;5. Maintaining customer satisfaction;6. Favorable political environment;1. Insurance frauds;2. Low investment compared to other industries;3. Dominance o f entrenched players;

1. Development o f new polices;2. Strong future growth;3. Increase in the number o f users;4. Service diversification;5. Rising o f 'middle class', and an elite group o f extremely ‘wealthy Americans’;

1. US recession and weakening of financial market;

USA is inbetterposition

Bangladesh is in worse situation

Bothcountrieshave greatpotential todevelopinsuranceindustry.

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3. Illiteracy; 2. Mounting insurance fraud; Bangladesh4. Poor economic conditions; 3. Increased competition from is in worse5. Low Savings; banks; situation6. Political instability; 4. Legal framework and7. Lack o f exposure; bureaucracy;8. Inadequate Government Support;9. Lack o f supervision from the government;10. Lack o f motivation program towards public;

-I- Findings:

From the comparative analysis, we find that Bangladesh insurance industry is in worse situation compared to that o f USA. From the table it is clear that Bangladesh insurance industry is full with threats and weaknesses. On the other hand, the strengths o f Bangladesh insurance industry are too little compared to threats and weakness. By the way, Bangladesh insurance industry has very good opportunities o f improvement. By taking proper steps, we can convert these opportunities into strengths.

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Chapter :7 Real Cases

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7.1 Real Cases: Bangladesh Perspective

• Case 1: Reinsurance

Insurer: Karnafuli Insurance Co. Ltd.Re-insurance with: Shadharan Bima Co. Ltd. and Rliance Insurance Co. Ltd.Insured: Saad Musa Fabrics Ltd. (garments factory)Sum insured: 33,60,00,000 tk Date of loss occurred: 7.11.05 Intimated date: 8.11.05Appointment of surveyor report submission: 8.11.05Informing Re-insurers: 9.11.05Submitting fire loss documents: 14.11.05Submitted documents: 14.12.05Primary report submission: 14.12.05Final Survey report submission: 24.05.07Date of Payment: 2.06.09Assessment of net loss (payment): 10, 38, 72,500 tk Important claim documents:1. Claim form duly completed in all respects and signed by the insured as well as their bankers or other co-insured.2. Copy o f relevant policy/ endorsement3. Survey report4. Fire Brigade report, copy o f FIR5. Policy investigation report6. Weather report or Certificate from Gazette Officer

• Case 2: Insurance Fraud

Insured Company: Sigma Sea FortInsurer Company: Shadharan Bima Corporation, Peoples Insurance Co. Limited & Green Delta Insurance Co.LimitedSurveyor: Buet & Prime Insurance Co.Company Condition & Nature: Under Litigation and Fish Company(cold storage)Sum Insured: 7,00,00,000 tk Policy Nature: Fire PolicyPeril Coverd: General fire risks, special coverage and accident caused by fire.Cause of Accident (False Cause): Defective fridge & blast o f thatCause of Blust (False Cause): Leakage in the high pressure pump and spreading out o f Amoniam gasPolicy Breach: Blast o f low pressure pump, where the blast should not be caused by thelow pressure pump. Itshould be the high pressure pumpAffcet of Accident: Damaged all fishes in the cold storage

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Why it’s Fraud: policy condition was breached by sabotaging the trans-meter o f coldstorage. While the trans-meter supposed to be outside the storage andthere were other automated measures for preventing this kind ofaccidents. So, that was not an accident.

7.2 Real Cases: USA Perspective

• Case 1: Newman Myers Kreines Gross PC VS Great Northern Insurance Co.

Insurer: Great Northern Insurance Co.Insured: Newman Myers Kreines Gross PC Compensation: No payment.

This Superstorm Sandy case arises out o f Con Edison’s decision to shut down certain electrical

services to prevent damage — no damage had occurred. As a result o f the electrical shutdown,

lawyers at Newman Myers could not enter their building. The firm submitted a claim for

business interruption with its property insurance company, which was denied. The U.S. District

Court for the Southern District o f New York upheld the denial. The court found that coverage

under the policy was triggered by “direct physical loss or damage.” The policyholder argued

that direct physical loss or damage meant “an initial satisfactory state that was changed by some

external event into an unsatisfactory state.” The policyholder posited that the cessation of

electrical services was “direct physical loss or damage,” since it prevented access to the building.

The court disagreed. It reviewed the case law upon which the policyholder relied, and found

that the relied-upon cases involved “some compromise to the physical integrity o f the

workplace.” It found that no such physical change occurred as a result o f the storm.

• Case 2: Zurich American Insurance Company VS Sony Corporation of America

Insurer: Zurich American Insurance Company Insured: Sony Corporation o f America Compensation: No coverage.

On a national level, this is perhaps the most important insurance coverage case o f 2014. Around 1974, the insurance industry added personal and advertising injury coverage to comprehensive general liability policies. This coverage included injury arising out o f the publication o f material that violates a person’s right o f privacy. For the past decade, this language has been subject to raging litigation across the country over whether violations o f the Telephone Consumer Protection Act are “published” within the meaning o f personal and advertising coverage.

