Insurance law in Bangladesh
This article addresses insurance laws in Bangladesh from ancient times to the present. In Bangladesh, as in the rest of the South East Asian region, the concept of insurance is still in its infancy. In order to modernize and update the insurance business in Bangladesh, the Parliament of Bangladesh established a new Insurance Act in 2010. Due to the passage of a new act to replace the old, the former Insurance Act 1938 became inactive as a result of the passage of the Insurance Act 2010.
Insurance, despite its importance to the safety and security of businesses and society, and the long-term influence it can have, is still underutilized. At the moment, insurance is widely used and increasingly admired in personal life and the business sector as a substantial risk management instrument used to mitigate the danger of a contingent, uncertain loss. The insurer offers financial protection to the insured under an insurance contract in the event of a loss due to the occurrence of an unpredictable event.
Insurance is a contract between two parties in which one party agrees to assume the risk of another in exchange for a consideration known as a premium and promises to pay a fixed sum of money to the other party in the event of an uncertain event (death) or after the expiry of a certain period in the case of life insurance or to indemnify the other party in the case of general insurance.
It is a contract in which one party, known as the insured or assured, insures or underwrites his property or life, or the life of another person in whom he has a pecuniary interest, or property in which he is interested, or against some risk or liability, by paying a sum of money as the premium. Under the terms of the contract, the insurer undertakes to indemnify the insured for any loss that may accrue to the other as a result of the occurrence of certain event.
The Insurance Contract’s Nature
As previously said, insurance is a contract, hence it must meet the key elements of a contract-
- The parties must reach an understanding.
- The agreement must be backed up by consideration.
- The parties must be contractually capable.
- The parties’ free permission is required, as well as
- To be a genuine contract, the purpose must not be illegal, immoral, or contrary to public policy.
A contract of insurance is an uberimae fidei contract, which means it is based on good faith. As a result, both parties must disclose all relevant facts.
A contract of insurance, on the other hand, is very different from a betting contract. There will be a danger of damage to the insured subject matter, and the insured will have an insurable interest in the subject matter.
Only for imminent loss or last reason to cover the insured will the insurer be liable. The maxim ‘causa proxima non remota spectatur’ expresses the principle. A contract of insurance is based on scientific risk estimation.
Double insurance and reinsurance
In a nutshell, double insurance occurs when an insurance contract on a specific subject matter is followed by another insurance contract on the same subject topic. On the other hand, when an insurance company believes that it will be difficult to bear the liabilities of losses as a result of this, it makes an insurance on that specific another in order to share the liability. It is known as reinsurance. Under current law, several types of insurance are permitted, but double insurance, with the exception of life insurance, is reckless.
Bangladesh’s Regulatory Framework
In Bangladesh, the insurance industry is not new. Almost a century ago, during British control in India, some companies began insurance business in this region, both in life and general insurance. This company has also continued in Bangladesh. As a result, legal regulations were required to govern insurance in Bangladesh. The Insurance Act of 2010 is the current law governing insurance.There were some insurance laws in the immediate preceding time, such as the Insurance Act of 1938.
To ensure a conflict-free operation in any country, every industry must be properly managed and maintained. In this regard, the Bangladeshi Parliament passed two insurance legislation on March 3, 2010, in an effort to enhance the regulatory environment and make the business operationally active. Insurance Act 2010 and Insurance Development and Regulatory Authority (IDRA) 2010 are the new legislation that went into force on March 18, 2010.
Important Insurance Acts:
- Insurance Act of 1938
- Insurance Regulations of 1958
- 1972 Insurance (Nationalization) Order of Bangladesh
- 1973 Insurance Corporations Act
- 1984 Insurance (Amendment) Ordinances
- The Insurance Act of 2010,
- The following sections concern insurance laws in Bangladesh:
- The 1938 Insurance Act
This Act included provisions concerning the definition of insurer and insured, commission payable to agents, agent licensing, staff appointments, registrar of policies and registrar of claims powers of the controller of insurance, acquisition of surrender value by policy, actuarial report, deposits, investments, loans, valuation of assets and liabilities, account and balance sheets, and so on. The Act also included laws governing the formation, management, and dissolution of insurance companies. It applied to both the life and general insurance industries.
The Insurance (Nationalization) Order of Bangladesh, 1972
This decree was issued to nationalize the insurance business in Bangladesh by transferring all such business to specified corporations established for the purpose, as well as to provide for the regulation and management of the corporation’s activity.
Order Dissolving the Bangladesh Insurance Corporation, 1972
This decree was issued to dissolve the insurance corporations.
1973 Bangladesh Insurance Corporation Act
This law was divided into 34 sections. It was released on June 23, 1973. It was authorized, however, to establish Jiban (Life) Bima Corporation and Sadharon (General) Bima Corporation by dissolving the previous four insurance organizations, namely Rupsa, Surma, Karnaphuli, and Teesta.
