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1. Introduction…………………………………………………………………………2
2. Research Objective……………………………………………………………….…3
3. Methodology………………………………………………………………...…...…3
4. Findings and Discussion………………………………………………………...….4
4.1. Role of the Insurance Industry in the economic growth…….……………………4
4.2.An overview of the current growth of the sector……………………………..…....5
4.3.Obstacles to the development of this sector……………………………………….7
4.4. Implications………………………………………………………………………8
4.5. Limitations of the Study………………………………………………….…...…..9
4.6. Further Research………………………………………………………….………9
5. Recommendations………………………………………………...………...……..10
6. Conclusion…………………………………………………………………………11
7. Reference…………………………………………………………………………..12

The insurance Industry of Bangladesh:
Roles, Growth and Obstacles

Abstract: The Insurance industry had started with a lot of possibilities and
opportunities for economic development in Bangladesh. But the current condition of
this sector is not very sound. This paper is aimed to show the major roles that this
sector plays, find its growth in recent years and identify obstacles to the development
of this sector,. Using a qualitative approach, this paper has shown the major roles of
the sector, a brief analysis of the growth of this sector with different data and
statistical reports and analyzed different problems of this sector which propelled it to
its low growth. At the end, it provided a number of recommendations to overcome
those obstacles so that the sector can reach the desired stage. The study identified the
key problems as lack of publicity, lack of qualified human resource, lack of marketing
policies, absence of business ethics and legal complexities.

Keywords: Insurance Industry, Economic Growth, Role, Problems.

1. Introduction

Insurance represents an important tool to lessen risks borne by individuals and

businesses in modern economies. It is nothing but a mechanism of spreading the risk
of one to the shoulders of many. It is a contract where the insurer agrees to indemnify
the insured against losses arising out of certain specified unforeseen contingencies or
perils, in return of a consideration known as premium. Thus, insurance is a process
which distributes the burden of the loss on a number of persons within the group
formed for this particular purpose (Chaudhury, 2008). The primary objective of
insurance companies is to protect individuals and corporations (policyholders) from
adverse events. The insurance businesses are of two types, namely, life insurance and
property-casualty (general) insurance. Life insurance provides protection against the
possibility of untimely death, illness, and retirement. Property insurance protects
against personal injury and liability such as accidents, theft and fire. The insurance
market in Bangladesh is consists of 46 general and 31 life insurance companies.
Among these there are two state-owned companies (one general and one life

insurance). The insurance companies are controlled by the Insurance Development and
Regulatory Authority (IDRA), which became operational in 2011. (Bangladesh
Insurance Association, 2000)

The insurance industry of Bangladesh supports the economic development of our

country in various ways. It provides financial security for the business, individual
assets and their life, their family. The economy of Bangladesh holds huge risk in every
sector. The business, property and assets are constantly on threats because the country
often faces natural disasters like flood, cyclone, draught, and hurricane. There are also
other factors like political strikes, and economic issues like inflation, high interest rate,
tax policy, deregulation, etc. However, Bangladesh’s, insurance market is not very
large compared to the degree of risk. To facilitate a country’s economic growth, it’s
highly important to know the roles different business and industrial sector is playing
on its economy. Without identifying how any particular area of business contributes to
success, there won’t be enough motivation for improve its current situation or to
develop it further. Hence, it becomes significantly important to know its current
growth and understand the positive values the country may have through sustained
growth of the insurance sector. The Insurance Industry at this moment is lagging
behind the other service sectors of Bangladesh. At the same time insurance is deemed
to be a key component for every business and human life. To enhance the growth of
insurance business in Bangladesh, the problems hampering the growth of this business
must be identified. It is also important to know how much prospects dealing with these
problems can bring in the economy.

2. Research Objective

This paper thrives to accomplish the following objectives-

(a) To find the various roles and values the insurance industry provides in
(b) To find the growth of the sector in recent years.
(c) To indentify the problems causing low growth of this industry.

3. Methodology

The research procedure aims at answering these three main research questions- (1)
What are the major roles the insurance industry play in Bangladesh? (2) How much
this sector has been growing in recent years? (3) What are the key factors behind its
low growth and obstacles to the development of this sector? A qualitative design was

chosen for this paper. Most of the data collected and their analysis in this paper is
more descriptive in nature. Statistical reports, charts, and comparisons are presented in
the growth section.. For our research limitation resulting in the inability to collect
primary data, we used secondary data collected from various sources. As far as data
collection tools were concerned, the secondary has been collected from different web
articles, journals, books, and various published materials regarding the insurance
industry of Bangladesh. We searched for the major contributions of the insurance
industry and briefly explain how it does that, its growth with contribution in GDP and
the obstacles from these sources and presented these data in the discussion section.
Finally, the implication and limitation of this study and recommendations were
explained briefly.

