Prospects of Insurance | Insurance Business Analysis

Prospects of alters indemnity Business AnalysisThis is the law of nature that mass m early(a) to live and play with hazards and to nearly point redress policy stand free batch from those frustrations. Even if this is true, tribe of Bangladesh still dont prefer to insure themselves. One whitethorn think that the mass of Bangladesh argon risk lover on the early(a) take place opposite may contradict by saying that their low acquire originator doesnt permit them to avail restitution policy. Here we pull up stakes try to come upon stunned the tasks of restitution backup in Bangladesh and testament try to aro enjoyment some steps for overcoming these problems.What is indemnification policy? amends in its elemental pull in is defined as A contract among two functionies whereby whizz musical compositiony called insurer infratakes in exchange for a fixed br some otherhood called indemnitys, to remuneration the other party called insured a fixed to uchstone of money on the happening of a definite event.In uncomplicated marges it is a contract among the person who buys policy and an indemnity policy guild who sold the Policy. By entering into contract the Insurance guild agrees to pay the Policy holder or his family members a predetermined add of money in skid of any unfortunate event for a predetermined fixed sum payable which is in normal term called Insurance Premiums.Insurance is basically a tax shelter against a fiscal wrong which can arise on the happening of an unexpected event. Insurance companies collect premiums to decl atomic number 18 oneself for this defense. By paying a actually itty-bitty sum of money a person can safeguard himself and his family financially from an unfortunate event.For Example if a person buys a keep Insurance Policy by paying a premium to the Insurance fraternity , the family members of insured person receive a fixed recompense in case of any unfortunate event like death. t here be different kinds of Insurance Products visible(prenominal) untold(prenominal) as Life Insurance , Vehicle Insurance, Home Insurance, rifle Insurance, Health or Mediclaim Insurance etc.Types of InsuranceAny risk that can be quantified probably has a type of amends to protect it. Among the different types of damages are car indemnification, also known as auto amends policy policy, car indemnification policy and in the UK as motor amends, is probably the most common form of indemnification and may cover twain lawful liability claims against the driver and waiver of or damage to the vehicle itself. Over most of the United States purchasing an auto insurance policy is required to ratifiedly operate a motor vehicle on earth roads. Recommendations for which policy limits should be apply are specified in a number of books. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to No cracking systems, which reduce o r eliminate the ability to sue for compensation barely provide automatic eligibility for benefits. kettleful insurance (also known as Boiler and Machinery insurance or Equipment Breakdown Insurance)Casualty insurance insures against accidents, non inescapably tied to any specific property.Credit insurance pays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.Financial loss insurance protects individuals and companies against various financial risks. For example, a personal line of credit organisation might procure cover to protect it from loss of sales if a fire in a factory prevented it from carrying break its business for a time. Insurance might also cover reverse of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are include in this category.Health insurance covers medical bills incurred because of sickness or accidents. obligation insurance covers legal claims against the ins ured. For example, a crustal plateowners insurance policy provides the insured with protection in the event of a claim brought by someone who slips and go on the property, and brings a lawsuit for her injuries. Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and/or monetary harm. The protection offered by a liability insurance policy is two-fold a legal defense in the event of a lawsuit commenced against the policyholder, plus restoration (payment on behalf of the insured) with enjoy to a settlement or court verdict.Life insurance provides a cash benefit to a decedents family or other designated beneficiary, and may specifically provide for burial and other final expenses.Annuities provide a stream of payments and are customaryly enlightenified as insurance because they are issued by insurance companies and regulate as insurance. Annuities and pensions th at pay a benefit for deportment are sometimes regarded as insurance against the first step that a retiree will outlive his or her financial resources. In that sense, they are the complement of heart insurance.Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to tone insurance.Locked Funds Insurance is a little known hybrid insurance policy jointly issued by organisations and banks. It is used to protect populace funds from tamper by unauthorised parties. In special cases, a government activity may authorize its use in protecting semi- close funds which are liable to tamper. Terms of this type of insurance are usually very strict. As such it is simply used in extreme cases where uttermost security of funds is required.Marine Insurance covers the loss or damage of goods at sea. Marine insurance typically compensates the owner of merchandise for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier. thermonu pass away incident insurance damages resulting from an incident involving radioactive materials is generally set at the matter level. (For the United States, see Price-Anderson Nuclear Industries Indemnity Act.)political risk insurance can be taken out by businesses with consummations in countries in which there is a risk that mutation or other political conditions will result in a loss.Professional Indemnity Insurance is normally a mandatory necessity for professional practitioners such as Architects, Lawyers, Doctors and Accountants to provide insurance cover against electromotive force negligence claims. Non licensed professionals may also purchase malpractice insurance, it is comm only if called Errors and Omissions Insurance and covers a dish out provider for claims make against them that arise out of the achievement of specified professional renovations. For instance, a w eb site designer can hold in EO insurance to cover them for certain claims made by trine parties that arise out of negligent murder of web site growth goods.Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, engorge insurance, earthquake insurance, home insurance, inland marine insurance or kettle insurance.Terrorism insuranceTitle insurance provides a guarantee that surname to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the overt records done at the time of a real estate transaction.Travel insurance is an insurance cover taken by those who motivity abroad, which covers certain losses such as medical expenses, lost of secret belongings, travel delay, personal liabilities.. etc.Workers compensation insurance replaces all or part of a workers wa ges lost and accompanying medical expense incurred overdue to a job-related injury.A single policy may cover risks in one or to a greater extent of the above categories. For example, car insurance would typically cover both property risk ( masking piece the risk of theft or damage to the car) and liability risk (covering legal claims from say, causing an accident). A homeowners insurance policy in the US typically includes property insurance covering damage to the home and the owners belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owners property.Potential sources of risk that may flop rise to claims are known as perils. Examples of perils might be fire, theft, earthquake, hurricane and legion(predicate) other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.History of Insurance busi ness in BangladeshInsurance is not a new business in Bangladesh. Almost a century back, during British rule in India, some insurance companies started transacting business, both biography and general, in Bengal. Insurance business gained momentum in East Pakistan during 1947-1971, when 49 insurance companies transacted both smell 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 more often than not limited liability companies. Some of these companies were specialised in dealing in a particular(prenominal) class of business, enchantment others were complex companies that dealt in more than one class of business.The government of Bangladesh nationalised insurance industry in 1972 by the Bangladesh Insurance (Nationalisation) revisal 1972. By virtue of this order, save and except postal life insurance and foreign life insurance companies, all 49 insurance companies and organisations transacting insurance business in the country were placed in the populace celestial sphere chthonian v corporations. These corporations were the Jatiya Bima dope, Tista Bima flock, 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 prudent for lowwriting. 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.The basic idea behind the formation of four underwriting corporations, two in all(prenominal) chief(prenominal) branch of life and general, was to encourage competition even under a nationalised system. But the burden of administrative expenses incurred in maintaining two corporations in each front of life and general and an apex institution at the top outweighed the advantages of limited competition. Consequently, on 14 May 1973, a restructuring was made under the Insurance Corporations Act 1973. Following the Act, in place of five corporations the government formed two the sadharan bima corporation for general business, and jiban bima corporation for life business.The postal life insurance business and the life insurance business by foreign companies were still allowed to continue as before. In reality, however, only the american life insurance company. continued to operate in the life domain for both new business and military wait on, while three other foreign life insurance continued to operate only for servicing their old policies issued during Paki stan days. postal life maintained its business as before. later 1973, general insurance business became the sole responsibility of the Sadharan Bima Corporation. Life insurance business was carried out by the Jiban Bima Corporation, the American Life insurance Company, and the Postal Life Insurance part until 1994, when a change was made in the structural arrangement to keep pace with the new economic dash of liberalisation.The Insurance Corporations Act 1973 was amended in 1984 to allow insurance companies in the secret field to operate side by side with Sadharan Bima Corporation and Jiban Bima Corporation. The Insurance Corporations Amendment Act 1984 allowed floating of insurance companies, both life and general, in the hush-hush sector consequence to certain restrictions regarding business functions and reinsurance. beneath the new act, all general insurance businesses emanating from the public sector were taciturn for the state owned Sadharan Bima Corporation, which cou ld also underwrite insurance business emanating from the private sector. The Act of 1984 made it a requirement for the private sector insurance companies to obtain 100% reinsurance protection from the Sadharan Bima Corporation. This virtually turned Sadharan Bima Corporation into a reinsurance organisation, in addition to its usual activities as occupy insurer. Sadharan Bima Corporation itself had the remunerate to insure its surplus elsewhere outside the country but only subsequently exhausting the retention capacity of the domestic market. Such restrictions aimed at preventing outflow of foreign exchange in the shape of