Health Insurance - A New Dimension in Health Care Services in ...

Journal of Business Research, vol. 2, 1999 

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Health Insurance - A New Dimension in Health Care Services in Bangladesh 

A Study of It's Perspectives, Problems and Prospects 

Mohammed Shah Alam Chowdhury. 1 

Abstract: This paper has pointed out that launching of Health Insurance has added a new dimension to the 

Health Care Services in Bangladesh. Since Health Insurance is a valuable mean of getting Health Care Services 

for the fixed income groups, within a period of 4.5 years, Group Hospitalization Insurance (GHI) has been able 

to attract around 6000 clients. Amid of severe political unrest, mass unawareness of prospects, general apathy 

towards insurance, various fraudulent attempts and above all declination of The State Bank of Bangladesh to 

permit Reinsurance due to restriction of transfer of foreign currencies, Health Insurance is still marching 

forward penetrating the corporate market segment. More two marketers entered into the market with more 

aggressive strategy. The existing growth rate and future growth potential and increased competition reconfirms 

that Health Insurance will be a success story in the service sector of Bangladesh. 

Introduction 

In 1995, over US $ 1230 billion in services were traded across the world, representing more 

than 25% of total global commerce. The growth rate in trade in services that stood at 8% in 

1994 reached 14% in 1995. The World Trade Organization (WTO) identifies trade in services 

as the fastest growing sector in world trade, today, and has set up a special division, GATS 

(General Agreement on Trade in Service) to keep track of this vast area of activity and to 

present trade barriers from arising. *1 

On the one hand, Bangladesh represented as the leader of the LDCs (Least Developed 

Countries) in signing GATT (General Agreement of Trade & Tariff) and committed to follow 

ISO 9000 for its quality of its product. Moreover, introduction of an Open Market Economy 

has opened her door to the Global Market for becoming a part of Global village. So gradually 

both the global product & services started penetrating into the market of Bangladesh. On the 

other hand, the domestic product and services also started entering into the global market. 

Thus, when the thrill of globalization of service sector started to touch the shore of 

Bangladesh, introduction of Health Insurance added a new dimension to its existing Health 

Care Services. 

Health Care Services can be divided into the following: 

(i) Out Door Services - it consists of regular out door medical treatment, which do not 

require staying in the Hospital/Clinics. 

(ii) Hospitalization Services - it consists of any medical treatments provided during the period 

of confinement in the Hospital/Clinics. 

________________________ 

1 Assistant Professor, Department of Business Administration, Jahangimagar University, Dhaka

2 Health Insurance - A New Dimension in Health Care Services in Bangladesh: 


(iii) Domiciliary Services - it consists of any medical treatments provided at the residence, 

specially for the elderly group. 

Health Insurance may cover the various types of Health Care Services for insured either in 

group or signal. The various schemes under Health Insurance in different countries differ in 

many ways but they can always be identified by either of the two categories: - 

(i) Social Health Insurance (SHI): The management of SHI is principally the responsibility 

of the government of a country. In a few cases, SHI is entirely financed by the government, 

but in most cases expenses are borne mutually by the government and the insured, former 

usually bearing the major portion. In countries where SHI had so long been financed by the 

government alone, the beneficiary members are now required to contribute also. And in 

others (jointly shared), government support is constantly declining. *2 

(ii) Private Health Insurance (PHI): As the name suggests, PHI is organized through 

private initiative alone and the government does not perform any direct role. PHI may be sold 

either as a group insurance or individual or both. *3 

Perspectives of Health Insurance in Bangladesh 

The existing facilities of Health Care Services of Bangladesh are: 

1. Government Health Care Facilities 

2. Private Health Care Facilities 

The standard of Government Health Care Facilities in Bangladesh is very poor in comparison 

with developed countries. Bangladesh-- as a least developed country, the infra-structural 

facilities of it's Health Care are in-adequate and below the international standard. Taking 

these limitations of Government Health Care Facilities as opportunities, a sizable number of 

Clinics/Private hospitals have emerged within a decade with relatively better services at a 

higher cost. However, the costs of enjoying private health care services are beyond the 

affordability of the limited income group (where almost 80% are dependent on agricultural 

sector) of Bangladesh. 

