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Internship Report on
Problems and Prospects of General
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
CHAPTER
# 1
INTRODUCTION
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
1.0 Introduction
Insurance is essentially a collective endeavor under which a large number of individuals
agree to share the loss which a few of them would incur in future. This means insurance
protects those unfortunates who suffer heavy financial impact of anticipated misfortunes
by distributing the loss among many who are exposed to the risk of similar misfortunes.
General insurance is a type of insurance in which one person makes regular payments so
that he receives a sum of money different types of accidental loss. The process insurance
has been evolved to safeguard the interests of people from uncertainty by providing
certainty of payment at a given contingency. The insurance principle comes to be more
and more used and useful in modern affairs. Not only does it serve the loss / damage of
any losses it also provide financial benefits to the individual for death or at the end of a
time period .
1.1 Background of the study
This report has been prepared as requirement of the insurance and risk management
course. The report was based upon the overall insurance companys problems and course.
The report was based upon the overall insurance companys problem and prospects in
Bangladesh .I was duly approved by our course teacher Md. Mujibul Houque. This report
will help us to know the insurance business problem and prospects
1.2 Objective of the study
The key objectives of the studies are to identify the problems and prospects of the
General insurance in Bangladesh. The other objectives of this study are to generate some
suggestions to overcome the problems identified so as to ensure smooth functioning and
growth of insurance. To know about the best practices of insurance of Bangladesh is also
another objective of this study.
1.3Literature Review
Uninsured risk leaves poor households vulnerable to serious or even catastrophic losses
from negative shocks. It also forces them to undertake costly strategies to manage their
incomes and assets in the face of risk, lowering mean incomes earned. Welfare costs due
to shocks and foregone profitable opportunities have been found to be substantial,
contributing to persistent poverty (Morduch, 1990; Dercon, 1996, 2004; Rosenzweig
and Binswanger, 1993; Elbers et al., 2007, Pan, 2008). Insurance has the potential to
reduce these welfare costs. By offering a payout when an insured loss occurs, it avoids
other costly ways of coping with the shock leaving future income earning opportunities
intact. Furthermore, the security linked to being insured can be expected to allow the
avoidance of costly risk-management strategies with positive impacts on poverty
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reduction. This literature review provides an overview of the current state of research on
Insurance identifies key knowledge gaps and develops a conceptual framework to inform
and organize the research agenda of the insurance Facility in the area of impact
evaluation, demand and supply issues. For the purpose of this review, Insurance is
defined in line with Churchill (2006) as an insurance that (i) operates by risk-pooling (ii)
is financed through regular premiums and is (iii) tailored to the poor who would
otherwise not be able to take out insurance. The main focus of the literature review is on
voluntary insurance1. Other ways through which individuals or the public sector can
insure against risks, such as precautionary savings, access to credit or through public
safety nets are therefore not treated in detail in this review. However, this leads already to
one key omission in the existing literature: generally, the benefits of insurance are not
compared to alternative mechanisms that may provide insurance- like benefits, possibly
in a more cost-effective way, such as savings, consumer or emergency credit, and public
safety nets.
Organization and private individuals take of insurance to protect them against possible
financial losses caused by a range of causes or unexpected factors. This means that
should the worst happen and these losses occur, they will receive financial compensation
from their insurance company. Therefore, insurance provides companies with financial
protection in the event of loss that could influence their operations. Individuals unwilling
or unable to handle their own funds have been pleased to find and outlet for their
investment in insurance policies. Endowment policies, multipurpose policies, deferred
annuities are certain better form of investment. An individual from his own capacity
cannot invest regularly with enough of security and profitability.
