Kathmandu, March 31, The Insurance Board has expressed concerns about the lapse ratio of insurance policies sold by the life insurers in the country.
At up to 27 per cent, the lapse ratio is quite high in Nepal. Often times the insured have been allowing their policy to lapse because the insurance agent did not properly explain the terms and conditions of the policy, lack of understanding, insurance policy was bought without regular income source and shocks in income source, and lack of proper follow-up, among others.
In this regard, the Insurance Board has instructed the companies to rectify the situation as high lapse ratio is hampering the objective of expanding insurance penetration among the people.
Chiranjibi Chapagain, chairman of Insurance Board, said the insurance sector regulator has urged the firms to reduce the lapse ratio to below five per cent within two to three years. “The lapse ratio in insurance companies varies from between seven per cent to 27 per cent,” said Chapagain, adding, “As new players have also entered the market, we have asked them to ensure low lapse ratio.” The lapse ratio measures the amount of insurance policy renewals with respect to the total number of insurance policies at the beginning of a specified period.
In the context of insurance penetration finally reaching double digits — 10 per cent in the last one-and-a-half years from seven per cent, the insurance sector regulator believes that the reduction in lapse ratio will make insurance schemes effective in the country.
Chapagain further said that insurance schemes are not effectively expanded as a high number of population falls under low-income group, there is lack of proper awareness, while insurance companies continue to be urban-centric. “But, with their increased paid-up capital and new players in the market, we expect that the insurers will be compelled to expand their services across the country.”
Source: The Himalayan Times