Suggestion made to create environment where people voluntarily buy insurance policy

Kathmandu, June 10

Insurance stakeholders have expressed serious concerns over insurance policy 'being sold not bought', and suggested immediate measures to create an environment where people buy insurance policies at their will but not due to the push sales by the agents.

Speaking on the last day of the three-day Asian Insurance Meet 2023 on Saturday in Kathmandu, to overcome this situation, they suggested designing the products innovatively and using technology to its fullest.

Poshak Raj Poudel, President of Jeevan Beemak Sangh Nepal (an association of life-insurance companies), said that Nepal is an underinsured market because policies here are not bought but sold.

According to him, a very few people buy insurance policy out of motivation while most of the others do it so because of the push sale of the agent. As per the data presented by the experts at the conference, average insurance policy buying ration in Nepal and Japan is 1:7.

However, growing young population is a huge prospective market in Nepal where digital marketing and awareness campaign can be launched. Developing product and distribution channel diversification is also a need for the future, said Poudel.  

Backing his ideas, Yoshihisa Ishii of the Foundation for the Advancement of Life and Insurance Around the World (FALIA), stressed on the diversification of insurance product and distribution channel.

"Some people don't want an agent to come to your house so they take up to digital channel. People should be given different options in accessing and buying insurance policies as per their need," he said.

Likewise, Subrahmanyam Kollimarla, Consultant Actuary at the Nepal Insurance Authority (NIA) – the organiser of the conference – said that there is still a challenge to make people feel that they should buy an insurance policy. The NIA has organised this event in partnership with International Association of Insurance Surveyors (IAIS), Asian Development Bank (ADB) and Access to Insurance Initiative (AII).

According to Kollimarla, there should be an ease in selling the product. Industry should develop simple and comprehensible products so people have better understanding about it and are motivated to buy it.

He even suggested for the application of artificial intelligence, increase the number of actuaries in Nepal.

Bhojraj Sharma, Chairman of Insurance Institute of Nepal, said that insurance in Nepal is still a saving not a protection and average insurance policy size is also very small – about Rs. 500,000. In terms of gender, of the total insured, 54 per cent are female and 46 per cent male.

However, he said that the growing number of nuclear families could be an opportunity for insurance penetration. Out of every 100 people in Nepal, 68 have smartphone which provides an opportunity to insurance companies to run awareness and education campaigns as well as marketing programmes, he said.

Experts of the conference had univocally stressed on increasing insurance penetration at the earliest. Nepal currently has a huge untapped market with about 90 per cent insurable population not buying any insurance policy.

The country has 42 per cent insurance penetration but the large part of it includes foreign employment term insurance which has been made mandatory by government decree.

Milena Kozomaro, Advisor of Access to Insurance Initiative and Ronaldo Limbago, Regional Coordinator for Asia of the AII, presented the status of women customers and participation in insurance industry.

"Women only made up 23 per cent of re/insurance company executives, 10 per cent of CEOs and 8 per cent of board chairs globally in 2019," said Limbago. However, no comprehensive data sets exist on women's access to insurance, neither on the demand nor the supply side.

Similarly, Sanganna Geji, Insurance Expert from India, said that failure in quantifying the risk is the reason behind the failure.

He also said that there is also concentration risk. "If your investments are not spread out properly, you have this risk," he said.

Geji suggested for the application of Risk Based Capital (RBC) to be calculative about the risks and adaptation of better strategies.

Prechhya Mathema, Consultant Actuary at the NIA, said that the NIA has formulated the RBC policy and it will come into effect from July 2024 with full implementation by July 2027.

RBC will apply to all life and non-life insurers, micro-insurers and reinsurers registered in Nepal.

"It will apply total balance sheet approach with the use of market consistent valuation," she said.

Responding to the doubt in the part of the insurance companies regarding the implementation of RBC, Mathema said, "Unless and until you do it, you don't understand. Benchmarks on RBC in developed countries can't work in case of Nepal so we need to implement it and create our own benchmark."

The three-day conference was attended by about 400 delegates from Nepal and two dozen countries from the Asia-Pacific region. Chairman of NIA, Surya Prasad Silwal, said that the insurance sector regulator would organise such event in the future as well in order to enhance policy and other discussions and create knowledge sharing platforms. 

 Published in The Rising Nepal daily on 11 June 2023.