Many of the existing literatures reviewed above clearly indicate that the insurance in
Bangladesh has not yet stood on a solid footing. Many reasons are there for the
backwardness and underdevelopment of insurance in Bangladesh
In a journal Assistant professor of DIU mentioned some diversified problem and
prospect of insurance in Bangladesh, there he mentioned that our main problems of
insurance are lower per capita income , poor knowledge of agents , illiteracy , religious
superstition , lower awareness , low savings , lack of continuity, shortage of fund , lack of
remainder, negligence policy holder, restriction , poor services to consumers, image , red
tapism to obtain compensation , lack of new products , low return , traditional
marketing ,traditional insurance act, restrictive insurance act , nature of intangibility ,
inadequate training, advantage of psc, discriminatory attitude, lack of reliability, lack of
advertisement, inability to solve the problems, low quality service, dearth of underwriter,
lack of confidence, inadequate government support, undue promotion , fabricated
information give by the agents, limited operational areas, licensing difficulty, rigid
premium, backwards of mentality.
In an interview with daily sun, Sheikh Kabir Hossain , Chairman of the BIA said in
reply to the question about insurance sector that The insurance sector can play an
important role in the growth of the economy of the country as it can accelerate the
development process. The sector in other countries is much stronger with policy supports
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
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as
it
can
ensure
a
sustainable
development
of
the
economy.
The industry in our country lacks attention of the policy makers and the previous
governments neglected the sector, but the present government under the leadership of
Prime Minister Sheikh Hasina has given much attention to the insurance sector.
He said mentioned various thing to reply the question of it current condition of the
insurance business and highlighted some problems There are several problems in the
sector. Many of the companies are facing problems in issuing initial public offerings
(IPOs) as the paid-up capital of the companies has been raised under the new Insurance
Act. He also said that In the past, the paid-up capital for the general insurance
companies was Tk 150 million, which has now been increased to Tk 400 million, while
that for life insurance companies has been raised to Tk 300 million from Tk 75 million. It
is not possible for some of the new companies to raise their paid-up capital to the set
level and so they will face setback for going public. But the provision is not applicable
for the previously registered (SEC) have agreed to consider the case on condition. As per
the consent of the authorities, the insurance companies with previous level of paid-up
capital would be able to release IPO with the condition that they will only offer stock
dividends and bonus shares but not any cash dividends, so that their paid-up capital can
increase. The companies would be able to offer cash dividends after their paid-up capital
is increased to Tk 400 million for general insurers and Tk 300 million for life insurers.
Mr Kabir Hossain said abut its size and its growth that:
The size of the market for life insurance as of December 31, 2009 amounts to Tk
105.153 billion while that for general insurance to Tk 12.764 million. The investment of
the sector market in life insurance marked a 24 percent growth in 2009 compared to that
in 2008, while 12 percent in general insurance. The premium of 17 life insurance
companies totaled to Tk 45.957 billion in 2009 while the amount was Tk 35.97 in 2008,
reflecting a 27 per cent increase. The premium of 43 general insurance was Tk 13.80
billion in 2009, compared with Tk 12.58 in the previous year.
Here daily sun asked about the reason of peoples reluctance of insurance business and its
claim , in reply he mentioned that the insurance sector still lacks of peoples confidence.
Although there are guidelines for clearing the claims, but still people face sufferings as
the
process
is
much
lengthy
and
requires
more
time.
This is because of the procedure, as most of the insurance company re-insures with public
sector companies and as per the provision, the re-insurance companies conduct
monitoring of the accidents and surveyors of the re-insurance company prepare the
report. But, in most cases, the people do not inform the company on time and, for
example for car insurance, while the accident takes place, the owner of the car brings the
vehicle
to
the
garage
and
inform
the
insurance
company.
But the surveyors are supposed to visit the damages in the spots, which create problems
with the claim. Delay in paying claims happens as the surveyors need time to complete
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the procedure and the report needs to be approved by the SBC. We are trying to simplify
the procedure and it would be possible through digitizing the system.
If private companies come forward for re-insuring, then it would be possible to ease the
process. We are trying to encourage the private companies for re-insuring and they can do
it in joint venture. Some of the local insurance companies are re-insuring with foreign
firms
on
a
50-50
basis.
Insurance journals
Internet books
Primary Sources:
The primary data were collected through interview with aid of an interview schedule. A
total number of 10 respondents randomly selected were interviewed. The sample
respondents comprised of 2 insurers from life insurance, 5 policyholders and 3 nonpolicyholders.
