MFIs to sell micro-insurance policy

 Kathmandu, July 11: The Insurance Board (IB) will soon be implementing bancassurance in the micro-insurance sector.

Bancassurance is the sale of insurance products and services by banks and financial institutions.

According to the IB, in the first phase, micro-finance banks will be involved in selling the insurance policies.

While the insurance sector regulator is finalising a manual to involve the micro-finance institutions (MFIs) to sell micro-insurance policies, a pool of 17 insurance companies has been created at the Nepal Insurers’ Association (NIA) for the same purpose.

The NIA and Saksham-Access to Finance Programme of the Department for International Development, UK have deposited Rs. 40 million each to the pool, said chairman of the IB Chiranjibi Chapagain.

A chief executive officer (CEO) will manage the micro-insurance pool at the NIA, and the pool manager will change every year.

 

source: Micro Insurance Academy

The IB aspires to take insurance to all 744 local units in collaboration with the banks.

“The IB wants to develop micro-insurance in the country, especially in the rural areas, therefore, we have directed all the insurance companies not to organise any seminar or meeting for the next three months but to go to the field,” he said.

According to Chapagain, once bancassurance is implemented, the public can access both banking and insurance services from the same organisation, which will not only facilitate the public to insure themselves and their properties but also help the banks to have additional income by selling the insurance policies.

The IB has proposed providing 25 per cent operating expenses to the micro-finance companies.

Until now, the insurance companies were selling their policies through the banks, but with the implementation of the new system, banks will work as an insurance agent.

There will be a separate insurance desk at every branch of the MFI.

“We have talked to the Governor of Nepal Rastra Bank, Dr. Chiranjibi Nepal. He is positive about furthering cooperation between the banks and insurance companies,” said Chapagain.

CEO of Nirdhan Uthan Bank, a micro-finance institution, Janardan Dev Pant termed the move as very welcoming and said that the micro-finance institutions were ready to join hands with the IB and insurance companies.

“It will be another milestone in supporting the poor people to acquire the necessary health services. It will also support in reducing poverty,” he said.

As per the insurance laws and rules, every insurance company should develop micro-insurance products and sell them.

Micro-Insurance Directives 2015 mentions seven types of micro-insurance products: domestic, health, accident, livestock, agriculture, term and regular.

The World Bank has defined micro-insurance as insurance targeting those that are ‘ignored by mainstream commercial insurance and social insurance schemes’. 

(Published in The Rising Nepal, on 12 July 2017)