4. Findings and Discussion

4.1. Role of the Insurance Industry in the economic growth

On the basis of our findings, following are some major roles the insurance industry
plays in the development and economic expansion of Bangladesh-

(a) Formation or capital and increase of investment: Insurance companies

receive premiums from insured persons. These premiums increase national
capitals. By investing these capitals, national productions increase.
(b) Reduction of hindrance or risk: Every sorts of business consists of risks.
Insurance companies minimize this risk and facilitate expansion and growth of
(c) Extension of business: By taking all uncertain business risk insurance
companies extended the field of business in our country. Insurance gives the
assurance of indent and help to collect the capital to launch a new business and
expand the existing business.
(d) Provide safety and security: Insurance companies provide security and if any
uncertainties come they provide financial support.
(e) Generates financial resources: Insurance generates funds by collecting
premium. These funds are invested in government securities and stocks.
(f) Medical Support: A medical insurance considered essential in managing risk
in health. Anyone can be a victim of critical illness unexpectedly. And rising
medical expense is of great concern; Medical Insurance is one of the insurance
policies that cater for different type of health risks. The insured gets a medical
support in case of medical insurance policy.
(g) Source of collecting funds: With the help of premium large funds are being
collected. These funds are used in business and development purposes.

(h) Increase of awareness: In our country most of the people are not aware about
their future life. Life insurance companies aware them to do something for
their future.
(i) Industrial development through equity participation: SBC plays a vital role
in the industrial development Of Bangladesh. SBC is the sponsor shareholder
of Investment Corporation of Bangladesh. Industry like National Tea Company
Limited, National Housing Finance and Investment Ltd. Aramit Ltd. Central
Depository BD Ltd.etc. SBC has huge amount of fixed deposit reserve with
various commercial banks in Bangladesh.

4.2. An overview of the current growth of the sector

While Bangladesh has made gigantic strides on the path to economic prosperity, its
insurance sector is a vital area that requires more attention and would benefit from
regulatory reform. The growth of this sector has been significantly low right from the
beginning of this sector. Within Bangladesh’s insurance sector, life insurance
constitutes a 73.5% share of its insurance market and non-life insurance a 26.5%
share. Micro-insurance and Islamic Insurance are also a part of Bangladesh’s insurance
sector. In 2017, non-life insurers earned a gross premium income of Tk2, 908.1 crores
and life insurers Tk8, 203.1 crores. In 2018, the insurance industry's gross premium
income stood at Tk 12,438 crore, up 11.25 percent year-on-year, according to data
from the Insurance Development and Regulatory Authority (IDRA, 2018). The last
time a higher premium income growth was seen was back in 2010 of 18.59 percent.
After that, it stayed within single digits. In 2018, new business growth of life insurance
was 9.16 percent, down from 16 percent registered a year earlier. For non-life
insurance, it was 11.70 percent, up from 11.11 percent logged in for 2017. (Potential
for growth, 2019)

The assets of all the insurance companies stood at Tk44, 328 crores by the end of
2016. Investments in both life and non-life insurance companies have grown
significantly during the period between 2006 and 2014. (The Daily Star, 2018)

Compared to its South Asian counterparts, including India, Bangladesh has the lowest
premium per capita. In 2018, insurance penetration in Thailand was 5.27% followed
by Malaysia 4.77%, China 4.22%, India 3.70%, Vietnam 2.42%, Indonesia 1.95%, the
Philippines 1.82% and Sri Lanka 1.15%. In emerging markets, the average per capita
spending on insurance increased by 13% to USD 166 in 2017.9 The average insurance
penetration in emerging markets increased to 3.3% in 2017 (2016: 3.2%), as premium
growth continued to outpace GDP growth within these economies. (Dhaka Tribune,

According to a sigma report of the Swiss Re Institute, as of 2017, the gross premium
volume of life insurance in Bangladesh stands at USD 974 million and that of non-life
stands at USD 371 million which depicts the year-on-year growth. In 2017, 2.20
million new life and 2.36 million and new non-life insurance policies were issued.
Further, the number of active life insurance policies was 10.78 million in 2017. The
assets of all insurance companies in Bangladesh stood at USD 5,810.61 million by the
end of 2017, with an average growth rate of 13.83% from 2009.5 Investments in both
life and non-life insurance companies have grown at an average rate of 14.95% during
2009–2017, with returns increasing from 8% to 11.5% during the same period.6 The
life insurance sector has a competitive landscape, with market share being closely
distributed among multiple players.

