Micro-insurance to be launched soon

Kathmandu, Nov. 8:

Insurance companies in Nepal are to implement micro-insurance services within a couple of weeks in coordination with micro-finance institutions (MFIs).

A meeting of insurance companies on Tuesday discussed the issues related to the implementation of micro-insurance.

Past president of Nepal Insurers' Association (NIA) Deep Prakash Pandey said that the insurance companies have been mulling over strategies for the effective execution of micro-finance which is targeted at people of the lowest rung in society.

Meanwhile, some companies have begun to sell the micro-insurance products targeted to the socially, economically and geographically marginalised people.

According to the Insurance Board (IB), Himalayan General Insurance has informed the Board that it had started implementing such insurance policies to the rural and deprived population.

Pandey, who is also chief executive officer of Shikhar Insurance Company Ltd., informed that the companies had been working on their own in order to implement the micro-insurance, but a coordinated effort was needed as the NIA had signed a memorandum of understanding (MoU) with the MFIs to collaborate in the effort.

Saksham, an initiative of the Department of International Development (DFID) Nepal, had coordinated to prepare the MoU.

Till now, about two dozen organisations including community-based organisations, micro-finance service providers, non-government organisations and development partners, have been selling micro-insurance product.

The government had decided to involve the insurance companies in this sector, and former Finance Minister Bishnu Prasad Poudel, through his budget speech for the current fiscal year, had directed the companies to distribute at least 5 per cent of their insurance services to micro-insurance.

Following the government's announcement, the IB had designed three life insurance and two non-life insurance products.

"The life insurance products for micro-insurance are endowment and term insurance while non-life products are household, personal accident and health insurance," said Kundan Sapkota, deputy director of the Board.

However, insurance companies are free to design their own product according to the market need which they can sell after IB's approval.

The IB has asked each insurance company to implement micro-insurance in the districts where they had been issuing policies for agricultural insurance.

According to Sapkota, the MFIs would perform a marketing function for micro-insurance. "The micro-insurance companies have good relations with the public in the villages and remote areas. Therefore, their network will help the insurance companies to implement the micro-insurance," he said.

But Pandey said that along with the reach to the rural people, publicity of micro-insurance products was equally important.

"The insurance companies have to face many challenges while implementing the micro-insurance. However, this sector will create a huge opportunity for them 5 to 10 years from now," he said.