When there is a health problem to any person, he/she needs expert medical help to combat 

critical illnesses. Moreover timely treatment is possible when they have necessary fund to pay 

the cost of health care services. In Bangladesh, it becomes really difficult for the fixed 

income groups to pay the charges of private health care services. The head of the family can 

be free from worrying about, the expense of the treatment if the family is under health 

insurance coverage. The target market of the Health Insurance Products are service holders in 

various organization for Group Hospitalization Insurance(GHI); and for Individual 

Hospitalization Insurance (1111) & Family Hospitalization Insurance (FHI) the target 

markets are middle class family 

Since Health Insurance is a valuable means of getting Health Care services for the fixed 

income groups, it is rapidly becoming popular practice not only in the developed

Journal of Business Research, Vol. 2, 1999 3 

countries like USA, UK, Japan, and the like but also in the countries like Singapore, 

Malaysia, Philippines, Thailand, India, Indonesia, Pakistan and Bangladesh. *4 

Due to frequent inquiries both by individuals as well as by the employers to the insurance 

companies for health insurance scheme, a feasibility study was conducted in 1994, 

demonstrates a tremendous potentials of Health Insurance in Bangladesh. *5 

In March 1994, one of the leading private life insurance Company launched GHI, for the first 

of it's kind, in Bangladesh. However, in 1999 two more companies have launched various 

health insurance products. The reason for delay to introduce health insurance in Bangladesh 

might be due to the fear of incurring heavy losses from false and inflated claims. Absence of 

professional expertise might be another important reason in this regard. Thus, Health 

Insurance market is rejuvenating with multi-dimensional product & services offerings from 

the marketers. 

Prospects Of Health Insurance In Bangladesh 

Since the two new marketers have entered into the market in early 1999, so the analysis & 

interpretations are based on the information & statistics on the Market Leader only. 

(a) Potential Market Of Health Insurance 

The feasibility study conducted for the market leader revealed that there is a tremendous 

potential market of Health Insurance in Bangladesh. The study was conducted among leading 

private companies, international non-government organizations (NGO's), banks, 

multinationals, autonomous bodies, insurance companies and public sector corporations. It 

was observed that (among the sample organizations) only 40 organizations had around 

120,000 employees under their direct payroll and they will in-turn have 600,000 dependent 

family members. This clearly reflects bright prospects of Health Insurance in Bangladesh. 

(b) Growth Opportunities Of Health Insurance 

Amid of severe political unrest, economic inflation, mass unawareness of prospects, general 

apathy towards insurance, various fraudulent attempts and above all declination of The State 

Bank of Bangladesh to permit Re-insurance due to restriction of transfer of foreign 

currencies, within 4.5 years Health Insurance was sold to 30 different organizations covering 

5655 employees. The year-wise sales coverage and claim ratio is detailed below, re-confirms 

the bright prospects of Health Insurance in Bangladesh. 

(c) Stages In The PLC (Product Life Cycle) Of Health Insurance 

The introduction stage starts when the new products are launched. In this stage, profits are 

negative or low because of low sales and heavy distribution and promotional expenditures are 

at the highest ratio to sales because of the need for a high level of promotional effort to i) 

inform potential consumers of the new and unknown product, ii) induce trial of the product 

and iii) secure distribution outlet. *6 reviewing the sales statistics of GHI stated in section 4.2, 

it is evident that it is at the Introduction Stage of its PLC.



Table 1: Year-wise Sales Coverage & Claim ratio of Health Insurance 

Year No. Of Members No. Of. Claim Ratio 

under 

the coverage 

Organization. 

1994 (June) 50 2 0 

1995 200 5 23.5 % 

1996 2400 15 39.9% 

1997 5000 28 57.9 % 

1998 5655 30 65 % 

1999 

(Forecast) 

7500 (Forecast) 40 65 % 

Source: Primary Data collected from DLIC. 

(d) Market Expansion Of Health Insurance In Bangladesh 

The present market leader of Health Insurance is the pioneer in this sector in Bangladesh. By 

looking ahead, the pioneer knows that competition will eventually enter and cause price and 

its market share to fall. *7 So as a part of it's long range market expansion strategy and sensing 

competition, the marketer developed and launched Individual Hospitalization Insurance 

(1111) & Family Hospitalization Insurance (FHI) targeting to individual market segment. 

The new products (IHI & FHI) also offer the same range of benefit schedule as GHI. The 

major difference of IHI with GHI is that any individual, alone can come under this scheme 

instead of group with a common bondage. The major difference of FHI with GHI is that any 

individual family can come under this scheme instead of group with a common bondage. It is 

expected that all of the three health Insurance products will combindly be able to expand the 

existing market size to an attractive one. 

