The government guidelines for formation of an insurance company

The government guidelines for formation of an insurance company:

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 Companies Act. Memorandum and Articles of Association duly approved by the Controller of Insurance would have to be submitted with the application.

6.      Once the registration process was completed the sponsors would have to obtain permission of the Securities and Exchange Commission to issue share capital.

7.       Reinsurance arrangements would have to be made at this stage.

8.      After all the above requirements were fulfilled the license 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 investments, taxation, and reporting, are regulated mainly by the Insurance Act 1938 and the Finance Acts. The privatization policy adopted in the 1980s paved the way for a number of insurers to emerge in the private sector. This resulted in a substantial growth of premium incomes, competition, improvement in services, and introduction of newer types of business in wider fields hitherto untapped. Prior to privatization, the yearly gross premium volume of the country was approximately 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 SadharanBima Corporation. Numerous institutions, associations and professional 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, supporting and protecting the interests and welfare of the member companies. Surveyors and insurance agents occupy a prominent 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. In present insurance is too much important to the business and individual sector. Mostof 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. BGICneed 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 develop economic condition as well as overcome the problems, it will help a lot to flourish this business in our country.

History Of Insurance Business In Bangladesh

History Of Insurance Business In Bangladesh

The origin of insurance is lost in antiquity. However, there is no evidence that insurance in its present form was practice prior to the twelfth century. A brief chronological historical development of the various branches of insurance is given below:

Marine Insurance:

Marine is the oldest form of insurance and came first in the list. This type of insurance probably began in northern Italy sometime during the 12th& 13thcentury and gradually the concept was rather transferred to or taken over by the United Kingdom. During the 13th/ 14thcentury the Italian merchants went to UK and along with the merchandise carried with them the trading customs including the concept of marine insurance.

Fire insurance:

After marine insurance fire insurance developed in present form. It had been observed in Anglo-section Guild form for the first time where the victims of the fire hazards were given personal assistance by providing necessaries of life. It15 had been originated in Germany in the beginning of sixteenth century. The fire insurance got momentum in England after the great fire in 1666 when the fire losses were tremendous.

Life insurance:

The third in the list of development is the life insurance business. The earliest policy of which there is a record dates back to 1583. During this period only short term polices were used be issued meaning that only at the death of the life assured during the term period the money was to be paid. On survival nothing was payable. In 1693 Halley introduced the mortality table giving a definite value to risk of death. In 1974, the life Assurance Act was passed in the British parliament requiring the presence of insurable interest before one could effect a life policy on the life of another.

Current pattern of Insurance in Bangladesh:

After the emergence of the People’s Republic of Bangladesh in 1971, the government nationalized the insurance industry along with the banks in 1972 by Presidential Order No. 95.By virtue of this order, all companies and organization transacting all types of insurance business in Bangladesh came under this nationalization order. This was followed by creation of five insurance companies in the life and non-life sector. Further changes were brought on 14th May, 1973. Through the enactment of Insurance Corporation Act VI, 1973 which led to creation of two corporations namely SadharanBima Corporation for general insurance and, JibanBimaCorporation for life insurance in Bangladesh. In other words SadharanBima Corporation (SBC) emerged on 14th May, 1973 under the Insurance Corporation Act (Act No. VI) Of 1973 as the only state owned organization to deal with all classes of general insurance & re-insurance business emanating in Bangladesh. Thereafter SBC was acting as the sole insurer of general Insurance till 1984. Bangladesh Government allowed the private sector to conduct business in all areas of insurance for the first time in 1984. The private sector availed the opportunity promptly and came forward to establish private insurance companies through promulgation of the Insurance Corporations (Amendment) Ordinance (LI of 1984) 1984.The Insurance Market in Bangladesh now consists of two state-owned corporations, forty three and seventeen private sector general & life insurance companies respectively, a total of 62insurance companies.

Thus the insurance sector in Bangladesh has grown up substantially and deepened remarkably with number of companies in both life and general segments. With the expansion of size of the insurance market, the volume of assets of the industry has also increased substantially. SBC is entitled to 50% of public sector business. Insurance Corporation (Amendment) Act 1990 provides that fifty percent 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 fifty percent 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. In respect of reinsurance, the same act provides that fifty percent of a company’s reinsurance business must be placed with the SadharanBima Corporation and remaining fifty percent May beer insured either with this Corporation or with any insurer in Bangladesh or abroad. At present, nearly all the company’s place 100% of their reinsurance business with the SBC.