Project on

Overview of Insurance Industry of Bangladesh

Course: FIN 642
Section: 2

Submitted To Submitted By

Dr. H. M Mosarof Hossain Arpita Saha 191 5261 660

Professor, Department of Finance Jubaiar Ahmed Bhuiyan- 191 5088 660

University of Dhaka Rezoana Arafin Choudhury 191 5010 660

Date of Submission : 11 December, 2019

 Letter of Transmittal

11 December, 2019

Dr. H. M. Mosarof Hossain

Professor, Department of Finance

University of Dhaka

Subject: Submission of Overview of Insurance Industry of Bangladesh

Dear Sir,

Here we are submitting our project on Overview of Insurance Industry of Bangladesh. We would
like to recall with gratitude, the tremendous support and encouragement, which we received from
you.

Throughout this successful project, we tried our best to make this report as detailed as possible by
collecting up-to-date information, applying extensive in-depth knowledge & expertise. We would like
to thank you for giving us the proper guideline about analysis so that we have completed this project
successfully. There may have many omissions but we have tried our level best to prepare this report
to the required standard. Lastly, we would be delighted enough if you would allocate some of your
valuable time to examine this report.

Yours sincerely,

Sumaiya Habib Tajre- 191 5261 660

Jubayer Ahmed Bhuiya- 191 5088 660

Faria Rahaman 191 5403 660

 Acknowledgement

At first, we would like to thank Almighty Allah for giving us the mental strength and knowledge to
complete this project successfully.

Then we would like to thank our respected faculty Dr. H. M. Mosarof Hossain for giving us this
opportunity for doing project on Overview of Insurance industry of Bangladesh. It is a great pleasure
for us to express our profound sense of gratitude to our respected faculty member for his constant
help and precious suggestions to enhance the quality of the report.
We have tried our best to implement the relevant theories that our faculty member has taught in this
course. We are grateful to our honorable faculty, for his valuable suggestions for the successful
completion of our report. Lastly, we thank all our group members those who were involved in this
group report helped us in completing our work on time.
 Table of Content
NO TOPIC PAGE
1 Introduction 1- 2

2 Industry Overview 3-4

3 IDRA 5
4 Insurance Companies 6-8
5 Types Of Insurance Business 9-10
6 Role of Private insurance Companies 10
7 Risk Management In Insurance Industry 11-12
8 Insurance Sector & Sustainable Growth 12-15
9 Types of Problem Faced In Insu. Business 15-16
10 Recommendation 17-18
11 Conclusion 19
12 References 20
 Introduction
This is the law of nature that people have to live and play with hazards and to some extent insurance
policy can free people from those frustrations. Even if this is true, people of Bangladesh still don’t
prefer to insure themselves. One may think that the people of Bangladesh are risk lover; on the
other hand other may contradict by saying that their low purchasing power doesn’t permit them to
avail insurance policy. This paper will highlight those issues relating to non-popularity of
insurance companies in Bangladesh.

The insurance services can be described as a product in the form of a written legal contract (the
insurance document) plus a bundle of services associated with it. Services are activities and/or
benefits that one party offers to the other and that services are necessarily intangible and do not
result in the ownership of anything. Insurance service is different from other services, as it is
complex and future contingent service involves substantial legal characteristics. The insurance
companies have to find ways to make their services more tangible. To increase the productivity of
providers who are inseparable from their products, to standardize the quality in the face of
variability, and to improve the demand situation and supply capacities in the face of service
perishability. Informing, educating, motivating, persuading, advising and other services prior to,
at the time of and after the issuance of the insurance document make the purchase of insurance
dissimilar from purchasing other products and from even other services.

The insurance companies of our country perform a wide range of activities such as service
designing, preparing contract and policy, marketing and selling, underwriting, rating, reinsurance
and other services and claim settlement. The insurance companies of Bangladesh practice
marketing to a different extent. Their level and depth of marketing orientation varies. A broad
distinction can easily be made between the public and private sector insurance companies. This is
because of the fact that the government owned two insurance companies i.e. the Shadharan Bima
Corporation and Jiban Bima Corporation get all the government insurance business by virtue of
the Insurance Act of Bangladesh.