( e) Modification Of GHI 

Additional Plans 

Initially GHI was launched with only two plans such as Super Care and Master Care with the 

maximum ceiling of Taka 45,000/= and Taka 25,000/= respectively. However, based on the 

market demand, GHI is now being offered with two additional plans such as Deluxe Care and 

Exclusive Care with the maximum ceiling of Taka 75,000/= and Taka 100,000/= respectively 

besides the original plan. *8 

Flexibility In Case Of Pre-Existing Conditions 

Originally, persons with pre-existing conditions have been disqualified to be the member of 

GHI. But, in practice it was found that for pre-existing conditions of a single member


of an organization, either the total group is to be rejected or the person with the Preexisting 

conditions is to be included. So, the company has to relax this condition by allowing the 

member with pre-existing conditions, with extra-premium to cover the risk of it. 

Inclusion Of Global Coverage 

Due to the statutory requirement of The Bangladesh Bank regarding restriction on transfer of 

foreign currencies, the marketer could not arrange re-insurance for GHI with foreign reinsurers. 

So, initially the coverage of GHI was limited within the national boundary. But to 

cope-up with the pressing demand of clients for global coverage, the marketer has to allow 

the interested member to enjoy treatment facilities beyond the national boundary 

and submit their bill (within the provision of the plans) for re-imbursement. 

Problems Of GHI In Bangladesh 

While marketing GHI in Bangladesh, the marketers are facing the following problems: 

(a) Lack Of Awareness 

GHI is the first of its kind offered in Bangladesh Market. Since the product is still at its 

introduction stage, a major portion of the market is still unaware about the benefits and 

distinctive advantages of GHI. This mass unawareness poses a great threat to the success of 

GHI plan in Bangladesh. 

(b) Lack Of Readiness To Buy GHI 

Even those who are aware of GHI, a major portion of them are yet in the various stage of 

buying process such as interest stage, evaluation stage, trail stage etc. At the introduction 

stage of GHI only the innovators are coming forward to buy it, while the early adopters and 

early majorities are yet to follow. *9 

(c) General Apathy Towards Insurance Plans 

GHI's target market was the corporate market segments, that is, organizations that will 

sponsor it for their employees. Most of the commercial organizations specially the private 

ones demonstrate a general apathy towards GHI and therefore, towards health insurance plan. 

(d) Fraudulent Attempts 

The marketer while marketing GHI in Bangladesh is experiencing various types of 

fraudulent attempts: 

(e) Concealment Of Facts 

Any person, who wants to be the member under the coverage of GHI, has to declare the facts 

regarding one's health, specially regarding chronic illnesses, congenital infirmities and preexisting 

conditions. But in a claim it was found that a member was hospitalized due to some 

chronic gynecological complicacies, regarding which the member intentionally concealed the 

facts during membership.



Inflated Bills 

The benefit schedule of GHI excludes any pre-hospitalization expenditure. However, in 

several claims it was found that, some of the pre-hospitalization expenditures such as 

transport charges for bring the patient into the Clinics/Hospitals, charges of diagnostic 

pathological test etc., are included under the ceiling of ancillary services of the benefit 

schedule. 

False Claims To Utilize The Maximum Ceiling 

While in some claims it was found that the bills of medicine and drugs are inflated in order to 

exhaust the maximum ceiling of Medicine & Drugs. For instance, it was found that either the 

quantities of medicine claimed during hospitalization do not tally with the total dosage used 

or medicines which are being prescribed for post-hospitalization stages are included in the 

claim. 

Overstay 

In few claim the marketer observed that the number of days of confinement seems to be very 

high with the nature of the case of treatment. It is assumed that the member's have influenced 

the physicians to allow them to stay more than required, so as to utilize the maximum 

coverage allowed under the plan. 

Complete False Claim 

In few claim the marketer observed that some of the dishonest members made a complete 

false claim without being hospitalized. Upon through investigation it was found that the claim 

made was baseless. 

Re-Insurance Of GHI 

Due to the statutory requirement of The Bangladesh Bank regarding transfer of foreign 

currencies, the marketer could not arrange re-insurance for GHI with foreign re-insurers for 

global coverage of its services. 