reinsurance premium and evolution a reinsurance market within Bangladesh.The restriction regarding business placement modify the interests of the private insurance companies in many ways. The restrictions were considered not congenial to the growth of private sector business in insurance. Two strong arguments were ramble forward to articulate feelings (a) S ince the public sector accounted for near 80% of the heart and soul premium volume of the country, there was little premium left for the insurance companies in the private sector to survive. In this context, Sadharan Bima Corporation should not crap been allowed to compete with the private sector insurance companies for the meagre premium (20%) emanating from the private sector (b) Being a competitor in the insurance market, Sadharan Bima Corporation was hardly acceptable as an agency to protect the interests of the private sector insurance companies and should not consume retained the exclusive right to reinsure policies of these companies. The arrangement was in fact, against the principle of laissez faire.Private sector insurance companies demanded breakup of the above restrictions so that they could (a) underwrite both public and private sector insurance business in competition with the Sadharan Bima Corporation, and (b) effect reinsurance to the choice of reinsurers. The g overnment modified the system through promulgation of the Insurance Corporations (Amendment) Act 1990. The changes allowed private sector insurance companies to underwrite 50% of the insurance business emanating from the public sector and to place up to 50% of their reinsurance with any reinsurer of their choice, at home or abroad, keeping the remaining for placement with the Sadharan Bima Corporation.According to the new rules the crown and deposit requirements for formation of an insurance company are as follows outstanding requirements for life insurance company Tk 75 trillion, of which 40% shall be subscribe by the sponsors for mutual life insurance company Tk 10 one thousand gazillion for general insurance company Tk 150 million, of which 40% shall be subscribe by the sponsors and for accommodating insurance society Tk 10 million for life and Tk 20 million for general.Deposit requirements (in cash or in okay securities) For life insurance Tk 4 million for fire insura nce Tk 3 million for marine insurance Tk 3 million for miscellaneous insurance Tk 3 million for mutual insurance company Tk 1.4 million and for cooperative insurance society, in case of life insurance Tk 1.4 million, and in case of general insurance Tk 1 million for each class.The government guidelines for formation of an insurance company are(1) The intending sponsors must first submit an activity in prescribed form to the head word Controller of Insurance for forward permission.(2) After necessary scrutiny the Chief Controller shall forward the action with his recommendation to the Ministry of Commerce.(3) After further scrutiny, the Ministry of Commerce shall submit its views to the Cabinet citizens committee constituted for this purpose.(4) The termination 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 w ould then be required to apply in a prescribed form to the Registrar of Joint Stock Companies to get readjustment as a public liability company under the Companies Act. enumeration and Articles of Association duly approved by the Controller of Insurance would generate to be submitted with the application.(6) Once the registration passage was completed the sponsors would project to obtain permission of the securities and exchange commission to issue share capital.(7) Reinsurance arrangements would grant to be made at this stage.(8) After all the above requirements were fulfilled the authorize to commence business under the Insurance Act 1938 is to be obtained from the Chief Controller of Insurance. Application can only be made subject to government announcements in this regard.The control over insurance companies, including their functions relating to trustments, taxation, and reporting, are regulated mainly by the Insurance Act 1938 and the Finance Acts.The privatisation poli cy espouse in the 1980s paved the way for a number of insurers to come out of the closet in the private sector. This resulted in a substantial growth of premium incomes, competition, improvement in table benefits, and introduction of newer types of business in wider fields in time untapped. Prior to privatisation, the yearly gross premium volume of the country was some Tk 900 million in general insurance business and approximately Tk 800 million in life insurance business. In 2000, premium incomes rose to Tk 4,000 million in general insurance business and Tk 5,000 million in life insurance business.Up to 2000, the government has given permission to 19 general insurance companies and 10 life insurance companies in the private sector. Insurers of the country now conduct almost all types of general and life insurance, except crop insurance and export credit guarantee insurance, which are available only with the Sadharan Bima Corporation.Numerous institutions, associations and pro fessional groups work to promote the development of insurance business in Bangladesh. Prominent among them are the Bangladesh Insurance Association and bangladesh insurance academy. Bangladesh Insurance Association was formed on 25 May 1988 under the Companies Act 1913. It is registered with the Registrar of Joint Stock Companies and has 30 members. It aims at promoting, funding and protecting the interests and welfare of the member companies.Surveyors and insurance agents occupy a bad position in the insurance market of Bangladesh. The surveyors are mainly responsible for surveying and assessing general insurance losses and occasionally, for valuation of insurance properties, while the agents work to procure both life and general insurance business against commission. The system of professional brokers has not yet developed in