All the data have been analyzed and compared based on Eastland Insurance Company
Ltd.
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CHAPTER#2
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
49 insurance companies transacted both life and general insurance schemes. These
companies were of various origins British, Australian, Indian, West Pakistani and local.
Ten insurance companies had their head offices in East Pakistan, 27 in West Pakistan, and
the rest elsewhere in the world. These were mostly limited liability companies. Some of
these companies were specialized in dealing in a particular class of business, while others
were composite companies that dealt in more than one class of business. The government
of Bangladesh nationalized insurance industry in 1972 by the
Bangladesh Insurance (Nationalization) Order 1972. By virtue of this order, save and
except postal life insurance and foreign life insurance companies, all 49 insurance
companies and organizations transacting insurance business in the country were placed in
the public sector under five corporations. These corporations were: the Jatiya Bima
Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima
Corporation, and Surma Jiban Bima Corporation. The Jatiya Bima Corporation was an
apex corporation only to supervise and control the activities of the other insurance
corporations, which were responsible for underwriting. Tista and Karnafuli Bima
Corporations were for general insurance and Rupsa and Surma for life insurance. The
specialist life companies or the life portion of a composite company joined the Rupsa and
Surma corporations while specialist general insurance companies or the general portion
of a composite company joined the Tista and Karnafuli corporations.
After independence of Bangladesh, insurance industry was nationalized. Subsequently
through the enactment of Insurance Corporation Act VI, 1973, two corporations namely
Sadharan Bima Corporation (SBC) for general insurance and, Jiban Bima Corporation for
life insurance were established in Bangladesh. SBC was acting as the sole insurer of
general insurance till 1984. Between 1985 to 1988 first generation of private general
insurance companies were emerged as Bangladesh Government allowed the private
sector to conduct business in all areas of insurance for the first time in 1984. A total of 16
private general insurance companies were registered in that phase. In 1996 another 8
private general insurance companies were registered. The third generation of private
general insurance companies, which included 18 companies, came into operation between
1999 and 2001. The general insurance market in Bangladesh now consists of 43 private
sector insurance companies and 1 state owned insurance company. Insurance Corporation
(amendment) Act 1990 provides that 50% of all insurance business relating to any public
property or to any risk or liability appertaining to any public property shall be placed with
the SBC and the remaining 50% of such business may be placed with this corporation or
with any other insurers in Bangladesh. But for practical reason and in agreement with the
Insurance Association of Bangladesh SBC underwrites all the public sector business and
50% of that business is distributed among the existing 43 private general insurance
Companies equally under National Co-insurance Scheme.
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Problem and Prospect of general insurance A case study of Eastland
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companies
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
The total premium income from private sector life insurance companies rose from TK
35794.53 million in 2008 to TK 45957 million in 2009 registering growth of 27.75%
The gross premium income of private sector non life insurance companies also increased
from TK11163.03 million in 2008 to TK 12284.22 million in 2009 registering the growth
of 10.93%.
The life fund of the private sector insurance companies increased to TK 105,153.96
million in 2009 from TK 80863.15 million in 2008 registering the growth of 30.04 %.
The total investment of the private sector life insurance companies rose from TK
67,151.19 million in 2008 to TK 87053.53 million in 2009 registering an increase of
29.64%. The total investment of private sector non life insurance companies stood at
TK.12764.15 million in 2008 registering a growth of 13.21 %.
The total asset of the private sector life insurance companies stood at TK 118020.14
million in 2009 against the TK. 91,367.73 million in 2008 registering a growth of
29.17%.
The total asset of private sector non life insurance company stood at TK32, 376.63
million in 2009 against TK. 22756 million in 2008 registering a growth of 43.59 percent.
It is hoped that the newly established insurance Regulatory Authority will help to
modernize and bring the insurance laws and rules of Bangladesh in line with international
standards and also help bring more discipline in the sector.
The Bangladesh Insurance Association strongly feels that professionalism modern
management and sales techniques and new products development are necessary for the
growth and progress of the industry.
