1. 0 Introduction Insurance is a system of spreading the risk of one to the shoulders of many. It is a contract whereby the insurers, on receipt of a consideration known as premium, agree to indemnify the insured against losses arising out of certain specified unforeseen contingencies or perils insured against. Since the emergence of Bangladesh as an independent nation, insurance industry was nationalized along with banking and other major industrial sector. At the initial stage of nationalization of insurance industry, five government owned insurance corporations including one controlling corporations were steps.
Sadharan Bima Corporation was established as the sole insurer for the general insurance Business in Bangladesh. Under the challenging world economic condition during many times SBC remains in a strong financial position. Despite the world economic recession the SBC continued progress in different areas of the business. 1. 1 Objective of the report The main purpose of this report is to have a clear idea about the growth of general insurance company – a case of Sadharan Bima Corporation. 1. 2 Methodology and Data Collection.
Of the two ways of data sources (primary and secondary) we have used only secondary sources as follows: • Text books, • Investigation report, • Previous researches related to the topic, • Journals, newspaper, indices data and • Electronic sources (Internet) 1. 3 Scope of the report The reader of the report will discover the following area after reading this report: ? Proper and right knowledge about the insurance business in Bangladesh. ? Practical knowledge about when the risk management and distribution system. ? The conditions under when claims are considered and the process of meeting claim.
? Their revenue, expenditure, profit, business policy, social work etc. ? Their development year by year. ? Knowledge about reinsurance business. ? Their respond to different parties. ? Importance and necessity of insurance in different sector. 1. 4 Limitations of the report Giving description on the growth of general insurance company – a case of Sadharan Bima Corporation needs vast research and wide range of information due to the complexity of the financial sectors. The time provided to complete the report is very short.
We did not get enough time to prepare this report properly. Although we, all the group members gave utmost effort to complete this report within reasonable time. Because of time limitation there may exists some errors. We had to face a lot of difficulties to collect required data and information. Information is not sufficient for us in the related website. Moreover, due to our limitation of intellect we may not have discussed some aspects properly. Yet, we hope we have rendered as much information in the report as required. 2. 0 History of Insurance Company of Bangladesh.
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.
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. After 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 Department until 1994, when a change was made in the structural arrangement to keep pace with the new economic trend of liberalization.
The Insurance Corporations Act 1973 was amended in 1984 to allow insurance companies in the private sector to operate side by side with Sadharan Bima Corporation and Jiban Bima Corporation. The Act of 1984 made it a requirement for the private sector insurance companies to obtain 100% reinsurance protection from the Sadharan Bima Corporation. Private sector insurance companies demanded withdrawal 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 government 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. The control over insurance companies, including their functions relating to investments, taxation, and reporting, is 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 businesses and approximately Tk. 800 million in life insurance business. In 2000, premium incomes raised 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. 3. 0 Sadharan Bima Corporation Sadharan Bima Corporation is only state-owned General Insurance Corporation operating under the direct control and supervision of the Ministry of Finance, Government of the People’s Republic of Bangladesh.
It emerged on 14th May, 1973 under the Insurance Corporation Act (Act No. VI) Of 1973 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. In the year 1984 Bangladesh Government allowed insurance Companies in the private sector and to that effect promulgated the insurance Corporations (Amendment) Ordinance 1984. Sadharan Bima Corporation has a very strong financial base. It has a market share of over 20 % of the total premium income of the insurance market of Bangladesh.
SBC, the largest insurance enterprise in the country, has a net worth of Tk. 605 core an authorized capital of Tk. 20 crore, paid up capital of Tk. 10 core and the anticipated revenue during the current financial year is approximately Tk. 417 core. Following characteristics of SBC proves its financial soundness: – Government owned enterprise – Financial Soundness due to huge assets owned by SBC – Only re-insurer in Bangladesh – Wide net-work of offices – Public trust – Huge trained & skilled manpower – Large investable fund – Huge Real Estate Assets in Dhaka, Chittagong, Khulna, Rajshahi, Bogra & Sylhet.
SBC TOWER – the only multistoried car parking building in the heart of the capital city of Bangladesh SBC is the sponsor shareholder of Investment Corporation of Bangladesh, Industrial Development and Leasing Company, National Tea Company Limited, National Housing Finance and Investment Ltd, Aramit Ltd, Central Depository BD Ltd. etc. SBC has met all prudential norms in further its financial strength. SBC is entitled to 50% of public sector business in Bangladesh.
