Oct. 01 - Almost 90 per cent of the total population in the country is living without an insurance policy despite the existence of insurance companies for almost half a century.
The total number of life insurance policies issued by eight life insurance companies stands at 2,474,992 as of mid-July, 2013, according to unaudited financials of life insurance companies for the fourth quarter of last fiscal year. This amounts to a mere 9.2 per cent of the total population.
However, according to the insurance regulator's statistics, the total number of life insurance policies issued stands at 320,531 — making the coverage rate less than two per cent of the total population. "We do not calculate mandatory term life insurance sold to Nepali citizens going for foreign employment, thus the number seems to be low," according to chairman of Insurance Board Prof Dr Fatta Bahadur KC.
Despite the importance of insurance policies that protect lives against unseen calamities and they being one of the best investment instruments, a majority of Nepalis are still not into insurance. "A majority of the population is unaware about the importance of insurance, and how the policies protect policy holders financially in case of a misfortune," said Dr KC.
Nepal witnessed the emergence of Rastriya Beema Sansthan in December 1967 — 46 years ago. Unfortunately, RBS is the one insurance company that has been unable to get its balance sheet properly audited due to governance issues.
As of now, there are eight private sector promoted insurance companies in operation, including two foreign companies.
"The educated population who are aware about the importance of insurance are also reluctant to get a policy," Dr KC pointed out.
Life insurance is not only important for its ability to financially protect lives against accidents and deaths but also is a lucrative investment tool. The endowment policies not only cover possible risks but also help save money for the future.
Insurance companies also agree that the reason behind limited outreach of life insurance is due to lack of awareness regarding its importance. "We have found that it is easy to convince people to buy a policy if the
insurance companies can make people understand the risk
coverage, rewards and returns in future of having a life insurance policy. If we are able to do this, more people will be willing to buy policies," informed CEO of Nepal Life Insurance Company Vivek Jha.
"Moreover, I have realised that we need to design specific products based on our target customers. Policies meant for people in Kathmandu may not interest those living in rural Nepal, so we need to develop target specific products to tap the untapped areas," he added. "We hope that the introduction of micro-insurance will help in expanding the penetration rate of insurance," Jha said. Once the micro-insurance regulation comes into effect, all insurance companies will have to issue microinsurance policies that amount to 15 per cent of the total policies within five years.