Insurance Industry

Insurance Industry Analysis

Risk is everywhere; insurance companies come forward to share all the independent risks to a community at an equitable rate by maintaining a pool of fund which policy holders pay in return of insuring their wealth. These companies make profit through selling insurance policy of different kinds that is known as premium income. Insurance companies do not rely only on underwriting profit rather they invest their technical reserve to various sectors like capital market, treasury bonds and fixed deposit, hence they earn a smart profit. However, risk is a word that is used often by insurance companies.

The insurance industry in Bangladesh has achieved a record amount of gross premium in recent years and has been steadily growing at a double digit rate. Unfortunately the current state of affairs of general insurance market in Bangladesh is far from satisfactory, because a large number of companies are not commensurate with the size of the market. Couple of years ago the insurance subject has transferred from the ministry of commerce to the ministry of finance which will help to solve issues related to taxation, Vat, enlistment of insurance companies with banks. In the mean time government has passed a law in the name of the insurance Act 2010, according to this law Insurance Regulatory Authority has been formed which will help to maintain proper control and supervision of this sector.

How to Operate:

Insurance companies sell policies in return they earn premium; it is their profit which is called underwriting profit or loss. The risk they are taking upon their shoulder try to share with reinsurers while they themselves also work as reinsurers. From this earning they reserve a certain amount as reserve to pay claims which is the big source of expenses, and this reserve works as technical reserve (Unearned Premium Reserve, Outstanding Claims Reserve, Incurred But Not Reported (“IBNR”) Claims)which they invest in safer sector to earn...