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Problem and Prospect of general insurance A case study of Eastland
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CHAPTER #3
PROFILE OF EAST LAND
I N S U RA N C E C O M PA N Y LT D .
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Problem and Prospect of general insurance A case study of Eastland
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economic
sectors
including
financial
institutions,
Trading,
garments,
Pharmaceuticals, Press, Construction, Cold Storage etc., started its journey as one of the
first generation General Insurance Companies in the private sector from 5th November,
1986. Eastland was listed as a public limited company with Dhaka Stock Exchange
(DSE) in 1994 and its Tk.30 million shares with 40% premium were over-subscribed by
more than 12 times! Ever since, its performance remained steady with average annual
growth rate of 20% over the last 5 years.
The total Asset of the Company is over Tk. 1104 million having Reserve base of about
Tk. 554 million and investment portfolio Tk. 825 million. The company has so far settled
claims amounting to Tk. 997.44 million and has been paying 'double digit' Dividends to
its shareholders ever since its inception plus stock Bonus in recent times.
The fundamental principle followed by the company from the very inception was to
maintain dynamism in its business policy as well as competitive edge in the market
through service innovation and obtaining best bargain from the global market of
reinsurance. Eastland is equally alive to its Corporate Social Responsibility (CSR). The
company stepped into 25 years of its successful operation on the 5th of November, 2010
and it has by now attained the height of sound financial strength and enviable goodwill,
thus being categorized among the Top-Ten' in the general insurance sector. The
Management of the company is a combination of astute executives with wealth of
experience of the Industry as well as young and dynamic leaders of to day; to meet the
challenges of to-morrow;
Eastland has been offering comprehensive range of insurance packages from its 23
branches throughout Bangladesh, which include: Fire, Marine, Hull, Motor, Industrial All
Risks, Engineering, Aviation, Personal Accident, Medi-claim and Miscellaneous risks.
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Eastland is a proud insurer of host of clients ranging from distinguished individuals to big
trading firms, Banks & Financial Institutions as well as large national & multinational
companies.
The company is living up to its promised slogan: The name you have learnt to Trust by
upholding its personalized services in both Sunny & Rainy days! As such, Eastland's
name has been embedded in the hearts of thousands of its clients.
Registered Name
Registered office
Paid up Capital
Authorized Capital
Incorporation
Commencement of Business
: AA-
: 1994
: 1994
: 1994
: Tk. 100
: Tk. 61.65
: 20%
Reserve Base
Investment Portfolio
Number of Branches
: 23
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Problem and Prospect of general insurance A case study of Eastland
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: BDT. 1,000,000,000
Paid up capital
: BDT. 3,28,780,000
AB Bank Ltd.
National Housing Finance and Investments Limited, a public limited company was
incorporated on August 18, 1998 as a non-banking development financial institution
under Companies Act 1994 with registered office at 109, Bir Uttam C.R Datta Road (ExSonargaon Road), National Plaza (7th & 8th Floor), Dhaka-1205
Authorized capital
Paid up capital
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Chairmans Profile
Mr. Mahbubur Rahman, Chairman is an eminent business person in Bangladesh. He is the
President of International Chamber of Commerce (ICC) Bangladesh, the world business
organization, Member, Business Advisory Council (BAC) of the United Nations
Economic and Social Commission for Asia and the Pacific (UNESCAP) Bangkok,
Member, Board of Governors, Institute of Business Administration (IBA), University of
Dhaka, Member of the Board of Bangladesh Open University (B0U) and Dhaka Stock
Exchange Limited. He is the chairman and CEO of
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Chairman
The Board of Eastland Insurance consists of twenty Directors, among them, thirteen are
sponsors, six are from Shareholders and the remaining one is an independent.
