Role of Insurance Companies in The Economic Development of Bangladesh

Role Of 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 these 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.
 Provide safety and security:Insurance provide financial support and reduce

uncertainties in business and human life. It provides safety and security against
particular event. There is always a fear of sudden loss. Insurance provides a cover
against any sudden loss. For example, in case of life insurance financial assistance
is provided to the family of the insured on his death. In case of other insurance
security is provided against the loss due to fire, marine, accidents etc.
 Generates financial resources:Insurance generate funds by collecting premium.
These funds are invested in government securities and stock. These funds are
gainfully employed in industrial development of a country for generating more
funds and utilised for the economic development of the country. Employment
opportunities are increased by big investments leading to capital formation.
 Life insurance encourages savings:Insurance does not only protect against risks
and uncertainties, but also provides an investment channel too. Life insurance
enables systematic savings due to payment of regular premium. Life insurance
provides a mode of investment. It develops a habit of saving money by paying
premium. The insured get the lump sum amount at the maturity of the contract.
Thus life insurance encourages savings.
 Promotes economic growth:Insurance generates significant impact on the

economy by mobilizing domestic savings. Insurance turn accumulated capital into
productive investments. Insurance enables to mitigate loss, financial stability and
promotes trade and commerce activities those results into economic growth and
development. Thus, insurance plays a crucial role in sustainable growth of an
economy.
 Medical support:A medical insurance considered essential in managing risk in

health. Anyone can be a victim of critical illness unexpectedly. And rising
medical expense is of great concern. Medical Insurance is one of the insurance
policies that cater for different type of health risks. The insured gets a medical
support in case of medical insurance policy.
 Spreading of risk:Insurance facilitates spreading of risk from the insured to the

insurer. The basic principle of insurance is to spread risk among a large number of
people. A large number of persons get insurance policies and pay premium to the
insurer. Whenever a loss occurs, it is compensated out of funds of the insurer.
 Source of collecting funds:Large funds are collected by the way of premium.
These funds are utilised in the industrial development of a country, which
accelerates the economic growth. Employment opportunities are increased by
such big investments. Thus, insurance has become an important source of capital
formation.
Others Contribution:
 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
 Reinsurance Services:
Sadharan Bima Corporation in its role as a re-insurer has lent support to the private
insurance companies in Bangladesh in a big way.
.
 Risk Improvement Services:
SBC 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.
 Obtaining financing. Consumers cannot obtain a loan to purchase a home, car, boat or
airplane without proof of insurance.Lenders won’t lend without proof of insurance,
because the risk would be too high. Without financing, businesses are unable to expand,
and when businesses are unable to expand, they do not create jobs. In fact, they may lay
off some of their employees. Without jobs, consumers have less money to spend and the
economy stagnates. Over time, peoples’ quality of life suffers, because their income
decreases.
 Paying taxes. Insurance companies and their employees pay taxes, which fund
government programs that help needy people, contribute to education, protect the
country, and maintain and expand the infrastructure.
 .
 Social effects
Insurance can have various effects on society through the way that it changes who bears
the cost of losses and damage. On one hand it can increase fraud; on the other it can help
societies and individuals prepare for catastrophes and mitigate the effects of catastrophes
on both households and societies.
Insurance can influence the probability of losses through moral hazard and preventive
steps by the insurance company. Insurance scholars have typically used to refer moral
hazard to the increased loss due to unintentional carelessness and insurance fraud to refer
to increased risk due to intentional carelessness or indifference Insurers attempt to
address carelessness through inspections, policy provisions requiring certain types of
maintenance, and possible discounts for loss mitigation efforts.
Conclusion:
Insurance sector in Bangladesh is contributing to the growth and development process of the
business and property by protecting all variety of assets from all types of hazards. However, the
size of the insurance industry in Bangladesh is small but over-institutionalized. Only by
achieving competitiveness, this sector can contribute more to the development of the economy of
the country. In spite of all constraints both at macro and micro environment, good growth rate
and tremendous growth potential reconfirm the brightest prospects of the insurance sector in
Bangladesh. If insurance sector can be developed at optimum level by eliminating the problems
identified in the study, it is expected that it will continue to march forward at an accelerated
speed and bring economic benefits to the economy.
References:
www.sadharonbimacorporation.com
www.google.com
www.wikipedia.com
www.jbc.gov.bd

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Role Of Insurance Companies In The Economic

 Reduce of hindrance of risk: Every sorts of business consists of risks. These

 Maintenance of national wealth: Insurance companies not only secure financial

 Distribution of risks: Insurance companies deal with lots of insured people. So

 Extension of business: By taking all uncertain business risk insurance companies

 Provide safety and security:Insurance provide financial support and reduce

 Promotes economic growth:Insurance generates significant impact on the

 Medical support:A medical insurance considered essential in managing risk in

 Spreading of risk:Insurance facilitates spreading of risk from the insured to the

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