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According to the rule, all insurance in the government sector is done through these two nationalized
insurance companies, so they enjoy a monopoly. None of the private insurance companies is
allowed to offer insurance services to government organizations. Furthermore, these two
corporations are also allowed to underwrite private businesses and people feel confident about
their reliability. So they have not yet felt any strong need to practice marketing properly. It seems
that they, for the time being at least, are quite contended with their existing market share. Although
in the present situation they do not need to practice marketing aggressively, however, if they are
to retain their existing private sector business and to grow at a pace as the overall market expands,
they need to become fully market oriented. Both the public and private sector insurance companies
in Bangladesh are not practically marketing oriented. They don’t follow the marketing concepts.
Moreover, these institutions are not still popular to the people of the country as we think they are
still unable to minimize problems in providing services to the customers. Proper understanding
and minimizing those service-marketing Gaps will have certainly a positive growth in the
insurance industry of Bangladesh.

2
 Industry Overview
The insurance industry in the country was nationalized in 1972 and two government corporations-
Sadharan Bima Corporation and Jiban Bima Corporation were set up for general and life insurance
respectively. All existing companies except American Life Insurance Company (ALICO) were
merged into these two corporations. The nationalized state of Bangladesh insurance
market continued until 1985 when the government had change in policy and allowed setting up of
insurance company by private sector. Over the year, a good number of life and general insurance
were in phases. Currently, in addition to the two government corporations, 17 life insurance and
43 general insurance companies are operating in the country.
Insurance industry in Bangladesh passed through a century long history of evolution, yet
struggling to achieve its mature stage. After liberation, as part of the nationalization process, the
industry was nationalized vide Presidential Order. Subsequently, in the process of
denationalization, private sector companies were allowed to operate in the industry side by side
with two state-owned corporations. Consequent to that, a good number of insurance companies
emerged in a small economy thus resulted in tough and unhealthy competition. Underhand
transaction on commission appeared as “open secret” in general insurance business. The Controller
of Insurance, even being the regulatory authority, failed to unveil sophisticated control mechanism
to bring the industry into a good shape. At certain stage, the agency commission system was
abolished to stop underhand dealing between the agent and the policy buyer. The move was,
however, failed to eradicate the unethical practices and thus resulted to the reintroduction of
commission system in the sector. The life insurance companies also follow aggressive marketing
strategy for business procurement, many of which are ended with high policy lapse. It is the general
belief of common people that insurance companies are not sincere in making payment and resorts
many whimsical reasons for declining claims which are not taken care of while opening policy.
Due to the negative attitude, the penetration rate in the industry is still very low (only 0.62% of
GDP) even having immense prospects. In order to make the sector vibrant and operationally sound,
the Government has taken a number of steps and some are in process with the main objective of
taming this wild horse.
The insurance industry is now at the final stage of transition. It has been decided to replace the age
old insurance laws with Insurance Regulatory Authority (IRA) Ordinance 2008 and Insurance

3
Ordinance (IO) 2008. The Department of Insurance will be abolished by the fivemember Insurance
Regulatory Authority headed by the Chairman not below the rank of Government Secretary. For
further enhancing the solvency position, the paid up capital for general and life insurance
companies have been raised to TK. 400 million and TK. 300 million respectively. The number of
directors in the company has also been reduced to 15 from 20 with the participation from the
policyholder directors. The new law also introduced mandatory solvency margin for the insurance
companies. Besides, the insurance companies will be required to ensure international accounting
standard, separate Islamic insurance from conventional ones and put a limit on commission
expenses. Moreover, the life insurance companies will be required to make the valuation of
liabilities on yearly basis to reveal the real strength of the company. The law also allowed foreign
investment in general insurance sector. With the promulgation of the ordinances, the insurance
industry will be under the Ministry of Finance from the Ministry of Commerce.
Insurance industry, as said earlier, at the final stage of its transition. Government has taken several
steps for revitalizing the sector to make it more vibrant and operationally sound. However,
amendments and initiatives can’t make an overnight change in the sector. As we know the
Department of Insurance is going to be replaced by an Independent Regulatory Authority yet the
same will not be fruitful until the authority is equipped with technocrats at the policy level and
adequate human resources at the operation level to take control over the sector. The new regulatory
body should discover some mechanism to eradicate underhand commission to reduce the high
procurement cost in general insurance business. Professionalism at every level of management is
very crucial for overall development in the sector. For efficient and prompt decision making,
management should be given sufficient delegation of power. The board should only involve in
strategic and policy aspects of the company without looking into the day to day operation. All the
insurance companies should have a sound HR policy that will attract the qualified people to choose
the profession as a ‘career’ not a mere ‘job’. HR development program should be a part and parcel
of regular business operation for the enhancement of skills and development of professionalism.
A good number of companies are still struggling for their survival, thus huge cost of IT
infrastructure is an additional burden for them. However, awareness should be built for effective
use of IT infrastructure in MIS that ultimately will bring positive results in future.