Bangladesh. However, it is a common practice of the insurers to engage salaried development officers for promotion of their insurance business.Problems of insurance business in bangladeshThe insurance business in Bangladesh is approach lots of problem in every now and then. To describe the problems, we use service select gap cast. By using the amaze it will become more easer to understand the problms of insurance in Bangladesh.Service prime(prenominal) cranny assumeManagers in the service sector are under increasing pressure to demonstrate that their work are client-focused and that continuous performance improvement is being delivered. Given the financial and resource constraints under which service organizations must manage it is essential that guest expectations are properly soundless and measured and that, from the customers perspective, any gaps in service quality are identified. This training then assists a manager in distinguishing cost-effective ways of oddment service quality gaps and of prioritizing which gaps to focus on a critical decision given scarce resources ( SERVQUAL and poser of Service Quality time outs A simulation for Determining and Prioritizing Critical Factors in Delivering Quality Services by Dr. Arash Shahin, Department of Management, University of Isfahan, Iran). What makes managing customer service different, as a merchandise problem, from managing the standard elements of the market mix (product, price, promotions, and place) is that customer service is typically delivered by front-line employees. Personnel policies, thus, turn over immediate marketing implications. Many retailers take this into consideration by treating employees as internal customers. According to this philosophy, management must transmit their internal customers on the company and its policies in order to induce front-line employees to deliver the desired levels of customer service. Standard effect policies that can facilitate customer service and sell the internal customers include (a) employee screening and selection, (b) training, (c) setting suitable reporting relationships, (d) goals a nd recognize systems, (e) internal communications, and (f) generally creating a service culture. The good luck Analysis Model goes a step beyond simply reexamining each of the standard power policies in light of the desired customer service. The model provides specific criteria concerning personnel and management policies that complete the linkage among customer expectations and perceive service delivery. In addition, the model provides a checklist of where breaks in the chain can glide by using this checklist can provide a useful audit of service quality (See A Service Quality AuditApplication of the Gap Analysis Model by Paul R. Messinger, University of Alberta). There are heptad major gaps in the service quality concept, which are shown in Figure-1. The model is an extension of Parasuraman et al. (1985). According to the pastime explanation (ASI Quality Systems, 1992 Curry, 1999 Luk and Layton, 2002), the three meaning(a) gaps, which are more associated with the outside customers are Gap1, Gap5 and Gap6 since they have a direct relationship with customers. Gaps 1 through 6 widen or close, so does Gap 7. The authors conceptual model of service quality followsThe key to delivering steep quality service is to continually monitor customer perceptions of service quality, identify causes of service quality shortfalls, and take appropriate action to improve the quality of service (close the service gaps). Gap 1. Not Knowing What Customers Expectestablish on interviews, the authors found that executives perceptions of superior quality service are generally congruent with customers expectations. Customers expectations versus management perceptions are the result of the lack of a marketing research orientation, pathetic upwardcommunication and too many layers of management. Gap 2. The Wrong Service-Quality StandardsGap 2 arises when there is a discrepancy between what managers perceive that customers expect and the actual standards that they (the manager s) set for service delivery. This gap may occur when management is aware of customers expectations but may not be willing or able to put systems in place that conform to or exceed those expectations. Gap 3. The Service-Performance GapOrganizational policies and standards for service levels may be in place, but is front line staff following them? A very common gap in the service industry, Gap 3 is the difference between organizational service specifications and actual levels of service delivery. Service specifications versus service delivery is the result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork. Gap 4. When Promises Do Not Match slantCustomers perceive that organizations are delivering low-quality service when a gap appears between promised levels of service and the service that is actually delivered. This gap is created when advertising, personal se lling or public relations over-promise or misrepresent service levels. Service delivery versus external communication may occur as a result of inadequate horizontal communications and propensity to over-promise. Gap5 The discrepancy between customer expectations and their perceptions of the service deliveredas a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences. Gap6 The discrepancy between customer expectations and employees perceptionsAs a result of the differences in the understanding of customer expectations by front-line service providers. Gap7 The discrepancy between employees perceptions and management perceptionsAs a result of the differences in the understanding of customer expectations between managers and service providers.Figure1 Model of service quality gaps (Par asuraman et al., 1985 Curry, 1999 Luk and Layton, 2002)Other ProblemsService quality gap model does not provide all the problems of insurance business. There some other problems too. These problems are given