Proprietor
Chemo Pharma Trading Agency
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Problem and Prospect of general insurance A case study of Eastland
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Partner
M. Rahman & Co.
Mrs. Hameeda Rahman
Director
ETBL Holdings Limited
Eastern Trading Bangladesh Limited
ETBL Development & Construction Limited
ETBL Securities & Exchange Limited
Progressive Investment Limited
Century Cold Storage Limited
Managing Director
Pioneer Rope Mfg. Co. Limited
Director
Rahman Enterprise Limited
Holy Crescent Hospital Limited
Hotel Saymen Limited Coxs Bazar
Proprietor
Trade International
Director
Lexel Knitwear Limited
Sunnex Limited
Director
Shinko Electro Plus
Sunnex Limited
Managing Director
Jamsons Makers & Packers Limited
Director
Islam & Company Limited
Babu Edibles Limited
Nishi Green Fields Limited
House maker
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Managing Director
Chandpur Jute Balers Limited
Eastern Overseas Limited
Mrs.Taslima Akhtar
Director
Social Investment Bank Limited
Union Fisheries
Director
Monico Plastic Industry
Heera Jewelers Limited
Proprietor
Media Wave
House maker
Director
Century Cold Storage Limited
Chairman
Dhaka Ink Company Limited
Managing Director
The Merchants Limited
Elite Printing & Packages Limited
House maker
Mission:
To create and deliver risk solutions and services that makes our clients risk-free and
successful.
To be among its peers in the market by providing fastest personalized services to the
clients through utmost good faith, good conduct, sincerity and integrity.
Vision:
To contribute actively for the betterment of the policyholders, shareholders and well
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being of the society at large through comprehensive insurance protection and creative
investment.
To double sales revenue over the next five years by providing maximum security for the
properties of the existing and potential clients
3.2 Management
Insurance is basically a technical business and dependent to a great extent on the quality
of techno-human resources available to form a management team. The company has in its
strength good number of highly qualified & experienced insurance personnel. The
operation of the company is being carried out by an experienced Management team with
wide exposure to insurance industry. Mr. M. Azmal Hoque, ACII, Managing Director
joined the company as Executive Director on February 1991 with a long job experience
in insurance business both at home and abroad. The Management team consists of the
following Executives:
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Internship Report on
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Executive Director
Mr. Ghulam Rahman
Mr. Shamsuzzaman
Head Office
Mr.Md.Tariful Islam
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Office
Mr. Md. Mosaraf Hossain
Company Secretary
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
The activities of the company are being carried out through the various Departments
namely Marketing, Underwriting, Re-insurance, Claims, Administration, Branches
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Control Department, Finance & Accounts, Audit/Inspection & Legal matters, Shares &
Investment, Information Technology, Board Secretariat and Company affairs
Earthquake Damage
Flood Damage
Explosion Damage
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Problem and Prospect of general insurance A case study of Eastland
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Burning of forest, bush, jungle & the clearing of lands by fire Dam
Marine Insurances
ICC-B
ICC-C
We also provide Theft & Pilferage (TP) and Non-delivery coverage with ICC-B &
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Coverage. ICC-A covers all risks with some exceptions. Moreover, we are providing
Inland Transit coverage by Truck/Lorry/Rail/Burge/Country Boat as required by the
Insured.
Marine Hull Insurance:
Total Loss only including Sue and Labor charge on Hull & Machinery.
Motor Insurance
Private Vehicle
Commercial Vehicle
Motor Cycle
Miscellaneous insurance
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Engineering Insurance
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Specialized Product
We also provide the following specialized products:
Shopkeepers Insurance
Aviation
3.4 Branches
Eastland Insurance Company Limited has been operating its business through twentythree branches located at different commercially potential areas across the country.