Political Unrest 

The political environment of Bangladesh since launching of Health Insurance products, (since 

1995) experienced a tremendous unrest. Frequent hartals, strikes and continuous blockade 

programs resulting to overall detoriation of law and order situation and stagnation of the 

national economy characterized this period. So, during this period due to political turmoil, 

GHI could not penetrate into its target market as forecasted. 

Suggestions 

The following suggestions might help the marketer to accelerate the growth and also to 

prevent various fraudulent attempts to a certain limit. 

(a) Personal Supervision 

Personal Supervision will have a multi-dimensional effect, which are detailed below


Ensure Quality 

Personal supervision will help the marketer to ensure the quality of service rendered to the 

members during hospitalization by the authorized Hospitals/Clinics. Though it will be 

costly in respect of time and money, but it will ensure quality and customer satisfaction. 

Ensure Smooth Settlement Of Claim 

Personal Supervision will further help the marketer to ensure the geneuinity of the various 

benefits enjoyed. This will ensure smooth settlement of the claim. 

Increase Loyalty And Customer Satisfaction 

Personal Supervision during confinement of the member will also help the marketer to meet 

with the member physically. The member will feel happy with this courtesy call. Thus, it 

will both increase the loyalty towards the company and will also ensure customer 

satisfaction. 

Thus, by ensuring quality, smooth settlement of claims, increase loyalty and customer 

satisfaction, personal supervision will be very effective and increase the possibility of 

renewal of the GHI for the coming years. 

Market Promotion 

Since the existing marketer is enjoying the monopolistic environment, less efforts has been 

provided towards product promotion. As stated earlier, since GHI is at its Introduction 

Stage initially it will need heavy promotional campaign at its target market. Thus by 

intensifying promotional measures, the marketer will be able to communicate with 

i) those prospect who are totally unaware to make them aware about GHI. 

ii) those prospects who are aware to develop their interest about GHI, help them to 

evaluate with proper information and finally to induce them to make a trail. 

iii) those prospects that are at the trail stage to induce them to finally adopt GHI. * 10 

(c) Original Documents 

The marketer should communicate clearly to both the members and Hospitals/Clinics 

regarding submission of original bills for smooth settlement of claims. No duplicate or 

fictitious bill is to be accepted. This will prevent fraudulent attempt to a certain extent. 

Conclusion 

Since the service of Government Health Care Facilities are below the international standard 

and the Private Health Care services are beyond the affordability of the fixed income group, 

thus Health Insurance is an important and valuable means of getting Health Care Services 

for them. So Health Insurance is rapidly becoming popular practice not only in the 

developed countries like USA, UK, Japan and the like but also in the countries like 

Singapore, Malaysia, Philippines, Thailand, India, Indonesia, Pakistan and Bangladesh..



Inspite of various constraints both at macro and microenvironment, excellent growth rate and 

tremendous growth potential reconfirms the bright prospects of Health Insurance in 

Bangladesh. If the suggestion pointed out in this paper are considered with due importance, it 

is expected that Health Insurance will be able to ensure quality, smooth settlement of claims, 

increase loyalty and customer satisfaction and can further accelerate it's growth . Amid of all 

the above constraints, it is expected that Health Insurance will continue to march forward at 

an accelerated speed and will thus become a success story in a third world country like 

Bangladesh. 

References 

1. Mollmann, M. Eberhard, Falk, M. Bernard H. And Tarjanne, Pekka (1996) Raising Standards For Services: 

A special supplement on 27th World Standard Day:The Bangladesh Observer, P. 11 

2. Chowdhury, Shah Alam (1995), A Case Study Of Dhaka City : Group Hospitalization Insurance in 

Bangladesh, Insurance Journal, Bangladesh Insurance Academy, Dhaka. P. 24 

3. Ibid., P-24 

4. Ibid., P-24 

5. Ibid., P-25 

6. Kotler, Philip : Marketing Management: Planning, Analysis & Control, 8th Edition, Eastern Economy 

Edition, Prentice-Hall Inc. P-361 

7. Ibid., P-364 

8. Deltacare Hospitalization Plan - Brochure of Delta Life Insurance Co. Ltd. , Dhaka, P-6 

9. Rogers, Everett M and Shoemaker (1971), Fax: 880-31-650177. Floyd, : Communication Of Innovation 

New York: The Free Press, P-182 

10. Delozier, M. Wayne (1976). The Marketing Communication Process, Mc-Graw Hill Pub. Inc, P-145

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