The Insurance Industry in Bangladesh
Delta Life’s Constraints
Measures Taken by Management
to Overcome Constraints
Delta Life Insurance Company was founded in late 1986 by Mr Shafat Ahmed Chaudhuri and 21 sponsors, mostly expatriate Bangladeshis living in Kuwait. Chaudhuri was a Britishtrained actuary—the only actuary in Bangladesh at the time—who had worked in insurance companies in Great Britain and Kuwait, and had served as Bangladesh’s Controller of Insurance soon after independence in 1971. By launching Delta Life following the denationalisation of the Bangladesh financial sectors in the mid-80s, Chaudhuri became the father of private life insurance in the country.
Delta Life’s initial products consisted primarily of endowment policies, which combined contractual savings with life insurance, targeted at Bangladesh’s middle and upper classes. Not long after the organisation started, however, Chaudhuri recognised that Delta needed to develop something quite innovative if the organisation was going to be relevant to the vast majority of the population who lived below the poverty line. He strongly believed that the poor needed insurance more than the rich.
The Start of Microinsurance
Inspired by the growing success of the Grameen Bank and other microcredit schemes in Bangladesh, Delta launched an experiment of its own, Grameen Bima or village insurance, in 1988, as a project under the Delta Life corporate umbrella. Indeed, there was no coincidence about the branding. If poor villagers were repaying small loans from Grameen Bank, then they would certainly need access to savings facilities as well as the security provided by Grameen Bima’s life insurance.
This non-traditional insurance scheme was based on beliefs that continue to guide Delta’s microinsurance initiatives:
• Insurance can contribute to the economic emancipation of the underprivileged. • Poverty alleviation cannot bring success if it is dependent on grants. 2
• The common people of Bangladesh are honest, hard working, dependable, dedicated, and cooperative. They have tremendous potential for social advancement.
Besides covering the risks of death for the poor, Delta’s management identifies additional benefits from its endowment policies, including alleviating poverty, empowering women and promoting mass employment. Since 85 percent of Bangladeshis live in poverty, a major objective for the company is to help people to move above the poverty line.
In the initial design of Grameen Bima, the project collaborated with a microcredit NGO that provided the delivery structure for Delta’s endowment product. This partnership dissolved after a couple of years because Delta found that the NGO’s staff were more interested in lending than mobilising savings or selling insurance. While clients were willing to take loans from the organisation, they were less comfortable entrusting it with their savings.
In 1990, Delta started its own delivery network and quickly realised the benefits of selling its own policies (see Figure 2). In 1991, the project began introducing loans to complement the endowment policy. The loans were intended to stimulate additional income for its policyholders, which would help to promote their economic development while making it easier for them to pay their premiums.
Grameen Bima also piloted innovative ways of using insurance to promote development. In the mid-90s, it experimented with female...
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