Branches are mainly concentrated in Dhaka and Chittagong. Among the branches, 13 are
in Dhaka, 3 are in Chittagong, 5 are in Khulna and one branch each at Rajshahi and Sylh
Name of
Branches
Address
Telephone
Number
Principal
PABX;
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9564600
(Auto Hunting)
Office
Imamgonj
7311624
Nawabpur
Road
7114253
Motijheel
9552433
Kawran Bazar
8112063
Elephant Road
8627497
Malibagh
Mohakhali
Gulshan
8852197
Narayangonj
7631937
Mymensingh
66766
Tangail
54910
Rajbari
65761
Name of
Branches
Address
Telephone
Number
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Agrabad
Jubilee Road
613954
Feni
74415
Name of
Branches
Address
Telephone
Number
Khulna
721615
Jessore
68851
Kushtia
61982
Meherpur
62981
Satkhira
63805
Name of
Branches
Address
Telephone
Number
Bogra
66105
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Name of
Branches
Address
Telephone
Number
Sylhet
718725,720498
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Fire insurance
The company underwritten a total fire insurance premium of TK206174577/- including
an amount of3116693/- from the public sector . the net premium income stood at Tk
65625677/- after ceding re- insurance premium of Tk 140548900/- . During the year
2010 , total payment of claim was 44309793/- against whch recovery from re-insurance
came to Tk54132259/- including previous years recovery.
Marine Cargo Insurance
The total gross income from marine cargo business was Tk. 17213622/- including
premium of Tk 8919527/- from public sector. The net premium income of marine cargo
business stood at Tk. 138270790/- after ceding Tk. 33865432 on account of re- insurance
premium. During the year , net amount of claim for (Tk.688065/-) was paid on this
account.
Marine Insurance (Hull and Aviation)
In the year 2010, the total underwritten premium income from marine hull and aviation
insurance business was Tk 13580614/- including premium of Tk 522695/- from public
sector business. The net premium income came to Tk.4405792/- after ceding Tk.
9174822/- on account of re-insurance premium. During the year . net amount of claim for
TK688065/- was paid on this account.
Motor Insurance
From motor insurance business our total gross premium income was Tk.56266771/including public sector business of Tk.850774/- . After ceding reinsurance premium of
Tk. 1868388/- the net contribution to the revenue account was Tk.54398383/-. During the
year net amount of motor claims to the extent of Tk. 15760110/- was paid.
Miscellaneous Insurance
The total gross premium of miscellaneous business came to Tk. 37465177/- including Tk.
15407997/- from the public sector. In the year 2010, an amount of Tk. 28620238/- was
ceded on account of re- insurance premium. During the year, the net amount of claim for
Tk.3259449/- was paid on this account.
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3.6 Claims
Eastland maintains strong commitments to effective handling of claims and has the builtin reputation in the market for expeditious settlements of claims.
Eastland is always ready to extend personalized service to its valued clients and for
maintaining close relationship with them. When there is a substantial loss of the insured
properties, Eastland-Executives immediately rush there along with a Govt. licensed
surveyor and provide advice for minimization of loss as soon as they receive loss
information from the Insured and considering the severity of loss arrange on account
partial payment for immediate recovery of the Insureds loss on the basis of the
preliminary
Survey
Report.
For settlement of claims at the soonest possible time, simplest procedure and formalities
are followed and are being executed through the claim Depts., headed by a highly
motivated and long experienced Asst. Managing Director being assisted by other senior
personnel.
The company so far settled from the inception claims amounting to Tk. 997.44 million.
During the year 2010, it settled 340 number of claims for 79.11 million on account of
fire, Marine, Motor and Miscellaneous insurance.
Claims Settled during last five years:
Year
Taka in Million
2006
73.97
2007
71.35
2008
92.80
2009
73.73
2010
79.11
390.96
3.7 Investment
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Taka in million
50.00
4.50
III.
Debenture Beximcom
8.88
IV.
Fixed Deposit
II.
V.
VI.
326.51
30/00
405.05
Total
824.94
(1)The intending sponsors must first submit an application in prescribed form to the
Chief Controller of Insurance for prior permission.
(2) After necessary scrutiny the Chief Controller shall forward the application with his
Recommendation to the Ministry of Commerce.
(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet
Committee constituted for this purpose.
(4) The decision of the Committee, if affirmative, should be sent back to the Ministry of
Commerce which in turn should send it back to the Chief Controller of Insurance for
communicating the same to the sponsors.