The 2010 Insurance Act
This Act repealed all previous insurance-related legislation. It is divided into seven chapters and comprises 160 sections. It is a revised law. It specifies the provisions that apply to the insurer, the insured, and the penalties for breaking the law.On the other hand, it includes provisions for Islamic insurance.
The 2010 Insurance Development and Regulatory Act
This Act governs the control of insurance businesses, including their investment, taxes, and reporting activities.
Other Related Statutes
However, in the Insurance Act 2010, the names of certain legislation connected to the insurance sector are introduced, such as-
a) The 1993 Financial Insurance Act
b) The 2001 Co-operative Societies Act
c) Government Securities Act of 1920
d) The Companies Act of 1994.
Section 5 of the Insurance Act of 2010 states that there are two sorts of insurance businesses:
1) Life Insurance as well as
2) Insurance that is not life insurance
A brief description of these two sorts, which include maritime, fire, and Islamic insurance, is provided below.
Insurance for life
The definition of an insurance contract is known from the preceding statement. Life insurance is used when the subject matter of the insurance contract is life. In such a contract, the insurer will compensate the insured if something indicated in the contract occurs, and in the case of life insurance, the insurable interest must exist at the time the contract is entered into.
There are various types of life insurance, such as whole life, endowment, limited payment, joint life insurance, and so on. Life insurance policies can be assigned to a third party who has no insurable interest in the insured and remain valid. It was noticed in the case that only a Magistrate of First Class could trial any crime for a violation of any provision of the Insurance Act.
Insurance that is not life insurance
Non-life insurance policies include the following:
Insurance for the Seas
Marine insurance is a vital branch of insurance. Marine insurance is a contract of insurance in which the insurer agrees to reimburse the assured against marine losses, that is, to marine adventure, in the way and to the extent agreed upon.There is no Bangladeshi law that governs maritime insurance provisions. Contract act requirements, customary rules, and tradition apply in Bangladesh. The British Marine Insurance Act of 1906 is implemented in some unique instances.
Insurance against fire
Fire insurance protects you against any loss caused by a fire. So, fire insurance business means the business of effecting contracts of insurance against loss by or incidental to fire or other occurrence generally included among the risks covered against in fire insurance policies, other than incidentally to some other kind of business.
Part -2 of the 1938 Insurance Act previously governed fire insurance.The Act of 2010 is now in effect. There are numerous sorts of fire insurance, such as valued, unvalued, specialized, and so on.
Islamic Protection Insurance
Islamic insurance is defined as insurance that is governed by Islamic rules and regulations. Section 2(7) of the Insurance Act of 2010 defines Islamic Insurance as “the insurance business based on Islamic Shariah law.”
However, there is a significant disagreement in Islam regarding the legality (halal) of insurance company. Few academics believe it is entirely forbidden. Some scholars, on the other hand, claim that ‘Allah (ST) has approved trade and banned usury (riba). To summarize, there is misunderstanding related life insurance but not involving non-life insurance if the business is usury fee, which is forbidden.
Bangladesh Mobile Insurance
Mobile Insurance in Bangladesh is one of the most recent developments in the insurance industry. To meet the need, three main mobile carriers in Bangladesh have implemented mobile insurance systems for their subscribers who use more over 250 tk per month. This type of subscriber will have access to life insurance.
Insurance Regulatory Commission
Insurance businesses operating in the country must be governed by detailed laws and norms, as well as overseen by a strong body known as the ”Insurance Development and Regulatory body” (IDRA), which was founded under the Insurance Development and Regulatory Authority Act of 2010. It is led by a 15-member executive committee, which includes a chairman and a vice-chairman.
Insurance Association of Bangladesh
firms under the Companies Act of 1994 are insurance firms. The private insurance businesses of Bangladesh have formed an association to promote, support, and safeguard the interests and welfare of its members, as well as to aid in the development of a healthy insurance business in Bangladesh. It is run by a 15-member executive committee, which includes a chairman and a vice chairman.
On the other hand, the “Bangladesh Insurance Academy” is a training and education facility for workers in this industry.
As the role of insurance in the development of our economy grows, it is vital to prioritize this sector for the protection of people in general and society in particular. Through risk-sharing activities that encourage investment in many essential businesses, the insurance industry plays a significant role in Bangladesh’s economic success. The government has now launched an insurance reform program in order to create a vibrant insurance business in our country.
As a first step toward reaching the goal, the Insurance Act of 2010 was passed to replace the previous Insurance Act of 1938, and the Insurance Development and Regulatory Authority Act of 2010 was also established to develop a stronger insurance sector in Bangladesh. In the age of globalization, the domestic market should be efficiently organized, and the legal framework should be effective in dealing with changing conditions in business and socioeconomic institutions.
As a commercial hub for international business, the Government of Bangladesh has taken numerous measures to protect the parties involved in insurance business transactions. The government is hesitant to open the floodgates to international insurance businesses. However, when it comes to reinsurance, the government has taken the exact opposite approach. The beneficiaries’ rights are further protected by having simple access to justice in the event of a disagreement, whether through ADR or the regular court system.
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