4
Insurance Development & Regulatory Authority Bangladesh
(IDRA)
Parliament on 03 March 2010 passed two insurance laws in a bid to further strengthen the
regulatory framework and make the industry operationally vibrant. The new laws, came in to effect
on 18 March 2010, are Insurance Act 2010 and IDRA 2010.

There are 77 insurance companies operating in the country and they need to be regulated under
comprehensive laws and guidelines and supervised by a strong regulatory authority. The Insurance
Act 2010 said the sector needs to be managed properly and he strengthened by reducing business
risks, and local and international insurance laws need to be harmonized considering the socio-
economic aspect of the country, and protect the interest of policy holders and other beneficiaries.

IDRA profile
M. Shefaqueahmed, actuarychairman
Md. Quddus khan - member
Sultan-ul-abedinemolla - member
Zuberahmed khan - member
Md. Murshidalam, member

Vision:

To make the insurance industry the premier financial service provider in the country and beyond
focusing an efficient corporate sector and capital market securing ever evolving aspiration of
society penetrating deep into all segments for high economic growth.

Mission:

Our mission is to protect the interest of the policy holders and other stakeholders under insurance
policy, supervise and regulate the insurance industry effectively, ensure orderly and systematic
growth of the insurance industry and for matters connected there with or incidental thereto.

5
 Insurance Companies At a Glance
List of non-life insurance companies
1. Agrani Insurance Company 2. Asia Insurance Ltd.
Ltd.
3. Asia Pacific Gen Insurance Co. 4. Bangladesh Co-operatives Ins.
Ltd. Ltd.

5. Bangladesh General Insurance 6. Bangladesh National Insurance

Co. Ltd. Co.Ltd.

7. Central Insurance Company 8. City Gen. Insurance Company Ltd.

Ltd.

9. Continental Insurance Ltd. 10. Crystal Insurance Company Ltd.

11. Desh Gen. Insurance Company 12. Eastern Insurance Company Ltd.
Ltd.

13. Eastland Insurance Company 14. Express Insurance Ltd.

Ltd.
15. Federal Insurance Company 16. Global Insurance Ltd.
Ltd.
17. Green Delta Insurance Co. 18. Islami Commercial Insurance Co.
Ltd. Ltd.

19. Islami Insurance Bangladesh 20. Janata Insurance Company Ltd.

Ltd.

21. Karnaphuli Insurance 22. Meghna Insurance Company Ltd.

Company Ltd.

23. Mercantile Insurance 24. Nitol Insurance Company Ltd.

Company Ltd.

25. Northern Gen.Insurance 26. Peoples Insurance Company Ltd.

Company Ltd.

27. Phonix Insurance Company 28. Pioneer Insurance Company Ltd.

Ltd.

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29. Pragati Insurance Ltd. 30. Pramount Insurance Company
Ltd.

31. Prime Insurance Company 32. Provati Insurance Company Ltd.

Ltd.

33. Purabi Gen Insurance 34. Reliance Insurance Ltd.

Company Ltd.
35. Republic Insurance Company 36. Rupali Insurance Company Ltd.
Ltd.

37. Sonar Bangla Insurance 38. South Asia Insurance Company

Company Ltd. Ltd.

39. Standard Insurance Ltd. 40. Takaful Islami Insurance Ltd.

41. Dhaka Insurance Ltd. 42. Union Insurance Company Ltd.

43. United Insurance Company 44. SenaKalyan Insurance Company

Ltd. Ltd.

45. Sikder Insurance Company

Ltd.

List of life insurance companies

1. American Life Insurance 2. Baira Life Insurance Company
Company (Foreign Company) Ltd.

3. Delta Life Insurance Company 4. FarestIslami Life Insurance Co.

Ltd. Ltd.

5. Golden Life Insurance Ltd. 6. Homeland Life Insurance

Company Ltd.

7. Meghna Life Insurance 8. National Life Insurance Company

Company Ltd. Ltd.

9. Padma Islami Life Insurance 10. Popular Life Insurance Company

Company Ltd. Ltd.

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11. Pragati Life Insurance Ltd. 12. Prime Islami Life Insurance
Company Ltd.