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 SBC and remaining fifty percent may be reinsured either with this Corporation or with any insurer in Bangladesh or abroad. The main pillar of the SBC is insurance as well as reinsurance business. SBC is the largest non-life insurance underwriter in Bangladesh in terms of gross premium, network of offices & trained manpower. On the other hand, SBC reinsures the risks of private insurance companies operating in Bangladesh.
3. 1Vision, Mission, Goal and Objectives. Vision: ? To be a world-class insurance & reinsurance organization in Bangladesh. Mission: ? To become the premier organization in Bangladesh for all insurance and reinsurance needs and to provide quality services at affordable cost. ? To be the Insurer of the first choice in Bangladesh by offering top class security, comprehensive, efficient services and professional conduct of business. Objectives ? To achieve business targets. ? To increase share of private sector business through marketing efforts.
? To build, maintain and improve the commercial image of the organization and gain recognition as a competent and professional insurer as well as re-insurer. ? To overhaul and simplify administration system & procedure. ? To attain full computerization and to utilize IT to its full potential. ? To enhance the skills and flexibility of the employees through continuous training. ? To ensure better return from SBC? s investment. ? To improve maintenance of existing real estate and expansion of it. Goal?
Venture into other areas Bangladesh and abroad on the strength of SBC? s crore competency. ? Enter into and expand new insurance product and services to meet the changing needs of the clients. ? Fulfillment of SBC? s social commitments towards the public as a state owned enterprise. 3. 2 Organizational Structure of Sadharan Bima Corporation. Under the statute, Sadharan Bima Corporation is run by a Board of Directors consisting of 7 members. The chairman and the directors of the Board including the Managing Directors are appointed by the Government.
The Managing Director, being the chief executive, conducts and manages the affairs and business of the corporation in accordance with the provisions of the Act, regulations, Government instructions and the resolutions of the Board. He is also guided by the sound commercial principles and business practices. The present organization structure of Sadharan Bima Corporation is given below: 1. Managing Director – Chief Executive. 2. General Manger 3. Deputy General Manager 4. Assistant General Manager 5. Manager 6. Deputy Manager 7. Assistant Manager 8. Junior Officer 9. Office Staff 10.
Total strength 3. 3 Branches of SBC. The Head Office of Sadharan Bima Corporation is located at 33, Dilkusha Commercial Area, Dhaka. In order to give efficient service to the insuring community, the management setup 6 Zonal offices at Dhaka, Chittagong, Rajshahi, Khulna, Narayangonj, and Comilla, and 2 Regional offices at Sylhet and Mymensingh. The Corporation also sets-up offices in various places, especially in the Muffassol Area. Sadharan Bima Corporation has now 110 offices throughout the country. These offices are smoothly running with near about 1500 Officers and Employees.
The addresses of the offices of SBC throughout the country are given below: 1. Dhaka Zonal Office 2. Chittagong Zonal Office 3. Rajshahi Zonal Office 4. Khulna Zonal Office 5. Narayangong Zonal Office 6. Comilla Zonal Office 7. Sylhet Regional Office 8. Mymensingh Regional Office 3. 4 Products and Services. There are some products and services that are given by SBC. Products that are given by SBC are: 1. Fire Insurance Policy. 2. Marine Hull Insurance Policy. 3. Marine Cargo Insurance Policy. 4. Motor Insurance Policy. 5. House Holder’s Comprehensive Insurance Policy. 6. Product Liability Insurance Policy.
7. Burglary insurance Policy. 8. Contractors All Risk Policy. 9. Engineering Insurance Policy. 10. Public Liability Insurance Policy. 11. Aviation Insurance Policy. 12. Workmen’s Compensation Policy. 13. Cash In Safe Insurance Policy. 14. Cash In Transit Insurance Policy. 15. Cash In Counter Insurance Policy. 16. Personal accident Insurance policy. 17. Peoples Personal Insurance Policy. 18. Dread Disease Insurance Policy. 19. Overseas Medi-Clam (Business and Holiday). 20. Overseas Medi-Clam (Employment and Student). 21. Export Credit Guarantee Insurance. 22. Livestock Insurance Policy.