(5) The sponsors would then be required to apply in a prescribed form to the Registrar of
Joint Stock Companies to get registration as a public liability company under the
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CHAPTER # 4
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Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
people dont have the minimum idea of insurance. People are not aware of the benefits
from the insurance policy and a great number of 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 of absorbing insurance policy in a
large extent.
Centralization
Most of 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 of the urban is better than the rural areas. They
dont think that the large number of 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 of the rural areas. Thus this centralization policy acts as an
obstruction for the growth of insurance business in our country.
Low awareness
Insurance awareness is poor. Agents are not skilled enough. These agents cannot perform
their job properly to make the people aware of life insurance.
Illiteracy
Mass illiteracy is another factor that adversely affects the marketing of insurance. About
70% of the population is floating in the sea of 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.
4.1.2 Economic Problems :
Poor economic conditions
Bangladesh is one of the poorest countries in the world and most of the people in this
country live under extreme poverty level. All of 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 which is called as premium and regarded as safety or
precautionary measures against any accident. The number of 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.
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
deemed to sufficient for the payment of premiums. This factor discourages many to buy
life insurance policy.
4.1.3 Political problems :
Political instability
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 of
inconvenience in running their business. Insurance business is not an exception 0of this.
Political instability and inconsistency of political courses are a serious problem for the
insurance business.
Lack of supervision from the government
Lack of 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 of the well known
insurance companies but also creates negative impact in the mind of 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 of the main
hindrances of growing insurance business.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
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.
Licensing Difficulties:
Almost all the insurers and policyholders criticized the licensing system for insurance
companies. They identified it as a major constrain behind the commencement of new
insurance business. Insurance companies opined that the government does not evaluate
their documents of application with due consideration and unnecessarily delays of
approval. In many cases the government in all regimes gives restriction to those
applicants who have political relationship or maintain liaison. This dirty role of
government not only encourages corruption but also hinders proper growth of insurance
business.
Traditional Insurance Act
The present insurance act was enacted more than half a century back. Many amendments
have been made though since then but the basic character of the act has remained
virtually unchanged. This act does not suit the needs of life insurance in the present day
in Bangladesh. The all pervasive stringent regulatory functions carried and exercised by
the office of the controller of Insurance (CI) is not consisted with the market
liberalization policy of the government. In its present form, the act is obstructing, rather
than helping, healthy growth of life insurance in the company.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
mass people insurance companies are always lagging behind from their expected
target.
Lack of information technology
Another problem is that most of the time many of 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
Insufficient service
In Bangladesh insurance company people failed to provide better service to the mass
people thats 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
customers house and offices regularly to aware themselves and influence them to
take insurance policy. In thats case Bangladesh insurance company people are not
that much expert.
Lack of marketing policy
One of the major problems in insurance company is lack of 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.
The discrepancy between customer expectations and employees perceptions
As a result of the differences in the under standing of customer expectations by front- line
service providers.
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
The offerings of much of the insurance companies are not so much attractive that they
can allure people to buy a life policy.
Lack of Advertisement
The lacking of proper advertisement and information about life insurance package are
also important factor for poor life insurance business.
Lack of Confidence
Lack of faith upon insurers is one of the fundamental reasons for which insurance
business cannot strong position in Bangladesh. Most of the respondents have said that
insurance in Bangladesh couldnt achieve the fullest faith of people. At one side,
insurance business is not well known to the general people and on the other side; the
known people are dubious about its service. Public image about services of insurance
companies is very poor. Majority of the insurance concerns and almost all non policyholders confessed this very frankly and counted it as a burning constraint behind the
progression of insurance business in Bangladesh. This feeling of distrust is very intense
in the case of life insurance as life insurance contract is usually made for a longer period
of time. The non-policy holders argued that the motive of insurance companies is to be a
millionaire over night.
Inadequate Government Support:
A good number of respondents held the government responsible for its little support for
the enrichment of insurance industry. Since the majority of people is uneducated and is
unaware about the benefits of insurance, the government has to take the responsibility for
wide publicity. But the government hardly performs this responsibility.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
A very commonly noticed problem in every employment area of Bangladesh is the undue
employment and promotion. Insurance sector is also not free from this infamy. A
significant number of respondents answered in favor of undue practice with regard to
promotion. Since majority of the insurance companies are in the hands of private owners,
the promotions sometimes depend on their willful decision. The performance of the job
holders is not properly appraise
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
more people are now willing to take an insurance policy for safeguarding themselves
from any danger.