13. Progressive Life Insurance 14. Rupali Life Insurance Company

Company Ltd. Ltd.

15. Sandhani Life Insurance 16. Sunflower Life Insurance

Company Ltd. Company Ltd.

17. Sunlife Insurance Company 18. Zenith Islami Life Insurance Ltd.
Ltd.
19. Mercantile Islami Life 20. NRB Global Life Insurance
Insurance Ltd. Company Ltd.

21. Guardian Life Insurance Ltd. 22. Chartered Life Insurance

Company Ltd.

23. Best Life Insurance Company 24. Protective Islami Life Insurance
Ltd. Co. Ltd.

25. Sonali Life Insurance Co. Ltd. 26. Sawdesh Life Insurance Co. Ltd.

27. Diamond Life Insurance Co. 28. Alpha Islami Life Insurance Ltd.
Ltd.
29. Trust Islami Life Insurance Co. 30. Jamuna Life Insurance Ltd.
Ltd.

List of the insurance companies in public sector

1. Sadharan Bima Corporation(Gen. Ins)

2. Jiban Bima Corporation (Life Ins.)

3.

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 Types 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. Marine insurance as such was not being practiced as a
separate specialized entity during that time since it were the merchants who used to transact marine
insurance business side by side with their general trading activities

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. It 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

9
another. All these gradually gave life assurance a sound, systematic and scientific basis as we see
in the present day.2.3 Development of Insurance in Bangladesh Insurance is not a new idea or
proposition to the people of Bangladesh

Role of private insurance companies in the

economic development of Bangladesh
 Formation of capital & increase of investment: Insurance companies receive premiums from

insured persons. These premiums increase national capitals. By investing the capitals, national

productions increase.

 Reduce of hindrance of risk: every sorts of business consists of risks. These risks are more

hazardous in Bangladesh. Insurance companies minimize these risks by giving privileges on

loss.

 Maintenance of national wealth: insurance companies not only secure financial facts, but

also influence people to take necessary steps to avoid risks.

 Distribution of risks: insurance companies deal with lots of insured people. So risks are being

distributed among them.

 Extension of business: By taking all uncertain business risk insurance companies extended

the field of business in our country. Insurance gives the assurance of indemnity and help to

collect the capital to lunch a new business and expand the existing business.

 Increase of awareness: As the maximum people of our country are illiterate so they have not

much knowledge about the future life and what will do to enhance the living standard. Different

types of advertisement, publicity and others awareness activities of insurance company which

helps to increase the awareness of general people.

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 Risk Management in the Insurance Industry
An insurance company, by virtue of its business nature, undertakes the risks of the
policyholders. Management of risks is very crucial as the same is highly correlated with the long
run sustainability and operating efficiency of the insurer. Principally, the higher the risk
management practice, the lower the risk and the more protection for the stakeholders. The risk
management primarily deals with the fortuitous events and their impacts, which basically come
from the core business activities of the insurance company. In addition, some operational risks and
market risks are also associated with, which also need to be addressed.

A. Business Risk Management

General Insurance:

General insurance companies of Bangladesh, by and large, follow traditional business

risk management tool. Most of the companies don’t have any underwriting Manual yet
follows common practice, rules and guidelines as framed by the regulatory authority.
Many of the companies have no regular risk inspection team before underwriting a
policy. Policies other than high valued risk (as framed by the management) are usually
underwritten based on the ‘principle of utmost good faith’. Excepting few instances,
policies underwritten at branch level aren’t turned down by the head office after
appropriate verification thereto, due to immense competition among the companies in
the industry.

Life Insurance

Life insurances have underwriting rules and guidelines which are printed in the product
rate books. The underwriting requirements (for new policies and revival of lapse
policies) are based on age and sum assured and are consistent with the reinsurer’s
underwriting requirements. Policyholders up-to certain age enjoy taking policy up-to
certain amount of sum assured without having any special medical test; however, full
medical report (FMR) and pathological urine report (PUR) are required for
policyholders exceeding the certain age limit and sum insured. However, it has been
observed that rules and regulations regarding underwriting aren’t strictly followed in

11
practice. The field level workforces are less interested in proper investigation of the
policyholders as a significant portion of 1st year premium (new policy) is being
absorbed by them in the form of commission.