Overall, insurance penetration (insurance premiums as a share of GDP) in Bangladesh

was 0.55% in 2017 and has mostly been on a downward trend since 2009 which
indicates that Bangladesh’s life insurance penetration rate falls behind that of several

other developing countries.

4.3. Obstacles to the development of this sector

Though insurance industry has very good prospect in the economy but for some
reasons it’s totally failed to achieve its goal. There are some problems regarding this
on both the national and organizational level. Our investigation was able to find the
following reasons behind this-

(a) Lack of Publicity: A large portion of people in our country don’t have the
minimum idea of insurance. People are not aware of the benefits they will get
from insurance company which creates a knowledge gap between the general
people and insurance company. 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 don’t
think that a large number of people live in rural areas.
(b) Lack of qualified officials: Insurance companies perform their activities by
recruiting marketing agent and they try to convince the people to take a policy.
Most of the cases the agents are not properly trained and they don’t know the
right process to catch potential people to make their policy holders.
(c) 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.
(d) Financial difficulties: Bangladesh is one of the poorest countries in the world
and most of the people in this country live under the poverty line. 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. Most of the insurance companies of our country are
facing financial problems. For poor financial condition the insurance
companies are also unable to expand their branch which is a barrier for the
growth of insurance business in Bangladesh. Apart from that, nowadays the
cost of doing business such as 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 cost that is hampering the strategies of insurance.
(e) Lack of training for the employees: As insurance companies are spreading
day by day the take lots of people but they are not providing proper training to

their employee. So without having proper training if will be difficult for the
employee to attract more people.
(f) Absence of business ethics: Some insurance companies create harassment on
the policy holders or sometimes on the dependents of the policy holders when
they want back their money after death or maturity. That time the insurance
companies show different causes in order to make delay to return back the
money at expected time. Sometimes they doesn’t provide the full amount. So it
creates negative impact to the people.
(g) Legal Complexities: To take an insurance policy there are great number of
rules and regulations which must be compelled by the insured person. And into
those rules a large number of complexities are present there. Therefore the
people are discouraged to take insurance policy.
(h) Insufficient service: 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.

4.4. Implications

The information presented in this study can be useful in some of the ways. By
analyzing and understanding this information, the strategy makers within the
administration and the insurance agency should receive powerful measures in order to
utilize the chances and to handle the dangers for guaranteeing a healthy improvement
of the insurance market. By understanding the usefulness and growth of the insurance
and risk protection, businesses can make decision and consider purchasing policies.
Also, policy makers and people involved in development of this sector can be
benefited by understanding the obstacles to this sector. They can determine which
areas of this sector needs improvement and which areas are already improved.

One of the essential necessities for the protection business to have sustained growth is
to improve preparing offices. Bangladesh Insurance Academy is giving preparing
offices and expert training to those connected with in insurance business in the nation.
The prospectus, curriculum and preparing projects of the foundation should be
adjusted to meet the cutting edge needs of the insurance industry.

To recapture and keep up a positive open picture the protection companies should beat
the disappointment with respect to administrations and claim settlements and ought to
keep up a help standard. The gathered premium ought to be put resources into
enormous and useful segments so that insurance agencies can restore their customers
anticipated return in auspicious. Government ought to have an administrative body for

the reconnaissance on insurance companies with the goal that they should play out
their business maintaining the ethical issues appropriately.

Insurance agencies need to change their enrollment techniques with increased center
around the promoting and deals preparing in light of the fact that, protection being a
service showcasing industry it requires exceptional consideration. Because of the
chance of developing business sector the insurance agencies can expand their objective
market by distinguishing and giving responsive administrations. In order to do so each
organization should set up and viably operate research and advancement office.

4.5. Limitations of the Study

This research confronted some issues. The constraints of this study were that it
provides only a general overview of the insurance industry. It was not possible to
thoroughly review all the existing papers and published materials regarding the
insurance industry. Besides, there was no primary data collected to do the research
from firsthand experience. We could not able to execute any survey or prepare
questionnaire and involve respondents into our study. Most of the data presented in
this research is secondary. As a result, we were unable to present most up to date
information regarding the roles and the problems of this sector. It turns out to be
unreasonably difficult for us to gather important data and set up a standard report.

In addition, it cannot be guaranteed that the recommendation to the problems is

effective for solving the problems in the insurance industry as those are yet to
implement by the responsible authorities in the industry. Also, lack of data implies the
validity of those probable solutions given to the problems.