Increased population
There is a big opportunity lies ahead for the insurance companies as the population of our
country are increasing day by day. Although most of people of our country live under
extreme poverty level and want to avoid insurance policy number of potential policy
holders in Bangladesh is growing with growth of 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 of insurance business that results in growing prospect for insurance
companies.
New businesss individual insurance
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 of accident. Therefore growing industry, mill,
factories are creating better scope for the insurance companies to flourish their business.
Developing mass awareness about insurance
People are now much more conscious about their safety. So they are encouraged to take
an insurance policy for making their life free from any unexpected occurrence. Increase
in literacy rate is helping predominantly to create awareness among the people regarding
taking insurance policy. Besides this insurance companies are also trying to eradicate the
negative attitude of people towards the insurance company by organizing various
programs such as seminars, programs including social responsibilities etc.
Micro insurance
Micro insurance can be a great prospective area for the insurance business in our country.
Most of the people of 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 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 of the society who can
be a prospective target market for this business.
Development of new policy
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
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 of the insurance Act allowing 50%
of all reinsurance of 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 of the existing rules can be another important policymaking
that will facilitate the insurance business in Bangladesh. The private insurance companies
can argue in favors of their capability to act as reinsures on the basis of 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.
Scope in non-traditional sector
Nowadays, along with traditional insurance services, they can offer various nontraditional insurance services to their customer. Target market of insurance company may
expand and they can offer different types of non-traditional insurance services such as
health insurance, personal accident insurance, travel insurance, burglary insurance and
pension scheme.
Scope of investment
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 of investment expansion persists in
the areas leasing, housing, health and money market.
Service diversification
Insurance is not just a tool of risk coverage. It is also an attractive instrument of savings.
The mixture of 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 of the insurance business in various sectors that affect
our economy can be differentiated in the following way.
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
4.3 The prospect of the insurance business in various sectors that affect
our economy can be differentiated in the following way.
Agriculture sector
The economy of Bangladesh is predominantly an agrarian one, with most people engage
in farming and fishing. The uncertainty of 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.
Business sector
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
Education sector:
Insurance companies can provide different types of scheme to expand education plan
insurance.
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
CHAPTER # 5
R E C O M M E N DAT I O N
AND
C O N C LU S I O N
Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
Uphold the interest of policy holder: Success of this type of business is depended
on the trust of insured persons. To gain the trust insurance companies should come
forward to compensate the real injured as soon as possible.
To regain and maintain a positive public image the insurance companies should
overcome the dissatisfaction in regards to services and claim settlements and
should maintain a service standard.
One of the basic requirements for the insurance industry to have sustained growth
is to enhance training facilities. Bangladesh Insurance Academy is providing
training facilities and professional education to those engaged in insurance
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
business in the country. The syllabus, curriculum and training programs of the
academy need to be modified to meet the modern needs of the insurance industry..
The collected premium should be invested in large and beneficial sectors so that
insurance companies can return their clients expected return in timely
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
5.4 Conclusion
At present insurance is too much important to the business and individual sector. Most of
the companies provide more or less same services. For this reason the competition is
increasing day by day between the insurance companies. On the other hand some new
insurance companies are going to start businesses in the competent market. BGIC need to
develop their some productive sectors. In present, a company cannot establish properly
without developing information technology. People search their desires requirement
through Internet so, insurance companies need to develop Web address to increase both
foreign and local investors. So we have discussed about both the problem and prospects
of insurance business in Bangladesh. The progress of insurance business depends on the
progress of economic condition .Insurance business also faces many problem. So if we
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Internship Report on
Problem and Prospect of general insurance A case study of Eastland
Insurance Ltd.
develop economic condition as well as overcome the problems, it will help a lot to
flourish this business in our country.
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