Definition and History of Life Insurance Company

 

Definition and History of Life Insurance Company

Definition of Insurance and History of Insurance Company:

What is life insurance?

Definition of life insurance:

Insurance is a legal way to cover one's risk. It is a type of contract where an insurance company agrees to reimburse the insured in case of loss of insured goods due to some unforeseen circumstances in return for receiving premium at a fixed rate.

History of life insurance company:

Bangladesh has a history of insurance system. During the British rule in India, more than 100 years ago, several insurance companies started both life insurance and general insurance business. The insurance business in East Pakistan was in good shape during the period 1947-1971. At that time 49 life and general insurance companies were in business. The source of these companies was spread in different countries. Among them are British, Australian, Indian, West Pakistani and East Pakistani. 10 insurance companies were headquartered in East Pakistan, 26 in West Pakistan and the rest in various parts of the world. With the exception of a few, most companies had limited liability and operated in a highly competitive economic environment. Some of these were specialized companies that were involved in certain types of business, while others were joint ventures that were engaged in multiple types of business.

The Government of Bangladesh nationalized the insurance industry in 1972 by Presidential Order No. 95. This order is better known as Bangladesh Insurance (Nationalization) Order 1972. The order places all insurance companies and firms operating in the country, except defense, postal life insurance and foreign life insurance companies, under five public sector corporations. These are Jatiya Bima Corporation, Teesta Bima Corporation, Karnafuli Bima Corporation, Rupsha Jeevan Bima Corporation and Surma Jeevan Bima Corporation.

The National Insurance Corporation was not directly involved in the insurance business. As a top agency, it oversees and controls the operations of four other insurance corporations. Teesta and Karnafuli did general insurance business, Rupsha and Surma did life insurance business. The 49 insurance companies launched at that time were merged with these 4 corporations. On the other hand, the life insurance portion of a specialized life insurance company or composite company is associated with Rupsha and Surma and the general insurance portion of a specialized general insurance company or mixed company is associated with Teesta and Karnafuli. The main objective behind the formation of 4 insurance corporations, 2 in each of the life insurance and general insurance companies, was to encourage competition even under the nationalized system. But the unnecessary administrative costs of 42 corporations and one of their top organizations make the benefits of limited competition insignificant. As a result, under the Insurance Corporation Act 1973 of 14 May 1983, infrastructural changes were brought in the insurance industry. Under this Act, 2 corporations were set up in place of 5 corporations, one is General Insurance Corporation for general insurance business, and the other is Life Insurance Corporation for life insurance business.

Postal life insurance and life insurance by foreign companies remain active as before. In reality, however, the only American life insurance company to continue new business and service activities in the field of life insurance. The other three companies continued to provide the necessary services for the insured policies only during the Pakistan period.

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The entire responsibility of running the general insurance business falls on the general insurance corporation. Life insurance is the responsibility of Life Insurance Corporation, American Life Insurance Company and Postal Life Insurance Corporation. But in times of change, economic liberalization has led to structural changes in the insurance industry. In 1974, the Insurance Corporation Act 1973 was amended. It includes general insurance and life insurance corporations as well as privately owned insurance companies. The Insurance Corporation (Amendment) Act, 1984, allows the establishment of general and life insurance companies in the private sector subject to certain restrictions relating to the conduct of business and reinsurance. Under the new law, all public insurance in the public sector is reserved for state-owned general insurance corporations. General insurance corporations are also given the right to conduct private financial sector insurance business by competing with privately owned insurance companies. The ban was imposed to provide some protection to state-owned general insurance corporations as well as to give private sector insurance companies the opportunity to gain some experience. There was another restriction on reinsurance by private sector insurance companies. The law states that private sector insurance companies must take 100 per cent of their reinsurance coverage from the general insurance corporation and they cannot go anywhere else for reinsurance. The purpose of such a ban is to create an environment in the form of reinsurance premiums to prevent foreign exchange from flowing out of the country and to create a reinsurance market within Bangladesh's internal capacity. This arrangement effectively turned the General Insurance Corporation into a reinsurer. However, their direct insurance activities also continue. However, after preserving the total market capacity, the general insurance corporation is allowed to reinsure extra money outside the country.

Restrictions on business are in fact a kind of obligation imposed on insurance companies to enforce their insurance policies. As a result of this situation, all insurance policies related to the property of Bangladesh, including all imports and exports under the naval insurance policy, have to be completed by the insurance company of Bangladesh.

The idea of ​​private sector entrepreneurs is that imposing such restrictions is not conducive to the growth of the private sector. Conservatism does not contribute to uninterrupted expected growth. This is because, since the public sector economy controls 60 per cent of the total premium amount, only a minimum of 20 per cent premium remains for private sector companies to survive. Even then, general insurance corporations were allowed to compete with private companies engaged in business with a negligible portion (20 per cent) of private premium deposits.

Private insurance companies demand that the above restrictions be completely lifted so that they can compete with general insurance corporations to conduct insurance business for both individuals and the public sector and reinsure to reinsurers of their choice. As a result, the existing system was changed by promulgating the Insurance Corporation (Amendment) Act, 1990. The changes are:

1. Private sector insurance companies will be able to account for 50 per cent of the insurance business derived from the private sector.