B. Internal Control Risk

Internal control procedure is an integral part of financial and business processes which
acts as the safeguard of the assets, promotes operating efficiency, and ensures
compliance with applicable policies and regulations and adherence to the prescribed
managerial policies. Most of the insurance companies follow centralized internal control
mechanism. Funding requirements of branches are approved by the head office.
67.64% of the companies have Board Audit Committee yet couples of which are nonfunctional.
For establishing internal control mechanism, 91.18% companies have
established internal audit department, however, the function of the internal audit
department is found inadequate mainly because of insufficient human resource. Only a
few companies makes regular branch/service cell audit while a good number of
companies make necessary inspection/audit as and when required basis.
Performance: Overall macro-economic slowdown resulting from change of government,
successive devastating natural calamities and price hike in the international market affected the
whole insurance sector.

Insurance sector in Bangladesh on the way to

sustainable growth
The commitment of the government to promote development of the insurance sector is of
enormous consequence for its promising future. In view of the pro-active policy support of the
government that the sector has so far received in an unstinted manner, we are certain that within
the next few years we will be able to make insurance a very important component of the country's
financial system. This will go a long way for eradication of poverty and promoting sustainable
economic growth.

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Insurance serves a number of valuable functions, which are very different from those, rendered by
other types of financial intermediaries. The indemnification and the risk pooling properties of non-
life insurance facilitate commercial transaction and the provision of credit by mitigating losses as
well as the measurement and management of risk. The availability of insurance enables risk-
adverse individuals and entrepreneurs to undertake higher risk and activities that yield higher rate
of return, promoting higher productivity and growth. The liabilities of life insurers, on the other
hand, are of long terms and due to the nature of their liabilities they can serve an important function
as institutional investors providing capital to infrastructure and other long-term investments.

Thus insurance makes a significant contribution to economic growth by improving investment

climate and promoting a more efficient mix of activities than would be undertaken in the absence
of risk management instruments. The contribution is magnified by the complementary
development of banking and non-bank financial institutions.

To accelerate the process of economic development the government of Bangladesh initiated a set
of policy and institutional reforms within the banking sector in recent years. These reforms have
continued unabated and extended to non-bank financial institutions in one form or other. Though
the insurance sector in Bangladesh has shown remarkable growth in recent years reflecting product
development and innovation, it was kept outside the purview of the reform programme until the
present government embarked on a set of reform measures to promote a vibrant insurance sector
to mobilize savings both from rural and urban areas and use those savings for investment in social
and economic programmes and projects.

As a first step towards achieving these objectives, Insurance Act, 2010 and Insurance Development
and Regulatory Authority Act, 2010 have been enacted. Following the development of an
appropriate legal framework, the government has established a strong supervisory body for
effective and efficient supervision of the insurance industry. Since its inception in January 2011,
Insurance Development and Regulatory Authority (IDRA) have been working relentlessly and, in
the process, have undertaken a series of measures in an effort to transform the insurance sector
into one of the most efficient, competitive and productive sectors of the wider financial system in
Bangladesh.

13
The First SAARC (South Asian Association for Regional Corporation) Insurance Regulators'
Conference, organized by the IDRA, Bangladesh, in Dhaka early this month, has given an
opportunity to the regulators and insurance professionals and experts of SAARC countries to
exchange views of mutual interests and have a better understanding of the regulatory framework
and functioning of the insurance markets in this region. Besides the distinguished speakers from
SAARC countries, resource persons from Hong Kong, Malaysia, Nepal, Singapore and the United
Kingdom have presented papers on the occasion, on contemporary issues relating to regulation
and supervision of insurance, among other taken part in deliberations.

Regulations requiring insurance to invest a certain percentage of their assets in government

securities and government-approved infrastructure project have been prepared after due process of
consultations with the stakeholders. After these regulations come into effect the government would
be in a better position to obtain funds from the insurance sector to finance its development and
non-development expenditures without having to worry about the inflationary impact of financing
budget deficits.

During the last two years, the IDRA has undertaken a package of wide-ranging measures to
enhance persistency of life insurance business, reduce business acquisition costs, ensure
transparency, improve corporate governance and enhance the rate of return on investment of life
insurance fund through monitoring and strict surveillance of pattern of investment of life
companies. The insurance companies in Bangladesh are now poised to take a big leap forward to
achieve a very high rate of growth in premium income and life fund. With the sound institutional
and regulatory framework in place and with the entry of a few good insurance companies,
particularly life companies, in the market, this writer, as an actuary, can make a projection with
a fair degree of precision that life fund would reach Tk.1000 billion in 2021.

