Executive Summary:

This paper examines the HR issues and problems, approaches and challenges of the insurance
industry in Bangladesh. Insurance industry of Bangladesh has gone through long history of
evolution and is still developing and trying to gain popularity. Human resources nowadays play a
very important role behind the success of any organization by contributing to every department.
Human Resources may set strategies and develop policies, standards, systems, and processes.
But many insurance companies in Bangladesh do not have a proper human resource department
although the number of insurance company in the country is increasing. As a result there are less
practices of human resource are seen. To make our insurance industry more competitive there
should be proper practice of human resource like recruitment, selection, planning, performance
appraisals, training and compensation.
After analyzing the HR issues, approaches and challenges, few recommendations are suggested.
The implications of the recommendations are also described in the end.

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Insurance industry in Bangladesh

Introduction:
Insurance is one of the most significant financial instruments. It is a kind of contract that an
insurance company signs with their clients agreeing that on any sudden happening of certain
events the insurance company will make payment or meet their clients cost. Insurance is a way
of directing peoples saving towards an investment. For instance, in a house insurance policy, the
insurance company will settle that if anything bad happens to the house, the company will pay
the cost of repairing it.

History of insurance industry:

Bangladesh insurance business has a long history of evolution. In the pre-liberation period, there
were as many as 49 privately owned insurance companies underwriting non-life insurance
business along with one central Govt. run-organization, namely, Pakistan Insurance Corporation.
After liberation war in 1972 The People's Republic Government of Bangladesh nationalized the
insurance industry along with the banks in 1972 by Presidential Order No. 95. By virtue of
nationalization order, 5 Corporations were set up to manage the insurance industry of which four
were subsidiary corporation, two each for life and non-life and an apex body, viz. JatiyaBima
corporation as a controlling corporation. At a later stage, the above five corporations were
replaced by two state owned corporations namely, SadharanBima Corporation (SBC) for general
business and JibanBima Corporation (JBC) for nor life business under a restructuring plan made
in 1973. Later in 1984, the government allowed the private sector to do business in the insurance
industry for the first time. The insurance market in Bangladesh now consists of two state- owned

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corporations along with forty three private sector general and seventeen life insurance
companies. Thus the insurance sector in Bangladesh has grown up substantially and deepened
remarkably with number of companies in both life and general segments. With the expansion of
size of the insurance market, the volume of assets of the industry has also increased substantially.
The gross premium of private sector general insurance business has been improving at a standard
rate over the years. The general insurance industry of Bangladesh noted a gross premium of
Tk.19.02 billion (provisional) in 2011 and Tk.16.54 billion in 2010 which was being shared by
44 companies including the Government owned SadharanBima Corporation (SBC) having gross
premium of Tk.1.91 billion (provisional) in 2011 (Tk.1.66 billion in 2010). The growth of
insurance premium income in 2012 was 5.59%. In 2012, the combined premium income
underwritten by public and private sectors stood at Tk 86,651 million. However, presence of
large number of companies in a small market leads to tough market competitors and illegal
methods which have already made a considerable number of sick insurance companies in the
industry.

Current position of the insurance industry:

The Bangladeshi insurance industry is becoming highly competitive. The main factors affecting
the performance of this industry includes fierce competition in the non-life segment, the rising
market shares of private insurance companies, and the increasing level of risk being retained by
insurers. The Bangladeshi insurance industry increased at a Compound Annual Growth Rate
(CAGR) of 16.0% during the review period (20082012), supported primarily by the life
insurance segment. But it still has a long way to go. However, compared to other countries, the
capital base and premium income is low with low market penetration and as a result the risk
taking ability is also low. Insurance industry in Bangladesh often needs to go through major
corruptions like manipulation or lack of proper control. The preliminary review by the regulatory
agency revealed horrendous pictures. Few company bosses even tried to harass the regulators
under the coverage of few political masters since they were not dancing according to their tunes.
The intelligence agency reports also found massive irregularities in the major life and non-life
insurance companies. People often claim that insurance companies in Bangladesh do not work

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properly. One of the main reasons is either they do not have separate Human Resource
Department or they do not follow any mechanisms of Human resource. There should be
appropriate practices of the Human resource mechanism like training employees, developing
career plans for them, promotion opportunities or performance feedback and appraisals. If these
problems are minimized then growth of the industry can be more significant.

Market share:
Insurance market in Bangladesh remains fragmented and extremely competitive due to existence
and operation of a large number of companies, incommensurate with the size of the market. The
life insurance segment recorded a significant review-period CAGR of 16.4%, driven by the
country's large population, robust economic growth, increased promotional efforts by private
insurance companies, rising disposable income levels and increased awareness of the need for
insurance. Life insurance led the Bangladeshi insurance industry during the review period,
accounting for a 76.9% share of gross written premiums in 2012. The market share of the largest
non-life insurance company is 13.59%. The top 7 private sector insurers collectively account for
a market share of 46.54% in the non-life sector.

Products and Services:

Life and non-life both companies provide different sorts of schemes and services. Some of them
are:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Life insurance.
Savings and retirement.
Accident and health.
Credit.
Home.
Islamic DPS
Car or any vehicle insurance.
Deposit protection service.
Education plan.

Objective of the study:

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1. Determining the HRM problems and issues facing insurance industry in Bangladesh.
2. Knowing the HRM approaches that are needed to be taken to ensure ongoing Strategic
Competitive Advantage.
3. Finding out HRM challenges that will be faced by Insurance Industry in Bangladesh in
21st century.

HRM Problems and Issues Facing Insurance Industry in Bangladesh

Day by day the human resource practices are being considered as the most essential factors in
managing any organization because both efficiency and productivity of the organization are
entirely dependent on the human capital. Therefore it is an important task for an organization to
select the right people and place them in the right place. For this purpose every organization
should have a proper human resource department which can apply a proper human resource
practice throughout the workplace. A right person at right place can translate the organizational
opportunities to its productivity. Efficient human resource practices help to control visions and
growth of an organization. Organizational capability relates to hiring and retaining competent
employees and developing competencies through effective human management practices (Ulrich
& Lake 1991). Indeed, developing a talented workforce is essential to sustainable competitive
advantage (Kundu&Vora 2004).Human resource measurement is about valuing the contribution
people make to the success of an organization, and the term human capital describes the
contribution made by human skills and knowledge to the production of goods and services
(Becker, 1993). Human resources in a developing country are an important resource and needs to
be fully utilized. Bangladesh has high potential to become strong nation as it is highly populated
country which means has huge human resources.
Insurance being the most financial institutions under financial services could not yet provide the
people with such financial services or has not got the expected popularity. This can be due to
many lacking or problems. One of the major problems is the lack of efficient human resource.
Fresh graduates or other job seekers hardly want to develop their career in insurance industry
because this industry is not also very much developed in Bangladesh. To bring competence, this
industry must try to take steps to change the scenario. This can be done by hiring efficient
people, proper training facilities, performance appraisals, career development programs for
employees and retaining them. Lack of motivation or efficient HRM practices can affect the

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employees in terms of their satisfaction and as a result hamper the organizational development.
An insurance company works mainly with human capital base so it must try to change the
environment and make interest to the public.
In Bangladesh, it is seen that there is lack of knowledgeable workers in the insurance company.
Or it is seen that right people are not placed in the right place. For example, for an insurance
sales agent, an outgoing, outspoken and smart person is needed rather than a high CGPA holder
university graduate. When these unknowledgeable persons are promoted to further positions,
they are turning into inefficient senior executives. This affects in the management and control of
the organization. Turnovers are high in this industry due to lack of HR practices like performance
appraisals or lack of proper training programs. There are hardly any effective training programs
or appraisal methods in the industry. There is also no such institutions where job seekers can do a
course or know more about insurance so that they can apply for the insurance companies.

HRM approaches needed to be taken to ensure ongoing Strategic Competitive

Advantage
Insurance industry is a service based industry which is highly dependent on the human resources
rather than machineries. Therefore in this sector it is very important to place right people in the
right place. After selecting the right person through competitive assessment from pool of
candidates, the employee should be given foundation through training. An insurance company
professionalism reflect through its training and educational program. These help to mold the
employeesbehavior develop skills and knowledge and help new employees to recognize the
corporate culture. Lack of efficient HRM practices reduces employees satisfaction towards their
organization and ultimately that affects their commitment to the organization. Training programs
need to be given proper importance than normal interviews. Effective training programs must be
selected first. How well training is held depends on the considerable degree of management
perspective of top administration. Recruitment policy of insurance industry may formulate to
recruit young people.
Human resource practices in any organization have become an essential part. It is an important
fact that an organizations people are its biggest assets. However, it is also seen that many

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organizations first look at the investments made on the human resource in terms of salaries,
wages and incentives, whenever it comes to cost cutting.
Bailey(1993) noted that the contribution of even a highly skilled and motivated workforce will
be limited if jobs are structured, or programmed, in such a way that employees, who presumably
know their work better than anyone else, do not have the opportunity to use their skills and
abilities to design new and better ways of performing their roles. Cross-functional teams and job
rotation are all examples of such structures.

Understand the value of people in the firm and their role in competitive advantageKnowing the economic value of the firms human resources is a necessary precondition
before any HR executive can begin to manage the function strategically. People of any
organization are fundamental assets who transform from material assets to productive
resources in order to satisfy the social needs of the country. They reach the organization
into success and do sustainable development within the organization. Reichheld (1996)
notes that people contribute to firms in terms of efficiency, customer selection, customer
retention, customer referral, and employee referral. Jeffrey Pfeffer (1994) issued sixteen
types of practices to gain competitive advantage through people:

1. Employment Security: Security of employment signals a long-standing commitment by the

organization to its workforce
2. Incentive Pay: People are motivated by more than money, things like recognition, security, and
fair treatment matter a great deal.
3. Participation and Empowerment: A broader participation by workers and allows employees
influence in controlling their own work process.
4. Symbolic Egalitarianism: One important barrier to decentralizing decision making, using selfmanaged teams, and eliciting employee commitment and cooperation is symbols that separate
people from each other. Consequently, it is not surprising that many of the firms that are known
for achieving competitive advantage through people have various forms of symbolic
egalitarianism.

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5. Long term Perspective: The time required to implement HRM practices and start seeing results
means that a long-term perspective is needed.
6. Selectivity in recruitment: It means that one must be careful to choose the right people, in the
right way.
7. Employee Ownership: Employees with ownership interests in the organizations for which they
work have less conflict between capital and labor - they are both capital and labor. Its
investment policies, and who are less likely to support hostile takeovers, leveraged buyouts.
8. Teams and Job redesign: Positive results from group influences are more likely when there are
rewards for group efforts, when groups have some autonomy and control over the work
environment, and when they are taken seriously and become the fabric of the organization. In
Insurance Industry every employee need to act as team player.
9. Wage Compression: Teamwork is fostered by the sense of a common fate, and that sense is
enhanced when people are rewarded comparably.
10. Measurement of Practices: it indicates how well the organization is implementing various
policies.
11. Cross Utilization and Cross Training: The most obvious is that doing more things can make
work more interesting. Variety in jobs permits a change in pace, a change in activity, and
potentially even a change in the people with whom one comes in contact, and each of these
forms of variety can make work life more challenging.
12. High Wage: High wages tend to attract more applicants, permitting the organization to be
more selective in finding people who are trainable and who will be committed to the
organization.
13. Information Sharing: Employees demand and receive more consultation about operations and
much more information about productivity and profitability.
14. Training and Skill Development: An integral part of most new work systems is a greater
commitment to training and skill development.

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15. Promotion within: It facilitates decentralization, participation, and delegation because it helps
promote trust across hierarchical levels--supervisors are responsible for coordinating the efforts
of people whom they probably know quite well.
16. Overarching Philosophy: It provides a way of connecting the various individual practices into
a coherent whole and also enables people in the organization to persist and experiment when
things don't work out immediately.

The Resource Based View of Competitive Advantage- This view focuses on firm
resources that can be sources of competitive advantage within the industry (Barney,
1995). Three basic types of resources can provide competitive advantage (Barney, 1991).
Physical capital resources include such things as the firm's plant, equipment, and
finances. Organizational capital resources consist of such things as the firm's structure,
planning, controlling, coordinating and HR systems. Finally, human capital resources
include such things as the skills, judgment, and intelligence of the firm's employees. With
this in mind, we propose that to identify the value of a Insurance companies human
resources as well as the proper role of the HR function in managing the Insurance
Companies human resources to achieve competitive advantage in the Insurance Industry.
One needs to ask four questions. These questions include the questions of Value,
Rareness, Imitability, and Organization, or what is referred to as the VRIO framework
(Barney, 1995).

1. The Question of Value: Firms create value through either decreasing product/service costs or
differentiating the product/service in a way that allows the firm to charge a premium price. Thus,
the ultimate goal of any HR executive is to create value through the human resource function.
2. The Question of Rareness: Another way to gain competitive advantage is by developing and
achieving few unique features of the organizations human resources.
3. The Question of Imitability: The characteristics must not be imitable. If other firms imitate
these characteristics, then the characteristics will provide nothing more than competitive
similarity. Thus, the HR must attempt to develop and nurture some unique characteristics of the
human resources that others cannot easily copy or follow. This can make them distinguishable.

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4. The Question of Organization: Organizations must be organized to exploit the resources. There
should be a proper practice that allows human resources characteristics to accept their potential
advantages.

HRM challenges Insurance Industry will face in Bangladesh in 21st century

Any industry or firm faces several types of challenges. The changes occurring today are
requiring human resource managers to play an increasingly important role in managing a
company. In many industries like insurance industry, the HR functions are struggling to meet the
current needs. In todays world, even the HRs role is not like it used to be before, based on
traditional way. Today HR plays a leadership role in building capabilities that ensure the
successful execution of business strategy. Now HR assures involvement in almost all decision
making areas. For example in assisting marketing, finance, customer service departments of the
organization. As HR has to look after every department and its nature of work has changed from
traditional functions, it gets difficult to understand the workforce mind or looking after
motivating each of them or maintaining diversity.
Below are some of the competitive challenges:
1. Going global- Almost every company is crossing the national boundaries and going
global. But it has become a challenge for doing business internationally. Likewise, for
insurance industry in Bangladesh going global is a challenge. Since insurance is customer
oriented so companies must develop a customer-oriented workforce to deliver service
quality, which is met through training (Kundu 2000). Training must be viewed as an
important investment for future success (Zeithmal and Bitner 2004).Companies need to
provide comprehensive training to the agents in the ways to narrow the gap between
clients and agents i. e. trust building training (Law, Wong, and Theresa 2005). Longterm basis training has a systematic influence on the improvement of management
techniques (Zadel 2006).
2. Embracing new technology- Nowadays businesses continue to shape themselves with the
pace of existing technology. Compared to other businesses, insurance industry is lacking
behind in terms of technological growth. This would be one of the biggest challenges for
our insurance industry. Our insurance industry needs to move beyond traditional roles

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and adapt technological changes and take advantage from it for maximizing the
competitive impact.
3. Managing change- The change in workforce is shifting recently as it is becoming more
diverse. The number of women, physically or mentally challenged people in a workforce
is increasing day by day. People from different cultural background are getting involved
under a same workforce. In this case, HR needs to understand each of the individual
workers need and try to give them benefit according to their need. It is a big challenge
because understanding each workers psychology and coping up with them and making
sure that they are no longer considered as minority is not easy. HR must also find ways to
retain this diverse workforce because they may add with different talents in an
organization.
4. Hiring and retaining talent- The employee of insurance industry have to be experienced at
structural design, process management and project management as well as a range of
skills with respect to facilitating learning and change. Retention of talented employees is
a challenge for HR because often employees might feel that their performances are not
being rewarded appropriately. And their employers keep having higher expectations from
them. This can increase an organizations turnover rate. On a day-to-day basis, workers
may not be as motivated and engaged. HR will have to continue to explore retention
strategies and benefits models that focus on factors beyond financial compensation.
Making employees feel part of the company, getting feedback from past workers on how
to improve the nontraditional working arrangement, and ensuring that the recruitment
process is equally rigorous for all staff, whatever the nature of their contract, may all
form part of any co-ordinated approach. HR will find it difficult to reward highperforming part-time and flexible workers, and will have to explore methods to offer
benefits or incentives to retain them in the pipeline for future work.

Conclusion:
Insurance industry in Bangladesh is a developing industry. But if we compare this industry
with the rest of the world then it has a very long way to go. As it is a people based industry so
the main objective is to identify the required human resource and place them in correct

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positions. But it is often seen that many insurance firms do not have a proper Human
Resource department which means there is less or almost no human resource practices. This
industry mainly lacks governmental control and capital as a result the industry still cannot
become popular like other financial institutions and have a tendency of not being able to take
risks.

Recommendation:
After coming to a conclusion of the study I think the following recommendations are needed.
1.
2.
3.
4.

Recruiting right people in right place.

Offering insurance related courses and training facilities.
Developing work environment and building a strong culture.
Maintaining human resource practices like performance appraisals.

Implementations of Recommendation:
1. Recruiting right people in right place- Many people do not want to build their career in
insurance industry so firms lack knowledgeable or skilled applicants for recruitment.
Therefore, insurance firms need to change their packages and make it more attractive to
fresh graduates or other applicants by showing their career development opportunities.
Thus companies can have more educated people. Along with this, the HR needs to place
right people in right position to achieve company goals and more benefits.
2. Offering insurance related courses and training facilities- In Bangladesh there are no
institutions where insurance related degrees are provided or courses offered. To make the
industry more competitive such courses or degrees will be required. There is a need of
proper training institutions in both public and private sector to develop employees social,
technical and communication skills where they can learn more about ethics, human
relations, safety and health. Different training methods can be applied or chosen to make
the process ease like classroom instructions, audiovisual training, computer based
training, on the job training, simulations, business games and case studies, behavior

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modeling, experiential programs and finally action learning. Afterwards an evaluation of

training programs must be practiced for better results.
3. Developing work environment and building a strong culture- To retain and attract
employees, working conditions of insurance companies should be improved by
increasing the satisfying factors like bringing modern technological practices for
increasing employee productivity. For more sustainability, the corporate culture must be
strong and acceptable to all so that the employees commitment towards the organization
can increase.
4. Maintaining human resource practices like performance appraisals- Appraisals provide an
opportunity to review the employees career plans in light of his or her strengths and
weaknesses. Insurance companies in Bangladesh lack such tools of performance
appraisals or compensation planning.

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work reform since Hawthorne. Working paper, Columbia University, New York.
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of
Management, 17, 99-120.
Barney, J. (1995). Looking inside for competitive advantage. Academy of Management
Executive, 9(4), 49-61.
Becker, G. S. (1993). Human capital: A theoretical and empirical analysis. New York: Free press.
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Hough L. M. (Eds.), Handbook of industrial and organizational psychology (2d ed.), vol. 2: 621 745.
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quality.Human Resource Planning, 27(2), 40-51.
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The Insurance Industry in Bangladesh, Key Trends and Opportunities to 2017, Wednesday,
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