In Zurich vs Sony, the battleground has shifted to coverage for data breaches. Millions o f Sony customers’ personal information was compromised. This resulted in over 50 class actions, which were multidistricted in California. Sony’s primary insurance companies, Zurich American Insurance Company and Mitsui Sumitomo Insurance Company o f America, sued Sony in New York. The court found that there was no coverage because there was no publication. The court reasoned that publication required an affirmative action by the policyholder and not an act by a

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third party. Since Sony’s system was hacked, the court held that Sony did not transmit the information to a third party and was not entitled to coverage.

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Chapter :7 Recomm endations

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> The government o f Bangladesh should increase credit margin for insurance industry to

reduce financial problem.

> The authority o f insurance industry o f Bangladesh should practice business ethics to

gain customer’s belief.

> The owners o f insurance industry should decentralize the insurance business to rural

area of Bangladesh to speared insurance service

> The owners o f insurance can arrange seminars for the public as well as for the

employees so that the employees can get a proper knowledge how to deal with customer

and how to increase their network and facility. Also, the perception of general people

towards insurance can be changed in a good way and people can feel interest to do

insurance.

> Insurance company o f Bangladesh should increase their online facility. By this it can

give and take facilities by setting in the desk.

> Insurance company o f Bangladesh should improve its technological facilities and it

should reduce its paper pencil works. By this the cost and time can be minimized. Also,

work will be easier by the advancement o f technology.

> The owners o f insurance industry should offer attractive insurance policy to increase

eagerness of customer in insurance sector.

> The government o f Bangladesh should update traditional insurance act.

> The owners o f insurance company should reduce discrepancy between customer

expectations and employees’ perceptions;

There are some recommendations given below for Insurance Industry of Bangladesh onthe basis of the overall condition of it:

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> The government o f USA should take precaution measures to stop insurance fraud.

> The owners o f insurance o f USA should increase investment in insurance sector

> The government o f U SA should take precaution measures to reduce economic

recession.

^ The government o f USA should make Legal framework and bureaucracy for insurance

industry.

There are some recommendations given below for Insurance Industry of USA on thebasis of the overall condition of it:

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Conclusion

The report that is on “Comparative Insurance Industries Overview: USA and Bangladesh”is report that mainly focuses on the pros and cons of the insurance industries in both US and Bangladesh. The report is an analysis bunch where lots o f analysis regarding the comparison of the insurance industries of US and Bangladesh have been shown and interpreted with necessary justification imperceptibly. The report is also a representation where the brief discussion on related insurance industries of the concerned countries have been discussed at first and after that the position of the insurance industries have been discussed with five major analytical viewpoints. The report shows that Bangladesh insurance industries though are now in a very minor level to compete with that o f US, but still the insurance industries o f Bangladesh is ahead of that of US in the sense of the growth rate per year in case of premium which also is a representation o f the total coverage taken by common people.So, it can be concluded that though the insurance industries in Bangladesh are not so much well matured, by following the recommendations, someday, of course in near future, it will be a matter o f comparison with that o f US. One thing also to be pleased that Bangladesh insurance industries have much higher growth rate than that o f the insurance industries o f the US. So, it can be concluded that though a disappointing situation still the insurance industries have been surpassed now, one day the insurance industries o f Bangladesh will compete with the insurance industries o f US.

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Azad, Abul Kalam (2001), 'Does Insurance Contribute Significantly to the Capital MarketDevelopment in Bangladesh?', Bank Parikrama, BIBM, Dhaka, Bangladesh. Bangladesh Bank (2006), Financial Sector Review, Research Department, BB, Dhaka. Bangladesh Insurance Association (various issues), Annual Report, BIA, Dhaka, Bangladesh.Choudhury T.A. and Raihan. A. (1999), "Implications o f WTO on the Banking and Financial Sector in Bangladesh." Bank Parikrama. June No-1, Volume - XXIV.Government of Bangladesh (2006), Bangladesh Economic Review, Ministry of Finance, GOB,Bangaldesh.Fross, Mikael, Esko Kalimo and Tapani Purola (2000), 'Globalization and

the Concept ofInsurance'- a paper presented in the international research conference on Social Security held at Helsinki during 25-27 September, Finland.GOB and World Bank (2004), 'A Review and Proposals for Reform of the Insurance Laws in Bangladesh', Dhaka, Bangladesh.Sengupta, Arjun, 2000. 'Financial Management o f Globalization- IMF and

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Websites:

1. www.wikipedia.com2. www.bea.com3. www.cbib.com4. www.centalbureauofinsurance.bd.com5. www.bangladeshbank.bd

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http://www.wikipedia.com/

http://www.bea.com/

http://www.cbib.com/

http://www.centalbureauofinsurance.bd.com/

http://www.bangladeshbank.bd/

Comparative Insurance Industries Overview between USA and Bangladesh

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