Innumerable martyrs and hundreds of thousands of our mothers and sisters made enormous
sacrifices to win freedom for us so that we could live in peace with honour and dignity. They
sacrificed their lives to make us free from hunger and exploitation, free from social repression
and injustices.

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While the present government under the leadership of Prime Minister Sheikh Hasina has been
working to achieve this goal and to transform this land into a middle income country by 2021, the
50th anniversary of our liberation, this would require all the citizens of this country to make
sustained efforts to realize that goal. The IDRA is committed to make a humble contribution,
within its jurisdiction, in promoting a healthy and vibrant insurance sector, paving the way for
achievement of our eventual goal.

Types of Problems faced in the Insurance industry

The key to delivering high 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).

The insurance industry in Bangladesh needs to look into solving the following service quality
shortfalls if it wants to play a dominant role in the financial sector of Bangladesh:
(1) Not Knowing What Customers Expect:
Based on interviews, we found that executives’ perceptions of superior quality service are
largely congruent with customers’ expectations. Customers’ expectations versus
management perceptions are the result of the lack of a marketing research orientation,
inadequate upward communication and too many layers of management.

(2) The Wrong Service-Quality Standards:

This arises when there is a discrepancy between what managers perceive that customers
expect and the actual standards that they (the managers) 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 meet or exceed those expectations.

(3) The Service-Performance Gap:

Organizational 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 is the difference between
organizational service specifications and actual levels of service delivery. Service

15
 specifications versus service delivery are 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.

(4) When Promises Do Not Match Delivery:

Customers 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 selling 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.
(5) The discrepancy between customer expectations and their perceptions of the service
delivered:
As 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.

(6) The discrepancy between customer expectations and employees’ perceptions as a result of
the differences in the understanding of customer expectations by front-line service
providers.

16
 Recommendations
A rating scale could also be established to rate the quality of services based on insurance
company’s facilities, past performance records, and client’s 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 important 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.It was found in the analysis that that lack of trustworthiness and reliability is the main
reason of not choosing an insurance company. In addition a large number of respondents 255 out
of 416 considered lengthy payments time in getting payment as another major obstacles in
choosing an insurance company. Moreover, clients have rated reference by family and friends as
another very important determinant in insurance provider choice. To enhance a positive reputation
of the insurance company, they can follow the strategies stated below:

1. Do a lot of personal selling of services to the clients and encourage existing customers
to tell good about your services to the potential customers.
2. Carefully choose personnel who interact with the customers.
3. Train personnel to interact well with the clients
4. Positive and societal marketing activities to build and project specific company image
5. Design facilities to achieve specific marketing or image objectives of the organization
6. Establish formal system for controlling quality of insurance services

7. Perform industry analysis on a regular basis and to remain competitive Base prices on
what competitors’ charges.

8. Public insurance companies must increase the rate of payment to encourage more
accounts
9. Public insurance companies must pay attention to understand the problems of the
clients. A short response time is expected from the public firms.

17
10. Take steps to eliminate hustle in getting payment after any incident.
11. Use a combination of cost and competition based costing system as gradually
competition based costing will be popular in the industry due to increment in the
number of competitors.

12. Use heavy informative advertisement to show how the service can be better utilized.
But as the insurance company’s benefit of service is long should practice more of
reminder advertisement.
13. Encourage the existing customers to promote your services to the new customers and
use newspaper as the prime media for advertisement to show the cost benefit of
insurance policy.
14. For the institutional insurance service provider, empower your customer by close
contact through sending mail and knowledgeable sales personnel.
15. Choose service-providing employees very carefully; train them highly to make them
knowledgeable regarding the service standards.
16. Insurance companies must be concentrating on their physical infrastructure and wide
distribution facilities.
17. Use technology to maximize the service quality and to reduce the fluctuation in service
quality. Provide service above standard as promised to the customers to reduce the
service gaps.

18
 Conclusion
The insurance companies can expand their target market by identifying and by providing

responsive diversified services. While the industry is stuck to the traditional insurance services,

the world is changing fast. The need for innovation is felt frequently which the industry can’t

provide. Unless insurance industry devotes its attention to innovative needs of the economy,

neither the economy nor the insurance industry is likely to flourish. From the political and

social behavior of the people it can be said that demand for these services will be higher in

near future. Even staying more with an insurance company is also dominated by many special

services. Insurance companies, especially public one must think about more value added

services.

19
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