INSURANCE LAWS IN BANGLADESH

2.1 Insurance

Insurance is such a contract where the insurer offers a contract and the insured pays premium. The insured need to show the insurable interest upon the insured subject matter of the insurance. For example- a person insured a building to mitigate fire risk. Then if unfortunately the building will face any short circuit by electricity and become damage then the insurer will pay the policy money to the sufferer. Hence it is a way to compensate a person. There are several laws and rules available in Bangladesh to implement the insurance contract and to avail the benefit of the contract. Furthermore several judgments provides by the Supreme Court of Bangladesh enriched the legal arena of insurance.[1] For example-in the case of  Janata Insurance Co. Ltd. Appellant (In all the cases)  vs Islam Steel Mills Limited and Anotherr [2]  a question arose that whether the person is insured or not. The court held, “the policies were owned by the plaintiffs and the premiums were paid out of their accounts, and thus the plaintiffs being the beneficiaries of the policies are legally entitled to claim the moneys covered by the policies under section 46 of the Insurance Act 1938.  So, it is a new jurisprudence when the status of an insured is questionable then it might be considered that who was the premium prayer.

2.2 Nature of the Contract of Insurance

As stated earlier, Insurance is a contract so it must satisfy the essential requirements of a contract–

1. There must be an agreement between the parties,
2. The agreement must be supported by consideration,
3. The parties must be capable of  contracting,
4. There shall be free consent of the parties, and
5. The object must not be illegal, immoral or opposed to public policy, to constitute a valid contract.[3]

A contract of insurance is a contract of uberimae fidei i.e on based on good faith. So, both the parties have to disclose all the material facts.

On the other hand a contract of insurance is very much different from a wagering contract. There shall be risk to cause damage of the subject matter of insurance and the insured will have insurable interest on the subject matter.

The insurer will be liable only for immediate loss or last cause to indemnify the insured. The principle is expressed in the maxim ‘’causa proxima non remota spectatur’’[4]. A contract of insurance is based on scientific calculation of Risks.

2.3 Re insurance and Double insurance

Briefly stated, when after making an insurance contract on a particular subject matter, another contract of insurance is made on that very subject matter, then it is called double insurance. On the  other hand when the insurance .e insurance company thinks that it will be difficult to it to bear the liabilities of losses (if caused) for this reason ,with a view to sharing the liability, it makes an insurance on that particular another. It is called reinsurance. Under the present law this types of insurance are approved but double insurance except life insurance is nothing but foolishness.

2.4 Insurance Laws in Bangladesh

Insurance business is not new in Bangladesh. Almost a century back, During the British rule in India, some companies started insurance business, both in life and general insurance, in this region [5]. This business has gained momentum in Bangladesh also. So, legal provisions were necessary to regulate insurance in Bangladesh .At present ,there is a law regarding insurance which is the insurance Act, 2010.There were some laws in the immediate past regarding insurance , for example Insurance Act 1938.

2.4.1 The Insurance Act, 1938

This Act contained provisions regarding matters like definition of insurer and insured, commission payable to agents, licensing of agents, appointments of staff, register of policies and register 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 etc. The Act also contained provisions relating to co constitution, management and winding up of insurance company. It was applicable to both in life and general insurance business[6].

2.4.2 The Bangladesh Insurance (Nationalization) Order, 1972[7]

This order was for the nationalization of insurance business in Bangladesh by transferring all such business to certain corporations established for the purpose and to provide for the regulation and control of the business of the corporation.

 

2.4.3 The Bangladesh Insurance Corporation (Dissolution) order,1972[8]

This order was made for the dissolution on of the Insurance corporations.

2.4.4 Bangladesh Insurance Corporation Act, 1973

This law contained 34 sections. It was promulgated on 23 june in 1973. However, it was enacted to establish Jiban (Life) Bima Corporation and Sadharon (general) Bima Corporation by abolishing the former four insurance corporations, namely, Rupsa, Surma, Karnaphuli and Teesta[9].

2.4.5 Some Past Laws

There were some laws and rules which were invoked in past were relating to insurance business but no information is found regarding them[10]. Namely-

1. a) The Insurance Rules, 1958
2. b) The Insurance (Amendment) Ordinance 1984.
3. c) The Insurance Regulations, 1990.
4. d) The Insurance Ordinance, 2008.

2.4.6. The Insurance Act, 2010[11]

All the previous laws relating to insurance were repealed by this Act. It contains 160 sections under seven chapters. It is an updated law. It provides the provisions applicable to insurer, insured, punishment for violation of the law .On the other, it provides provision for Islamic Insurance also.

2.4.7 The Insurance Development and Regulatory Act, 2010

The control over insurance companies including their functions relating to investments, taxation and reporting are regulated by this Act[12].