23. All Risk Insurance Policies. 24. Fidelity Guarantee Policy. Services Provided by Sadharan Bima Corporation 1. Re-insurance Service 2. Risk Improvement Services 3. Industrial Development through Equity participation 4. Human Resources Development for Insurance Industry. 3. 4. 1 Re-insurance Services After establishment of private Insurance Companies in the year 1985 in Bangladesh, Government authorized SBC to accept 100% reinsurance of private insurance company’s. SBC in its role as a re-insurer has lent support to the private insurance companies in Bangladesh in a big way.
In view of the huge net-worth and retention capacity, SBC has accepted both treaty and facultative businesses from the private insurance companies. In respect of reinsurance, the Insurance Corporation (Amendment) Act 1990 provides that fifty percent of a company’s reinsurance business must be placed with the SBC and remaining fifty percent may be reinsured either with SBC or with any other insurer in Bangladesh or abroad. SBC is doing direct insurance as well as private insurance company’s reinsurance. SBC is the largest General Insurance Corporation in Bangladesh doing direct Business to the tune of BDT 886 million in the year 2005.
During the same period its reinsurance premium income was BDT 2627 million. SBC is a shareholder of Asian Reinsurance Corporation. SBC’s major portfolio comprises of fire, marine cargo, aviation and engineering business. SBC also accepts reinsurance business from overseas market through its intermediaries and as well as directly. The sound financial backing and rich experience earned over the years in the field of insurance, reinsurance and financial services (which includes investment, risk improvement services etc), brings SBC in an ideal position of a professional reinsurer in Bangladesh.
At the present growing economy in Bangladesh the premium income of SBC is also increasing day by day. 3. 4. 2 Risk Improvement Services As the only state owned General insurance and re-insurance enterprise in Bangladesh Sadharan Bima Corporation has extended its support to the insurance market in Bangladesh in a extended way. Sadharan Bima Corporation would always endeavor to deliver the best customer services for the fulfillment of insurance, reinsurance and risk management needs and problems to the insurance market in Bangladesh.
On the order hand, Sadharan Bima Corporation provides risk improvement services to its valued clients through: a) Pre-underwriting inspection services. b) SBC has the opportunity to take the necessary help and advice from the foreign reinsurer regarding risk improvement techniques. c) SBC regularly enlists professional and expert surveyors to asses risk and loss before and ager loss. It may be mentioned that license for the survey firms are issued by the office of the Chief Controller of Insurance, Govt. of the Peoples’ Republic of Bangladesh. 3. 4.
3 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, Industrial Development and Leasing Company, 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. 3. 4. 4 Human Resources Development for Insurance Industry: To develop the human resource for the insurance industry in Bangladesh.
SBC has arranged professional training for its officers & staffs both within the country and abroad. SBC also arranged professional training for the officers of the private insurance companies operating in Bangladesh. 3. 5 Corporate Social Responsibility. SBC is committed to conduct all its operations in a manner that is protective of the environment, health and safety of employees, customers and the community. In fulfillment of this commitment, SBC maintains a continuing effort to adhere to the following principles: Develop its employees by encouraging empowerment and rewarding innovation.
Promote an environment for learning and personal growth of its employees by providing training within the country & abroad. Endeavour to attain a position of leadership in each category of its business. SBC is committed to insuring its business to conduct in accordance with high ethical, professional, legal standards and good corporate governance practices. Aim to achieve business excellence by understanding, accepting, meeting and exceeding valued clients expectations. SBC will determine its clients needs and have a commitment to provide high quality services to meet them. 4. 0 Growth of SBC. 4. 1 Revenue.
In according to the accounts record of Sadharan Bima Corporation (SBC), we have learnt SBC earns revenue from three types of insurance –Fire Insurance, Marine Insurance and Miscellaneous insurance. In each type of insurance revenue is earned from Gross premium, Reinsurance premium and other income which is shown in chart and graph. [pic] From the records of SBC, In 2005, it earned revenue BDT 170. 09 crore from Fire insurance, BDT 98. 38 crore from Marine insurance and BDT 104. 88 crore from Miscellaneous insurance. By increasing each year, in 2009 SBC has earned BDT 239. 28 crore from Fire insurance, BDT 150.