belowLack of trustworthiness Lack of trustworthiness is one of the the major problems of insurance business in Bangladesh. Lengthy process in getting payment afterwards any incident is the main reason of trustworthiness. Time killing behavior in payment after incidence is reducing the trust of the customers towards the insurance companies. belittled income of the people Low income and purchasing power doesnt permit the people of Bangladesh to go for an insurance policy. practically we can easily relate the above mentioned factors. For example, in one hand the lower income of the people is creating barrier in buying insurance policy, on the other hand lack of trustworthiness makes this insurance avoiding behavior more acute.Unattractive offerings Insurance companies are not pro viding attracting offerings to their customers. All the offerings are similar. There is very less variation among the offerings of differnt insurance companies.Lack of information about the insurance companies The insurance companies are not delivering their information (regarding company and insurance policy) properly or evenly which is other problem of the insurance companies.Inefficiency in problem solving Inefficiency in problem solving is another problem of the insurace companies. If any customer comes to then to solve some problems, they do not solve those problems efficiently.High service/processing cost Insurance companies charges towering service/processing cost from their customers.Less convincing sales people Some insurance companies appoint sales people at a very lower cost. These sales people are not much convincing. They can not convince effectively to purchase insurance pollicy. This is another problem of insurance companies.Lengthy process to get payment after inc idents Insurance companies take a lenthy process to get payment after incidents. Sometimes they take one or two years to pay their customers. This is one of the major problems of insurance companies.Steps to overcome the problems of insurance businessThe demographic trends suggest that as private insurance companies (both local and multinational) have proliferated in Dhaka city, better educated and more affluent people have gravitated to these insurance companies for insurance services. These people/clients are likely to have better information about the quality of services provided by both public and private insurance companies and their inclination to select private insurance companies suggests, implicitly, that the quality of service is better at these private firms even though their (private insurance companies) service cost is somewhat higher. Moreover, many branch operation of private insurance companies help the people to make paygrade among them and qualification an insur ance decision in favor of those which are trustworthy. But between the private local and foreign insurance company choice, clients are mostly considering foreign private insurance companies due to its trustworthiness, experience in operation and wide area coverage. Less number of branches of the public insurance companies may be another prime reason of not being prefer by the local clients. By definition, it might be more accredited if the clients were inclined towards the public insurance companies from trustworthiness point of view, but as statistics suggests in favor of choosing foreign private insurance firms, probably we have to be satisfied by saying that it is in many respect guided by clients psychology of getting better and prompt services. The fillip structure must also play a role in ensuring the quality services delivered by the public insurance companies. One resultant role is to tie part of the compensation of insurance personnel in public companies to services ren dered and feedback received from clients. This, of course, is a complex issue and has implications for pay crustal plate administration, since public bank staffs, as government servants, are paid harmonize to certain pay structures. While beyond the scope of this paper, authors feel that compensation flexibility is necessary to reward those who are dedicated to providing quality insurance services. If compensation adjustments cant be incorporated, benefits-including promotion, transfer in more precious branches, study leave, performance bonus and the like-could be tied to performance evaluation mechanism. There must be a formal procedure of evaluating the employees by the clients through some questionnaire type performance appraisal form. A suggestion, protest or recommendation book in the branch can be introduced where the clients can even complain or appreciate about a specific employee. Public awareness and the transparency of the high official may have a positive impact on that issue. A rating scale could also be established to rate the quality of services based on insurance companys facilities, past performance records, and clients evaluations. The rating factors and mechanisms would have to be developed on the basis of inputs from clients and the profession. It would also be central to determine, specify, and strongly enforce the legal consequences for tampering with client records and their evaluations. This process will lead to qualifying and ranking each and every insurance company (Private and public). We think the insurance policy collection and profit margin should not be the only benchmark to position a specific insurance company. As the number of insurance companies continues to grow, it is important to develop a national capability to periodically evaluate and publicly disseminate (As University Grants Commission did for the private universities) the ratings or rankings of all insurance companies so that each service providers nature is widel y known. Armed with this information, clients can make more informed choices.In addition, as an important determination of insurance company choice, firms must invest in building their reputation/reliability which will hel