2. Private sector insurance companies can insure up to 50% of their reinsurance with any reinsurer in the country or abroad. The remaining 50 percent is kept under the General Insurance Corporation. Although specified in the law, the real situation in the insurance market was different.

The amount of capital and deposit required to form an insurance company is as follows:

1. Capital requirements Life insurance company pays 300 million rupees, 80 percent of which is paid by the entrepreneur; Traditional Mutual Life Insurance Company: Rs. 15 million; General Insurance Company: Rs. 400 million, 80 per cent of which is paid by the entrepreneur; Cooperative Insurance Society Rs 25 million for life insurance and Rs 25 million for general insurance.

2. Deposit requirements Each insurance company has to deposit cash at the time of submission of application for registration or at different rates according to different insurance codes in the approved defense. For example, life insurance: Rs 15 million; General Insurance: Rs. 25 million; Mutual insurance company: Rs 3 million; Cooperative Insurance Society Rs. 25 million.

Since the formation of insurance companies is a policy issue of the government, it is mandatory to follow certain rules. The policies are:

1. Interested entrepreneurs need to apply in the prescribed form along with the authorities for prior approval.

2. After the necessary selection, the authority will send the application with its recommendation to the Ministry of Finance.

3. The Ministry of Finance will send the matter to the Cabinet Committee for decision after further scrutiny.

4. If the decision of the committee is positive then the application has to be sent back to the Ministry of Finance and from there it will be sent to the authority to inform the entrepreneur.

5. The entrepreneur will then have to apply to the Registrar of Joint Stock Companies in the prescribed form for registration as a Public Liability Company under the Companies Act. Memorandum and Articles of Association approved by the authority should be submitted along with the application.

6. Once the registration is completed, the entrepreneur has to get approval from the Securities and Exchange Commission to issue capital shares of the company.

7. Formalities related to reinsurance have to be completed at this stage.

8. If the above mentioned conditions are fulfilled, one has to apply with the authority for obtaining a license to start a business under the Insurance Act 2010. (Application can be made only subject to official announcement in this regard). Insurance companies are regulated by the Insurance Act 2010 Finance Act, 2010 and the Insurance Development and Management Authority Act 2010, including their investment functions, taxation and reporting.

As a result of the privatization policy, a number of insurance companies have entered the private sector since 1975. As a result, the amount of money earned from premiums has increased significantly. This growth has been made possible by competition, improved services and the discovery of new types of businesses from an undiscovered wide field. Prior to privatization, the country's total annual premium was Rs 900 million in the general sector and Rs 800 million in the life insurance sector. At present this amount has been increased to Tk. 13398 million for general insurance and Tk. 44958 million for life insurance.

There are currently 43 general insurance companies and 16 life insurance companies operating in the Bangladesh market. Apart from the state-owned Life Insurance Corporation and General Insurance Corporation, the other companies include: Agrani Insurance Company Limited, United Insurance Company Limited, Islami Insurance Bangladesh Limited, Eastland Insurance Company Limited, Eastine Insurance Company Limited, Eastern Insurance. , Continental Insurance Limited, Karnaphuli Insurance Company Limited, grinadelta Insurance Company Limited, Janata Insurance Company Ltd, Dhaka Insurance Limited, Delta Life Insurance Company Limited, Northern General Insurance Company Limited, National Life Insurance Company Ltd, Popular Life Insurance Company Limited, Pioneer Insurance Company Limited, People's Insurance Company Limited, Purabi Insurance Company Limited, Pragati Insurance Company Limited, Progressive Life Insurance Company Limited, Prabhati Insurance Company Limited, Prime Company Limited, Prime Islamic Life Insurance Limited, Phoenix Insurance Company Limited, Fareast Islamic Life Insurance Company Limited, Federal Insurance Company Limited, Bangladesh Co-operative Insurance Limited. Company Ltd., Mercantile Insurance Company Limited, Meghna Insurance Company Ltd, Meghna Life Insurance Company Limited, Reliance Insurance Limited, Rupali Insurance Company Limited, ferret Life Insurance Company Limited, City General Insurance Company Limited, Central Insurance Company, a golden Bengali Insurance Limited, Standard Life Insurance Limited and Homeland Life Insurance Company Limited.

The insurance companies of the country cover almost all types of general and life insurance business except crop insurance and export loan guarantee. These two special insurances are only available in general insurance corporations.

Numerous organizations, associations, professional groups work for the development and expansion of insurance business in Bangladesh. Some of the notable ones are:

The Bangladesh Insurance Association was formed under the Companies Act of 25 May 1983 and was registered with the Registrar of Joint Stock Companies. The association has 60 members and aims to develop, expand, co-operate and safeguard the interests of member companies.

Bangladesh Insurance Academy The Government of Bangladesh established it in 1983 for the purpose of developing, organizing and imparting vocational education on insurance and conducting research on insurance.

Surveyors and Agents Surveyors and brokers occupy an important place in the insurance business in Bangladesh. Surveyors are responsible for calculating and inspecting general insurance losses and sometimes for valuing the insured property. Brokers, on the other hand, run general and life insurance businesses for a commission. Insurance companies also hire paid development officers.

Professional brokerage system has not yet been developed in Bangladesh. Purchasing insurance policy directly by the insured is the conventional insurance method.