59 crore from Marine insurance and BDT 168. 13 crore from Miscellaneous insurance 4. 2 Total Revenue [pic] From the graph of total revenue we can learn the total revenue of SBC in 2005 was BDT400. 52 crore. SBC earned BDT 441. 14 crore in 2006, BDT 519. 47 crore in 2007, BDT 582. 37 crore in 2008. In 2009, by increasing the revenue became 602. 33 crores. From the graph we can see a liner trend of incensement of total revenue. In five years period revenue has increased about 50%. It reflects that SBC is running well by contributing vastly in insurance market of Bangladesh. 4. 3 Revenue, Expense and Claims
We can see an overall financial view of Sadharan Bima Corporation at a glance. By the passing of years SBC? s revenue has increased gradually and reached at BDT 602. 33 crore. At the same time it? s expense has also been increased. But the increase in profit figure (BDT 101. 50 crore) is quite satisfactory. SBC is generating it’s investment income at a slow pace. | |2005 |2005 |2006 |2007 |2008 |2009 | | |(in crore) |(in crore) |(in crore) |(in crore) |(in crore) |(in crore) | |Total Revenue | |400. 52 | 441. 14 | 519. 47 | 582. 37 |602. 33 | |Total Expense | |364. 14 | 399. 1 |458. 86 |484. 21 |500. 83 | |Profit | |36.
38 |42. 04 |60. 61 |77. 37 |101. 50 | |Net Claim | |86. 29 |102. 54 |133. 19 |134. 03 |132. 22 | |Investment Income |26. 64 |27. 17 |29. 72 |38. 12 |40. 47 |44. 33 | [pic] In 2005, the total expenditure of Sadharan Bima Corporation was TK364. 14crore. In2006, it was TK399. 1 crore. It had been increased at TK34. 96 crore. In 2007, the total expenditure was TK458. 86 crore and it had been increased at TK59. 76 crore. The total expenditure was high in 2007 than that of 2006. The total expenditure in 2008 was TK484. 21 and in 2009 TK500. 83 crore. The amount of increased in 2008 was TK25. 35 crore and 2009 was TK16. 62 crore.
Though every year the total expenditure has been increased, the total revenue has also been increased. So the amount of profit has been increased. 4. 4 Net Claim [pic] From the graph we can see in 2005 net claim was 86. 29 crore and it increased next two years and reached in figure 133. 19 crore in 2007. Graph line shows from 2007 to 2009 net claim rate was steady. At last 2009 figure was BDT 132. 22 crore. 4. 5 Net Profit [pic] From this graph we can see in 2005 the profit was BDT 36. 38 crore and in 2009 that was BDT 101. 5 crore. The graph line shows us from 2006 to 2009 profit increased very sharply which was quite satisfactory.
4. 6 Investment Income [pic] Above bar chart shows us a clear view of investment income of SBC. From 2004 to 2009 investment income of SBC has increased but in a moderate rate. In the year of 2007 and 2008 investment income increased at a good rate. SBC should take steps to increase its investment income. 5. 0 Findings and Conclusion The intension of the study is to examine the role of Sadharan Bima Corporation general insurance business in Bangladesh. The major findings of the overall study are discussed below: • Sadharan Bima Corporation is controlled by the Ministry of Finance and it I is a government institution.
• Sadharan Bima Corporation collects premium from the people, in return, it assures to minimize their risk involved in business. It collects premium from people by maintaining the rules and principles. • Sadharan Bima Corporation has 8 zones with 84 branches and the number of employees is 959 for giving more services to the policy holders. • It has 110000 policy holders, certificate holders and endorsement holders. It involves fire policy, marine policy motor car policy, vehicle policy etc. • From 2005 to 2009 its revenue and profit is increasing. Its net claim and investment income is also rising. 5.
1 Impact on Our Economy Sadharan Bima Corporation contributes to develop economic condition of Bangladesh. As a result, • Creating more savings • Makes capital formation, • Develops trade and commerce • Creates more employment • Social security 5. 2 Recommendations Sadharan Bima Corporation can provide to policy holders developed services by the following processes: • It can appoint more employees because the authorized number of employees is 2623. • For modern services it should use computerized systems in every department. • This organization can create more policy holders by publicity and advertisement.
• It can make its laws and principles easier for the policy holders. Reference Website: • http://www. sbc. gov. bd • http://www. bankersbd. com/bangladesh-insurance-company. html Other: • ‘Annual Report’ (2004 to 2009), Sadharan Bima Corporation • Class lectures, • Group discussion.