2.4.8. Other Related Laws

However, in the Insurance Act 2010 name of some laws are inserted which are related to the business of insurance such as-

1. a) The Financial Insurance Act, 1993;
2. b) The co-operative Societies Act 2001;
3. c) The Government Securities Act 111920;
4. d) The Companies Act, 1994.

2.5 Types of Insurance

According to section 5 of the Insurance Act, 2010 there shall be two types of Insurance business namely-

1) Life Insurance and

2) Non-Life insurance

A brief discussion is given below on this two types including marine, fire and Islamic insurance.

2.5.1. Life Insurance

It is known earlier the definition of the contract of insurance. When the subject matter of the insurance contract is life, it is called life insurance. In such a contract the insurer will indemnify the insured if even mentioned in the contract is occurred ad in case of life insurance the insurable interest must exist during the time of entering into the contract.

Life insurance may be different types such as whole life, endowment, limited payment, joint life insurance etc. The policies of life insurance can be assigned to third party who has no insurable interest on the insured and it is valid[13]. In the case of National Life Insurance Company Ltd vs Controller of Insurance the court observed that Only a Magistrate of First Class to try any offence for breach of any provision of the Insurance Act.

2.5.2. Non Life Insurance

Some of the non-life insurances are –

2.5.2.1 Marine Insurance

Marine Insurance is an important branch of insurance. Marine insurance is a contract of insurance where by the insurer undertakes to indemnify the assured in the  manner and to the extent thereby agreed, against marine losses , that is to marine adventure .There is no Bangladeshi law to regulate the provisions of marine insurance .In Bangladesh ,the provisions of contract Act, customary rules and tradition are applicable . To some exceptional cases, the British Marine Insurance Act of 1906 is applied[14].

2.5.2.1 Fire Insurance

Fire Insurance means insurance against any loss caused by fire. So, fire insurance business means the business of effecting, otherwise than by incidentally to some other class of business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.

Previously, fire insurance was regulated by part -2 of the 1938 Insurance Act .Now the Act of 2010 are applicable. Fire insurance may be of various types, namely valued, unvalued, specific etc.

2.6 Islamic Insurance

The Insurance which is regulated as per the Islamic rules and regulations is called Islamic Insurance. Section 2(7) of The Insurance Act 2010 defines Islamic Insurance as Islamic Insurance business means the insurance business based on Islamic shariah law.

However there is a great conflict regulating the validity (halal) of insurance business in Islam. Few scholar says that it is completely haram i.e prohibited. On the other, some scholar says that ‘Allah (ST) has approved trade and prohibited usury (riba). So, in conclusion, it may be said that there is confusion regarding life insurance but not regarding non life insurance if the business is usury fee as it is prohibited[15].

2.7 Mobile Insurance in Bangladesh

One of the new evolutions in insurance sector is Mobile Insurance in Bangladesh. For the filling up the demand, three leading mobile operators, working in Bangladesh, have invoked mobile insurance systems for it`s subscribers who use more than 250 tk per month. Such type of Subscriber will get the facility of Life insurance[16].

2.8 Insurance Regulatory Authority

The insurance companies operating in the country need to be regulated under comprehensive law and guidelines and supervised by a strong authority named ‘’Insurance Development and Regulatory Authority’’ (IDRA) established under the Insurance Development and Regulatory Authority Act, 2010. It is run by an executive committee of 15 members including a chairman and a vice-chairman[17].

2.9 Bangladesh Insurance Association

Insurance companies are the companies are the companies under the companies Act, 1994. The private insurance companies of Bangladesh has an association to promote ,support and protect the interests and welfare of the member companies, to help develop the healthy growth of insurance business in Bangladesh. It is run by an executive committee of 15 members including a chairman and a vice chairman[18].

On the other, there is an institution for providing training and education to the people of this sector name “Bangladesh Insurance Academy”.

2.10 Conclusion

The role of insurance in developing our economy is increasing so it is necessary to give importance in this sector for giving protection of the people in general and the society in particular.

---

[1] Agrani Insurance Company Ltd vs Commissioner of Taxes 65 DLR (2013) HD 380

[2] 52 DLR (2000) HD642,   63 DLR (2011)AD also see in 15 MLR(2010) AD 478-485

[3] Mc Kuchal, Mercantile Law 7^th edition , 520

[4] Sen Mitra , Commercial Law 25^th edition , 420

[5] The Financial Express, 16^th April, 2013

[6] Mc Kuchal, Marcantile Law, 514

[7] President Order No. 95 ,1972

[8] President Order No. 161 1972

[9] A.B Siddique , Company and Business laws, 247

[10] www.insured .com

[11] Act no.13 of 2010

[12] En.banglapedia.org (insurance)

[13] Ashely v. Ashley, 1829

[14] Sen Mitra , Commercial Law, 430

[15] Qa.islam.com

[16] Daily Prothom Alo, 4 April 2015

[17] www.idra.org.bd

[18] www.bia.org bd