4.6. Further Research

Farther investigation should consider the potential effects of carrying out various
development projects for the sector, for example effect of change in R&D, recruitment
process, improving public image etc. As we were unable to conduct primary data
collection, further research can be more improved by collecting more necessary
information through conducting surveys and collecting firsthand information regarding
the importance to the insurance business. The process can help out collecting more in
depth data about the roles of insurance industry in different sectors particularly. Apart
from that, future studies can look for more comparison by comparing the
underdeveloped stage with the future or growing stage. Future studies can investigate

for the benefit the country may have in the economy of Bangladesh as a result of
executing the development process.

5. Recommendations

The concerned policy makers of insurance sector should adopt the following measures
in order to make the best use of the opportunities and to tackle the threats for ensuring
the growth and development of the insurance industry in Bangladesh. (S U, Khan. and
M N, Uddin., 2012)

(a) Regain Popularity with Appropriate Marketing Strategy: To regain and

maintain a positive public image, the insurance companies should practice
appropriate marketing strategy and provide better service to its customers. To
create people awareness, insurance companies should also arrange on regular
basis seminar, symposium, road show etc in different parts of the country.
(b) Product Innovation: Insurance Companies should diversify their product.
They should introduce new products to satisfy customers’ needs.
(c) Developing Professional Code of Ethics: Insurance companies should try to
develop professional ethics among its personnel. Government should have a
regulatory body for the surveillance on insurance companies so that they must
perform their business maintaining the ethical issues properly
(d) Establishment of R&D Cell: In response to the opportunities of growing
market, the insurance companies should expand their market by identifying and
providing responsive services. In order to do so each company should establish
an effective research and development cell.
(e) Arrangement of Training Programs: Relevant authorities in collaboration
with supportive agencies should provide training to the insurance related
personnel for improving the insurance business in the country. Bangladesh
Insurance Academy (BIA) should arrange training programs on regular basis.
The syllabus, curriculum and training programs of the academy need to be
modified to meet the future challenges of the insurance industry.
(f) Monitoring: The office of the Controller of Insurance should be strengthened
with expert professional people aiming at efficient handling of the affairs of the
insurance companies.
(g) Recruitment Strategies: Insurance companies need to modify their
recruitment strategies with increased focus on the marketing and sales training
because insurance being a service industry it requires a special attention.
Insurance companies should recruit youths who are trainable and developable.
(h) Reducing Excessive Management Expense: Management should take
remedial measures to reduce expenses to a more acceptable and controllable

level. An insurance company having high expense ratio should not allow the
present high management expense and should do possible everything to reduce
it to about 20% to 30% of total premium income within the shortest span of
time. Management expense growth over the future years should be at least 10%
lower to premium growth rate. This can be ensured by reducing the present
supervisory tiers.

6. Conclusion

Bangladesh’s insurance sector is a vital area that requires more attention. The role of
insurance in managing risks in an economy cannot be overstated. On a micro scale, it
safeguards households and companies from a myriad of risks. On a larger scale, it
reduces the financial burden on a government and creates a stable environment in
which businesses can thrive and succeed. Although in recent years, the insurance
market in Bangladesh is facing many problems and there have not enough initiatives
taken yet to heal this market, this sector can significantly change the economic growth
rate of Bangladesh if the flaws are reduced. At present protection is an excessive
amount of imperative to the business and individual segment. The vast majority of the
organizations give pretty much same administrations. Therefore the challenge is
expanding step by step between the insurance agencies. To cope up with this, strategy
should be build upon creating a huge demand for it among both individual and
organization. If required attention is given and sufficient steps are taken this industry
has a huge potential and prospect for the development of Bangladesh.

7. References

Chaudhuri, A.H. (2008): Risk and Insurance, Rainbow Book Mall, Dhaka,

BIA (Bangladesh Insurance Association) (2000): “Bangladesh Insurance Academy”,

Insurance Journal, Vol.51.

Mandal, M.G. (2010): “Insurance Industry in Bangladesh- An Overview”, Insurance

Journal, Bangladesh Insurance Academy, Vol.49, pp.22.

S U, Khan. and M N, Uddin. (2012). Insurance Industry in Bangladesh. Insurance

Industry in Bangladesh: Opportunities and Challenges, Vol. 23, No. 04, 20.

Dhaka Tribune. (2019). Transforming our insurance sector. [online] Available at:

Potential for growth: Transforming Bangladesh’s insurance sector Potential for

growth: Transforming Bangladesh’s insurance sector. (2019). [online]
Available at:

Dhaka Tribune. (2019). Insurance coverage in Bangladesh lowest in emerging Asia.

[online] Available at:

The Lawyers & Jurists. (2013). Problems and prospect of insurance Business in
Bangladesh - The Lawyers & Jurists. [online] Available at:

The Daily Star (2018). Poor return raises concern for insurers. [online] The Daily
Star. Available at: