organizational management report on karnaphuli insurance co. ltd

MGT210: Organizational Management

Section: 09

Report on: Karnaphuli Insurance Co. Ltd.

Submitted To:

NOOR-E-HASNIN (NEH)

Lecturer, Department of Management, SBE-NSU

Submitted By:

Mahade Hasan Nobel [1510608630]

Akram Hossain [1511948030]

Md. Iftakharul Haque Fahim [1511495030]

Mohammad Abdullah Sujon [1521036631]

Syed Nasif Fuad [1610643630]

Md. Tanzirul Amin [1611676030]

MGT

210

Date of Submission: Sunday, 4th December 2016

Karnaphuli Insurance Co. Ltd. Page 1

Acknowledgement

The success of any research study depends upon a number of factors among which the proper

guidance from the faculty plays an important role. The report is based on the organizational

management and business stratagem of Karnaphuli Insurance Co. Ltd.

At first, we would like to give thanks to Almighty Allah, due to His mercy and blessings we

were able to complete this report. We take here a great opportunity to express our sincere and

deep sense of gratitude to Lecturer Noor-E-Hasnin ma’am, Department of Management-

SBE, North South University for giving us an opportunity to work on this report. The support

and guidance from ma’am was a great help and it was extremely valuable for completing this

report and gain practical knowledge.

We are also grateful to Mr A.N.M. Fazlul Karim Munshi, Managing Director and CEO

(former Additional Managing Director and Head of Marketing) of Karnaphuli Insurance Co.

Ltd.; and Mr Md. Azharul Karim, Deputy General Manager (former Sr. Assistant General

Manager) of Karnaphuli Insurance Co. Ltd. for their relentless help by providing us with the

important information and crucial lessons about the Karnaphuli Insurance Co. Ltd. and the

insurance industry at home and abroad.

The project is an effort to contribute towards achieving the desired objectives. In doing so,

we have optimized all available resources and made use of some external resources, the

interplay of which, over a period of time, led to the attainment of the set goals. We are

satisfied to complete this complex task with the sincere cooperation of each other in our

group. We express our sincere thanks to all the people who, directly or indirectly, contributed

in time, energy and knowledge to our attained goal and success.


Table of Contents

Contents

Page No.

Executive Summary 03

Introduction 04

Mission, Vision and Business Strategy 05

Company Background 06

Organization Chart 09

Situation Analysis 10

Management Issues 13

SWOT Analysis 17

PORTER’s Five Forces Industry Analysis 19

Conclusion & Remarks 21

Bibliography 22


Executive Summary

Since its inception in 1986 Karnaphuli Insurance Co. Ltd. continued steady development, and

have witnessed a successful year in 2015-16 despite a host of challenges faced in overall business

investment climate of the country. The interest on FDR decreased drastically, Capital Market was

volatile. With these obstacles for economic growth the Karnaphuli Insurance Co. Ltd. kept its

steady growth responding to the need and expectations of the customers. They improved their

fund management, fixed deposit rose to Tk.64, 02, 74,824/- plus BGTB Tk. 2, 50, 00,000/- and

underwriting profit of Tk.4, 42, 53,384/-. They act with integrity and consistency based on a set

of values, ethical standards and fairness. They strive to run the company as 100% compliance to

the rules, regulations, and circulars of their regulators IDRA, which helped them to improve

operational excellence to squeeze cost. They have achieved the targets of 100% collection, zero

tolerance to outstanding, profit after tax increased slightly than last year. With the personalized

services of their team, their insured-insurer relationship built on the personal and long term

relationship. Each and every customer is special to them. They welcome challenges, show

strength of character, and remain positive, even when things are tough they see difficulty as an opportunity to demonstrate their ability.

Meeting Customer needs, organizing resources in the most efficient and effective way, beating

the competitors, they are trying their best to achieve corporate objectives. Their image in the

Insurance industry is of great value to them. At the cornerstone of their business, they try to offer

highest level of care and customized services to their clients. As per their policy, they are not

unnecessarily aggressive. They intend to conduct and grow their business with their guiding

principles, which they believe will bring out positive result in the long run for the Company as

well as the society at large.

With a vision to achieve an increased and diversified customer portfolio, Karnaphuli has rolled

out a plan to penetrate the Retail and SME (Small and Medium Enterprises) segment. They are

committed to reach every one with their product. With the strong distribution channel they will

ensure insurance services to the door steps of the customers in 2015-16 through reinvention over their competitors.

We all know the turmoil in our capital market. This challenging condition compelled them to sell

out maximum shares squeezing our portfolio resulting to loss of Tk.6, 45, 80,131/- from the share

market. They are committed to maintain a strong financial base through the sustainable increase

in premium income. They are compliant insurance Company regarding paid up capital, board

size, minimum share hold by the members of the Board of Directors, appointment of independent

Director and all of the parameters of corporate governance as set by the Bangladesh Securities and Exchange Commission from time to time.

Moreover, they have established on line system restructuring IT and Internal Audit department

which helped them ensure better compliance at a cost effective manner. Hence, they expect a steady and sustainable development of the company.

As an innovative company that plays a leading role in quality the expertise of their employees is

of enormous importance as it would not be possible to implement the strategy successfully

without them. Utilizing comprehensive promotion and training activities they strive to be seen as

an employer of choice at all levels on the job market. Along with the duteous employees, the

honourable Chairman, the honourable members of our Board of Directors and Executives are also

extending their helping hands and guidance with their prudent knowledge experience and expertise for the welfare of their organization.


Introduction

Karnaphuli Insurance Company Limited was incorporated on 23rd

November 1986 as

public limited company under the companies Act 1913, obtained the certificate of

registration, for carrying on General insurance business from the controller of capital issues

on 23rd

November, 1986. The company started to commercial operation on 25th

November,

1986 being sponsored by a group of renowned business personalities, reputed industrialist

and journalist of the company.

Karnaphuli Insurance Company Limited (KICL) is a first generation and top-tier Non-life

insurance company. The company has been maintaining strong capital base, ethical business

standards, corporative culture and corporate governance, superior underwriting skills and

dynamic investment management since its inception.

Karnaphuli Insurance Company Limited was started its journey with paid up capital of

3.00crore in 1986. At present the company’s paid up capital is Tk. 407,039,590 and

authorized capital Tk. 60.00crore.

With a network of 27 branches covering strategic financial centers of Dhaka, Chittagong,

Rajshahi, Khulna, Barisal, Shylet, Rangpur, Bogra and some important district town has been

providing whole hearted services to the doorsteps of the client. Consisting of a workforce

around 800 people KICL has an active presence in the capital market and general insurance

industry. The Company is always eagerly ready to fulfill the needs of all the clients with high

profitability & balanced growth. KICL has earned excellent market reputation and absolute

confidence of its valued clients

The Board of Karnaphuli Insurance Co. Ltd. Has been constituted with 14 Directors

including 3 independent directors as on 31 December , 2015 as per section 76(1) of insurance

act 2010 and notification of Bangladesh Securities and Exchange Commission.


Mission

The mission of the company is to serve the nation with significant contribution to the national

economy through specialized, personalized and relentless services to the customers with

excellent team spirit to steady growth of the company and maximum return to shareholders

and other stakeholders of the company.

Vision

The vision of Karnaphuli Insurance Co. Ltd. is to make the company Bigger, Better and

Bolder.

Business Strategy

The company is focused on few strategic issues encompassing change Management in the

short to long period through the implementation of various policies, processes and activates

to ensure continuous, sustainable and qualitative growth, with the sole objectives of

institution building. An effective cluster management program has been implemented.

Branch management is now being continually exposed to mature thoughts and ideas trough

mentors resulting is qualitative improvement of their own business and operational

activates.


Corporate Philosophy

The customers, employees and shareholders are equally important to Karnaphuli Insurance

Co. Ltd. They want to achieve strong corporate growth to risk management inclusion. They

provide solutions at a minimum cost based on a level of satisfaction of all segment of their

customers, thus also contributing to the prosperity of their employees and shareholders.

With a firm commitment to provide solutions, they are constantly developing innovative and

technologically advanced product and services to satisfy the customer needs. They offer

cutting edge compensation package and good work environment to their employees. By

embracing a creative corporate culture, they increase the share values according to the

expectation of shareholders, which has given them a path to growth and progress.

Core Values of Karnaphuli Insurance Co. Ltd

1. Priority to customers/clients: Being service oriented organization, they give first priority

to their customer in extending their services, engage themselves to build up durable

relationship with the customers, and differences if any arises is solved through mutual

discussion.

2. Organization above self: They believe that organizational interest is above all individual

interest. So, all efforts are concentrated at the interest of organization.

3. Trust: They believe that there cannot be teamwork without mutual trust. Trust is

fundamental to their business and guides all internal and external interactions.

4. High Standards: They believe that excellence can achieved only by setting benchmarks

that challenge their full potential as an organization and as individuals.

5. Shared Ownership: They believe in everybody sharing in achieving best result both

organization and team efforts.

6. Spirit and adventure: They believe in continuous innovation and creativity to meet

challenges head-on since they deal with unforeseen risks.

7. Respect for Diversity: They believe that diversity is their strength. They recognize team

members having varying backgrounds, competencies, ideas and constructive action helps

better understanding.


Products and Services

1. Conventional

Fire & allied perils Insurance

Riot and Strike damage (R&SD)

Malicious damage (MD)

Flood & Cyclone

Earthquake (Fire & Shock)

Aircraft damage

2. Marine Cargo Insurance & Marine Hull Insurance

3. Motor Insurance

a) Motor Insurance

b) Motor Insurance

4. Miscellaneous Insurance

Burglary

Workman’s compensation

Employer’s liability

Hotel Owners All Risk (HOAR)

Personal Accident (Air Travel)

Product liability Insurance

Public Liability Insurance

Professional Indemnity Insurance

5. Corporate

Risk Management

Industrial All Risk Insurance including Machinery Insurance

And business interruption

Property All Risk Insurance including business interruption


6. Engineering Insurance

Machinery Breakdown Insurance (MBD)

Deterioration of Stocks (DOS)

Boiler and Pressure Vessel (BPV)

Erection all Risk (EAR)

Contractor All Risk (CAR)

Electrical Equipment Insurance (EEI)

Contractor Plant and Machinery (CPM)

Loss of Profit following Machinery Breakdown

7. Financial

Cash in safe

Cash in Transit

Cash in Counter

Fidelity Guarantee

Bank lockers Insurance

A.T.M. Booth Insurance

8. Investment and Portfolio Management

Underwriting

Pre-IPO placement syndication

Trusteeship

Organizational Departments And Committee

Departments: a. Finance and Accounts b. Management and HR

c. Marketing and Public Relations d. IT Division

Committees: a. Business Development Committee b. Claim Settlement

Committee c. Ethics Committee d. Money Laundering Committee

e. Audit Committee


Organizational Chart

Karnaphuli Insurance Co. Ltd.

Non-Managerial Employees

First-line Management

Top Management

Middle Management


Situation Analysis

Financial Highlights

TAKA in Millions

(Except the ones with ^mark)

Particulars

2011 2012 2013 2014 2015

Authorized Capital

600 600 600 600 600

Paid up Capital

369.2 369.2 369.2 387.66 407.04

Gross Premium Income

232.57 276.38 265.14 274.83 280.76

Net Premium income

Less Re-Insurance

137.11 156.69 165.99 139.66 148.08

Underwriting Profit

28.95 49.96 40.18 36.84 35.98

Total Investment

727.79 747.98 790.89 817.28 747.27

Investment Income

91.17 59.67 74.76 72.6 24.9

Net Profit before Tax

101.48 86.95 92.26 90.5 44.25

Net Profit after Tax

78.22 57.62 62.66 59.5 19.05

Dividend Amount

55.38 46.15 46.15 46.52 40.7

Dividend Paid (Cash)*

15.00% 12.50% 7.50% 7.00% 10.00%

Dividend Paid (Stock)*

- - 5.00% 5.00% -

Fixed Deposit (FDR)

468.82 500.47 525.92 556.47 640.27

Total Assets

1,068.16 1,117.27 1194.63 1,238.72 1216.93

Earnings Per Share*

2.35 1.56 1.7 1.53 0.47

Net Asset Value Per

Share (NAVPS)*

19.36 19.42 19.87 20.95 19.11

No. of Share Holder's

(Existing)*

18,868 16,812 17,384 16,215 16,183

Required Solvency

Margin

55.77 62.99 66.69 57.41 62.84

Available Solvency

Margin

451.11 439.8 427.39 585.87 369.95


Board Of Directors

The Board of Karnaphuli Insurance Co. Ltd. has been constituted with 14 Directors including

3 independent directors as on 31 December, 2015 as per section 76 (1) of Insurance act 2010

and notification of Bangladesh Securities and Exchange Commission. The Board is chaired

by Mr. Nizamuddin Ahmed, an eminent business person and well reputed industrialist.

Former Director of FBCCI, Former Vice President of Bangladesh Insurance Association,

Director of Dhaka Chamber of Commerce & Industries (DCCI) and Director of Bangladesh

Chamber of Industries (BCI) Mr. Nizamuddin Ahmed has diversified business exposures.

Credit Rating

The Karnaphuli Insurance Company Limited regularly analyzes the position of its claim

paying ability. During the year Company achieved A+ (Pronounce as A Plus) rating for long

term and AR-2 for short term which reflects a stable outlook on the basis of its premium

collections, core services expeditions, settlement of claim and sound liquidity position by the

Alpha Credit Rating Limited.

Reserve

To protect the risk factors of the company it is very essential to have a good amount of

reserve fund for company. The company created a reserve fund in line with recommendation

of the Insurance Act and Income Tax Ordinance. The reserve for exceptional losses increased

to Tk. 164,071,713 which is higher by 9.38 % over last year.

Assets

Total Asset of the Company at the end of year 2015 stood at Tk. 1, 216, 929,914.

Claim Settlement

During 2015-16 Karnaphuli Insurance Company Ltd. settled claim of Tk. 97,302,284 against

Tk. 73,300,633 in 2014-15. In 2015-16 Karnaphuli Insurance Company Limited experienced

a year of burdens in claims. Gross claim increased by Tk. 24,001,651 compared to that of

previous year registering a growth of 33 %.


Premium Income

The Company earned a premium of Tk. 280,757,465 for the year 2015-16 against Tk.

274,832,716 in 2014-15. Out of this Tk. 242, 965,640came from private sector and balance of

Tk. 37, 791,825 as public sector business received from Sadharan Bima Corporation. After

ceding Tk. 132,676,044 as re-insurance premium, the net premium income for the year

amounted to Tk. 148,081,421 against Tk. 139,662,323 in 2014-15. Growth of premium

collection is 2.15%.

Underwriting Profit/Income

The underwriting profit has declined as compared with previous year. Underwriting profit for

the year is Tk. 35,981,299 against Tk. 36,837,928 in 2014-15. The fixed deposit has

increased by Tk. 83,800,000. The Company earned interest on fixed deposit amounting to Tk.

56,346,983. Current year’s dividend income was Tk. 3,869,631 and share trading loss was

Tk. 64,580,131

Gross Income and Profit

Gross Income in the year 2015-16 stood at Tk. 61,878,199 against Tk. 109,434,777 in 2014-

15 Net Profit before Tax Tk. 44,253,384 out of which underwriting profit is 35,981,299

against Tk. 36,837,928 in 2014-15.

Variance Within The Financial Year

Underwriting profit decreased due to stiff competition and others multifaceted circumstances.

Investment income decreased due to low interest rate and unsatisfactory performance of the

stock market. Total income decreased due to loss on sale proceeds of shares of Tk. 6, 45,

80,131.

Interest on Statutory and other Investments

Interest earned on statutory investments of Tk. 2.50crore lying with Bangladesh Bank in the

form of Bangladesh Treasury Bonds has been accounted for at the prescribed rate. Besides,

interest received from banks on STD accounts and FDR accounts have been duly credited to

the Profit and Loss Account.

Share Value at DSE

The aggregate market value of the shares as on 31/12/2015 stood at Tk. 49,624,600 as against

cost of Tk. 31,384,370, and Debentures of Tk. 2,679,846.


Management Issues

Role of CEO & Managing Director

The duties and responsibilities of CEO/Managing Director are clearly defined in the articles

of Association and the guideline of the IDRA. CEO and Managing Director must present the

Company's financial and business position in each board meeting for directors understanding

and guidance. CEO is overall responsible for running of the business and implementation of

the Board strategy, policy and performance of the Company. He looks after the day to day

business and accountable to the Board for the financial and operation activities of the

Company. Under prudent leadership of CEO a group of talented executives are performing

efficiently within the jurisdiction of power delegated by the Board.

Compliance with the Law

The Company applied all the applicable legal obligation and regulatory requirement of

Bangladesh Securities & Exchange Commission, Dhaka Stock Exchange Ltd. and Insurance

Development & regulatory Authority .Respective officers are responsible for ensuring proper

compliance with applicable laws and regulation. Corporate Compliance Auditor M/s. Hussain

Farhad & Co. Chartered Accountants was appointed by the board of director to conduct

corporate compliance certification as per requirement of Bangladesh Securities and Exchange

commission.

Application of BAS, IFRS, BFRS and IAS

Bangladesh Accounting Standards (BAS), International Financial Reporting Standards

(IFRS), International Accounting Standards (IAS) and Bangladesh Financial Reporting

Standards (BFRS) as applicable in Bangladesh have been followed in preparation of financial

statements and any departure there from has been adequately disclosed by Karnaphuli

Insurance Co. Ltd.

System of Internal Control

The system of internal control is sound and is implemented and monitored effectively. The

Internal Audit Department of the company regularly checks the accuracy and reliability of its

accounting data and takes initiative to promote the operational efficiency. The management is

accountable for the implementation of the internal control systems and its principles. The

financial data have been reviewed, confirmed and reported regularly to the Board of

Directors. The management has taken into consideration its liquidity status, projected cash

flow based on the market situation and its performance in the past years in support of the

assumption.


Re-Insurance Policy

As per rule, while arranging such agreement the Insurance Company/Underwriter needs to

surrender net Re-insurance balance quarterly to Re-insurer through Statement of Accounts.

On getting confirmation, Re-insurance premium is needed to remit to Re-insurer. Re-insurer

by virtue of such agreement extends agreed commission and allows, claims recovery to the

ceding Company. This agreement is renewable in each year subject to no objection from

either side. At the moment, their lead Reinsurer is Sadharan Bima Corporation (SBC) and

General Insurance Corporation (GIC) of India.

Investment Policy

Karnaphuli Insurance Company Limited keeps an amount in the form of investment to meet

up the uncertain loss. The Company has invested its fund very carefully in diversified way.

Karnaphuli Insurance Co. Ltd. earns investment profit other than underwriting profit.

Company has invested its fund in the capital market since 1996 in the share, debenture and

bond. The Company reduced its investment in the capital market and reinvestment that fund

in the form of FDR.

Dividend Policy

The net profit of the Company is Tk. 44,253,384 for the year 2015-16. Reserve for

exceptional loss is maintained for Tk. 14, 071, 080. The Board of Directors' of the Company

recommended 10% cash dividend to the shareholders out of the surplus available for

distribution at the end of the year 2015-16, subject to the approval of the shareholders in the

29th annual general meeting held on 27th June, 2016. The Company always

dispatched/credited dividend to the shareholders within the stipulated time.

Risk and Concern

Major risks are: strategic risk, underwriting risk, re-insurance risk, reserving risk, investment

risk and liquidity risks. Board of Directors is very much careful about the risk factors of the

company. It monitors such risk from time to time, keeping abreast of relevant developments

and takes corrective and preventive measures as necessary to protect its interest to the fullest

extent.

Extra Ordinary Gain and Loss

To reduce the investment in capital market the management decided to sale the shares from

investment in share market. As such the company incurred loss Tk. 6,45,80,131 which was

partly adjusted with previous year's reserve for diminution in value of investment Tk.

2,98,50,727.


Solvency Margin

Under the section 43 of Insurance Act 2010, the Company has maintained the required

solvency margin. During 2015-16 the company's solvency margin was above the required

level. Karnaphuli Insurance Co. Ltd. required solvency margin of Tk.62.84 million whereas

the Company's available solvency was Tk. 369.95 million which means the value of assets

had been more than the liabilities in that particular period.

Fairness of Financial Statement

The financial statements along with the notes are prepared inconformity with the Company

Act 1994, Insurance Act 2010, and Securities and Exchange Commission Rules 1987. These

statements present fairly the Company's state of affairs, the results of its operation, cash flow

and changes in equity. In compliance with BSEC notification dated 7 August 2012 Chief

Executive Officer and Chief Financial Officer have given the declaration about the fairness of

the financial statements.

Anti-Laundering Activities

All the concern branches/department have been instructed to remain alert from motive of

money launder's in connection with insurance underwriting and claims settlement. If any

suspicious activities of any insured are found in connection of insurance document the

concern branches are immediately inform to the chief money laundering compliance officer.

Software development and IT Division

The management has established an Information Technology (IT) department headed by

experienced and professional IT personnel. Since 1995 the share department of Karnaphuli

Insurance Co. Ltd. has been introducing computer system and software of share management

system has been developed by IBCS Primax Software (BD) Ltd. The management of

Karnaphuli Insurance Co. Ltd. felt the necessity of utilization of Computer Integrated

Information System (CIIS) in the Company and as such most of the branches are connected

in one networking system.

Employee Benefit Plan

The Company maintains a contributory provident fund for its employees. Every eligible

employee contributes 10% of their basic salary on a monthly basis and the Company also

contributes an equal amount to the fund. The fund is approved by the National Board of

Revenue. The number of permanent employees engaged for the whole year who received a

total annual remuneration of Taka 36,000 and above was 320.


Management Expense and Provision for Unexpired Risks

Management expenses as charged to Revenue Accounts amounting to Taka 107,995,870 is

approximately 38.47% of gross premium of Taka 280,757,465 earned during the year. The

expenses have been apportioned at 51.90% to Fire, 28.57% to Marine and 19.53 % to

miscellaneous business as per management decision. Before arriving at the surplus of each

class of business necessary Provision for Unexpired Risks have been created at the rate of

40% on all business except on Marine Hull business for which the provision was made 100%

of the total premium for the year 2015-16.

Corporate Social Responsibility (CSR) Activities

Karnaphuli Insurance Company Limited is committed its role of Corporate Social

Responsibilities (CSR). The Company during the year 2015-16 has contributed to Honorable

Prime Minister's relief fund and Bangladesh Muktijudha Sangsad.

Corporate Website and Communication with Shareholders

The company encourages communication with shareholders throughout the year and

welcomes their participation at the Annual General Meeting. The annual general meeting

decides on the appropriation of net-income, election of board members and appointment of

the Auditors. Karnaphuli Insurance Company Limited regularly provide all information like

as quarterly, half yearly and annual financial statements, price sensitive information through

two daily newspapers and web site www.kiclbd.com of the Company in time.

http://www.kiclbd.com/


SWOT Analysis

Strengths

1. Good reputation in the Bangladeshi insurance industry, having many regular and fixed

customers especially several big companies or industrial firms.

2. Convenient Re-insurance policy with co-operation with reliable Re-insurers such as:

Sadharan Bima Corporation (SBC) of Bangladesh and General Insurance Corporation

(GIC) of India. Having foreign re-insurers gives the company a competitive advantage

over others.

3. Loyal, dedicated and enthusiastic workforce carrying out their everyday task and

working towards achieving organizational goals and company welfare.

4. Good use digital information technology with a Computer Integrated Information

System (CIIS) in the company, connecting the branches within one networking

system.

5. The company is being operated in an Economies of Scale, having a solvency margin

of Tk. 369.95million. Making steady profits and gaining good net premiums.

6. The Company achieved A+ (Pronounce as A Plus) rating for long term and AR-2 for

short term which reflects a stable outlook on the basis of its premium collections, core

services expeditions, settlement of claim and sound liquidity position by the Alpha

Credit Rating Limited.

7. The Company maintains a contributory provident fund for its employees. Every

eligible employee contributes 10% of his basic salary on a monthly basis and the

Company also contributes an equal amount to the fund.

Weaknesses

1. Lack of advertising and limited marketing only targeting niche corporate and

industrial segments.

2. Slow decision making process, since almost every decision is taken by the

CEO/Managing Director. This affects the organizational efficiency sometimes.

3. Decreased company stock prices at the Dhaka Stock Exchange, with an approximate

Earning per Share Tk. 0.47 and Net Asset Value per Share (NAVPS) Tk. 19.11.

4. Decrease in annual profit percentage, underwriting profit for the year is Tk.

35,981,299 against Tk. 36,837,928 in 2014-15. The fixed deposit has increased by Tk.

83,800,000. Current year’s dividend income was Tk. 3,869,631 and share trading loss

was Tk. 64,580,131.


Opportunities

1. Expected future economic growth of Bangladesh and forecasted GDP of around 7%

by the World Bank, ADB and IMF. Thus, there is an anticipated boom in the

manufacturing and industrial sectors for whom Karnaphuli Insurance Co. Ltd. Can be

a reliable choice.

2. The large Retail and SME (Small and Medium Enterprises) segments are yet to be

penetrated; these sectors can bring in profitable premiums and great fortunes for any

insurance company.

3. Rise in awareness among the public and entrepreneurs about the insurance system.

Moreover, people have a growing interest to prefer companies like Karnaphuli, with

high claim settlement rates.

4. Lack of experienced workforce, modern technology, reliable claim settlement service

and corporate/business ethics within the other insurance companies.

5. Overall steady growth of the insurance industry in Bangladesh with increasing

number of customers and net premium incomes.

Threats

1. Unhealthy competitions among the existing companies and entry of new companies.

Presence of unethical practice of providing commissions over premiums and claim

issuance is a very critical factor.

2. Current political instability and decreasing financial turn-overs in the business sector

means fall in the amount of new customers for insurance.

3. Unstable stock-market with depreciative price of shares of the company, the company

lost around Tk. 6, 45, 80,131/- in the recent year due to this reason.

4. Increase in Tax issuance on the insurance companies by the government and

providing negligible incentives to them.

5. Lack of information and knowledge among the general public about the insurance

sector, often leads them to choose cheap but unreliable alternatives.

6. Expected entry of multinational insurance company in Bangladesh. Moreover, there is

a tendency of the native customers to go for foreign brands/companies.


PORTER’s Five Forces Industry Analysis

1. Threat of New Entrants: The average entrepreneur can't come along and start a large

insurance company. The threat of new entrants lies within the insurance industry

itself. Some companies have carved out niche areas in which they underwrite

insurance. These insurance companies are fearful of being squeezed out by the big

players. Another threat for many insurance companies is other financial services

companies entering the market. What would it take for a bank or investment bank to

start offering insurance products? In some countries, only regulations prevent banks

and other financial firms from entering the industry because starting money may not

be a critical issue on today’s context for any insurance company. If those barriers of

regulations were ever broken down, like in the U.S. with the Gramm-Leach-Bliley

Act of 1999 or the Bangladesh Insurance Act 2010 we can be sure that the

opportunities for new entrants are massive. Though many companies are operating in

economies of scale but lack of brand loyalty still persists among the potential

customers.

2. Power of Suppliers: The suppliers of capital might not pose a big threat, but the

threat of suppliers luring away human capital does. If a talented insurance underwriter

is working for a smaller insurance company (or one in a niche industry), there is the

chance that person will be enticed away by larger companies looking to move into a

particular market.

3. Power of Buyers: The individual doesn't pose much of a threat to the insurance

industry. Large corporate clients have a lot more bargaining power with insurance

companies. Large corporate clients like airlines, pharmaceutical, textile, marine cargo

etc. companies pay millions of monetary units a year in premiums. Insurance

companies try extremely hard to get high-margin corporate clients.

4. Availability of Substitutes: This one is pretty straight forward, for there are plenty of

substitutes in the insurance industry. Most large insurance companies offer similar

suites of services. Whether it is auto, home, commercial, health or life insurance,

chances are there are competitors that can offer similar services. In some areas of

insurance, however, the availability of substitutes is few and far between. Companies

focusing on niche areas like: Marine cargo, usually have a competitive advantage, but

this advantage depends entirely on the size of the niche and on whether there are any


barriers preventing other firms from entering. Moreover, the low switching costs and

buyer loyalty also plays vital roles.

5. Competitive Rivalry: The insurance industry is becoming highly competitive. The

difference between one insurance company and another is usually not that great. As a

result, insurance has become more like a commodity - an area in which the insurance

company with the low cost structure, greater efficiency and better customer service

will beat out competitors. Insurance companies also use higher investment returns and

a variety of insurance investment products to try to lure in customers. In the long run,

we're likely to see more consolidation in the insurance industry. Larger companies

prefer to take over or merge with other companies rather than spend the money to

market and advertise to people. Like, in our country of the 47 general insurance

companies Green Delta Insurance Company does around 50% of the annual insurance

business of Tk. 2000crore. The completion is on the rise due to slow growth rate,

diminishing prices and limited demands.

Remarks on Industrial Status Of General Insurance Sector

The global economic environment needs to improve continuously in 2015 and 2016.

In many emerging economies growth expectations are turning out to be lower than in

previous years. In the advanced economies, the positive effect of the improved

economic outlook on premium growth in property-casualty insurance is likely to be

curbed by the significantly keener competitive situation not least because of the very

solid capital resources of many insurers. In the emerging economies, we expect the

demand for insurance to continue to be high overall, even though total premium

growth of about 7.5% on average in 2016 is expected to be slightly lower than that in

previous years. However, the premium growth is likely to continuously exceed the

economic growth. The number one growth region will continue to be the emerging

markets of Asia. Since, insurance industry is a highly competitive sector of the

economy so careful decisions, innovative business strategy, thoughtful targeting of

customers and building of brand image are the areas that any insurance company

should give importance to.


Conclusion

Karnaphuli Insurance Co. Ltd have been functioning its insurance activities since 1986 with

all the name and fame. The company has so far gained financial solvency with satisfaction

and earned reputation in settling claim within due time. In view of the above, the entire day to

day affairs of the Company are maintained by skilled officials having technical know-how.

The growth of the Company is satisfactory. As such, this Company shall function much better

in future because of adoption of valued policies covering the entire operational activities of

the company, including managerial, investment, training and staff welfare. In fine, they are

confident to enjoy one of the best Credit Rating duly reflecting their best of financial and

managerial capabilities. At the moment, this Company enjoys "A+" Credit Rating.

The major challenges that manifested Insurance Sector due to poor investment in new

Industries and barrier in Garment sector by the buyers imposing new conditions for

compliance, which disrupted the economic activities and negative affect on premium income

and interest on FDR. Against this tough scenario, the company put in its best efforts at

harnessing best possible return from its core business through prudent cost control and

premium income drive. Compiling all the instructions of their regulator IDRA, the overall

performance of the Company is satisfactory.


Bibliography

Source:

Mr. A.N.M. Fazlul Karim Munshi

CEO & Managing Director

Karnaphuli Insurance Co. Ltd.

Biman Bhaban (3rd

Floor), 100, Motijheel C/A, Dhaka-1000.

Contact: Phone- 9564810-11; FAX- 88-02-9555802; E-mail- [email protected]

Mr. Md. Azharul Karim

Deputy General Manager & Branch In-charge

Baliadi Mansion Branch, Karnaphuli Insurance Co. Ltd.

92/1, Motijheel C/A, Dhaka-1000.

Contact: Phone- 9564516; Fax- 88-02-9564516; E-mail- [email protected]

Links:

1. http://www.kiclbd.com

2. http://www.kiclbd.com/reports/annual_report_2015.pdf

3. https://www.google.com/search?rct=j&q=karnaphuli%20insurance%20co.%20ltd

4. http://www.investopedia.com/features/industryhandbook/insurance.asp#ixzz4Rfyzp19

Z

5. http://www.academia.edu/1767455/Poblems_and_prospects_of_insurance_business_i

n_bangldesh

6. http://www.slideshare.net/

7. http://www.ivoryresearch.com/samples/economics-essay-example-strategic-

management-of-tesco-supermarket-pestle-analysis-porter-5-forces-analysis-critical-

success-factors-swot-analysis-value-chain-analysis-tesco-strategic-options-core-

comp/

8. http://www.investopedia.com/features/industryhandbook/insurance.asp

~~~Thank You~~~

mailto:[email protected]

mailto:[email protected]

http://www.kiclbd.com/

http://www.kiclbd.com/reports/annual_report_2015.pdf

https://www.google.com/search?rct=j&q=karnaphuli%20insurance%20co.%20ltd

http://www.investopedia.com/features/industryhandbook/insurance.asp#ixzz4Rfyzp19Z

http://www.investopedia.com/features/industryhandbook/insurance.asp#ixzz4Rfyzp19Z

http://www.academia.edu/1767455/Poblems_and_prospects_of_insurance_business_in_bangldesh

http://www.academia.edu/1767455/Poblems_and_prospects_of_insurance_business_in_bangldesh

http://www.slideshare.net/

http://www.ivoryresearch.com/samples/economics-essay-example-strategic-management-of-tesco-supermarket-pestle-analysis-porter-5-forces-analysis-critical-success-factors-swot-analysis-value-chain-analysis-tesco-strategic-options-core-comp/




http://www.investopedia.com/features/industryhandbook/insurance.asp