Despite hardsell, insurance firms feel the heat from Indian markets

By Milan Mani Sharma

KATHMANDU, Feb 8: Despite the increasing number of insurance companies entering into the domestic insurance market with new and attractive insurance schemes, a sizeable domestic capital is still making its way to the Southern neighbour, especially in the form of life insurance premium.

According to an report of the Insurance Board (IB), the apex insurance authority in Nepal, over Rs 40 million worth of domestic insurance business goes alone to the Life Insurance Corporation (LIC), the Indian insurance company, particularly from the Terai region.

The report is based on the study carried out by the IB in the Terai districts sharing border with India in cooperation of the local bodies and the supporting organisations and agencies.

Furthermore, well-placed officials at the Nepal Insurers’ Association (NIA) claimed that over 55 percent of the insurable population of the Terai region hold the life insurance policy of LIC. About 10 percent of the national population is the potential life insurers in the country, claims concern experts.

The amount being expatriated to India is about 19 percent of the total saving mobilised by the private life insurer - National Life and General Insurance Company (NLGIC) which was the sole private player in the life insurance market until last year.

"NLGIC mobilised a total of Rs 220 million during the last fiscal year under life insurance business, which was a growth of 60 percent in comparison to the previous year’s figure," said Ajaindra Singh, Chief Executive Officer of the NLGIC.

Rastriya Bima Samsthan (RBS) is another life insurance company into operation in the country. However, it has yet to issue out the audited financial statement.

"The trend of domestic capital going out of the country in the form of life insurance premium is on the rise," said an official at the IB on the condition of anonymity. He attributed incompetence of the domestic life insurers behind the capital expatriation.

However, experts point their fingers on IB for not being able to enforce the Insurance Act 1995, which clearly bars the Nepali citizen from insuring the domestic property across the border.

"The regulatory body has completely failed to enforce the authority granted to it by the Insurance Act," said a leading insurer.

Section A, Article 41 of the Act clearly cites that the Nepali citizen should not insure the property owned in Nepal out of the country. In case any person or organisation fails to abide by the law, they could be fined up to Rs 30 thousand or put behind the bar for 2 years.

But the IB has its own story to say. "We have has no organisational infrastructure to curb the menace," said an official of IB. However, they argue the increasing legal awareness among the people would help to curb such menace.

"We have launched various programs, targeting particularly the Terai populace to generate awareness about the legal insurance procedures and on insurance business as a whole," said Shekhar Kumar Aryal, Legal Officer of the IB.

"The main objective of the campaign is to tell the people that they should not hold unregistered insurance policy offered by uncertified agents, he added.

However, some of the experts claimed that the Act itself is not clear whether the ‘property’ that it bans from being insured out of the country includes ‘life insurance component’.

The two life insurers though in operation since decades are still struggling against resources and manpower constraint due to which they have not been able to explore the potential domestic market. "Despite a remarkable mark up in the economy in post liberal era, the performance of the life insurance business is less than expected," Aryal added. However, he was optimistic that with addition of another life-insurance giants, the continuing menace will be checked.

Meanwhile, experts viewed, "Though it is too early to jump into the conclusion, but if the past trends is anything to consider, it is hard to expect a magical result with a entry of new life insurers into the market."

But, a senior figure of the RBS, on the condition of anonymity, blamed the private life insurance companies for the problems of huge outflows of the domestic insurance business. "The over concentration of the private companies only in the city areas has compelled many potential insurer to look into the offers coming from across the border," Suraj Thapa, an insurance agent said.

WRDB to be privatised

Post Report

BUTWAL, Feb 8: In a bid to bring gradual structural reforms in Rural Development Banks, the Western Rural Development Bank (WRDB) is to be the first rural bank to be privatised.

The privatisation process of the WRDB, which has a comparatively sound financial position among such five banks, will go to the private hands within the current fiscal year, informed Durba Khatri, Executive Director of the WRDB, who is also a member secretary of high-level Rural Development Bank Co-ordination and Direction Committee.

"Similar process would be initiated for other remaining four RDBs after the completion of the privatisation process of the WRDB," he said.

As per the privatisation programme, 44.5 percent of the share of the Nepal Rastra Bank, which is the main promoter with 67 per cent investment share, would be sold.

Of the 44.5 per cent share that would be put on sale, 36 per cent would be given to the member of the group while 6 per cent and 6.67 per cent would allocated to the employees of the bank and Rural Micro Finance Development Centre (RMDC) respectively.

"If the member group becomes unable to absorb the share then joint venture banks will be offered," Khatri informed.

The basic objectives and function of the RDBs will no be changed even after their privatisation, he assured.

The government with an aim to fight against poverty by enhancing income generation activities had established the RDBs in all five-development regions.

He further claimed that the efficiency and productivity of the bank would be increased after the privatisation of the bank.

"Unnecessary political interference, business unfriendly activities of the trade union along with unaccountability of the employees have been the major causes for the sliding financial condition of these banks," he said.

He hoped that the bank would be free from such problems once it is transferred to the private hands.

Nepali currency depreciates by 30 p

Post Report

KATHMANDU, Feb 8: The Nepali rupee today depreciated by 30 paisa against the US dollar to touch lifetime low exchange rate. The exchange rate of Nepalese currency fell from Rs 77.50 to Rs 77.80 as against one unit of US dollar.

The depreciation of the Nepali currency is the third time in past nine days, during which the value of Nepalese rupee tumbled by 75 paisa against the US dollar.

Since Nepal maintains fixed exchange rate with the Indian currency, the current decline on the exchange rate is directly associated with the change in the value of Indian currency against the US dollars. The value of Indian rupee against the US dollars was IRs 48.68 on Thursday, which later fell to IRs 48.76.

High Demand of the greenback in the Indian market particularly from the public sector is said to the prime cause for the current slip in the Indian currency against the US dollars.

Govt seeks advice from business community

Post Report

KATHMANDU, Feb 8: Minister for Industry, Commerce, and Supplies Purna Bahadur Khadka asked the business community to recommend measures to improve shrinking trade and industrial scenario by identifying the root cause of the problems.

Minister Khadka said this while speaking at an interaction on "current situation of trade and industry" organized by the Nepal Chamber of Commerce (NCC) on Friday.

"Instead of demanding more facilities, entrepreneurs should assert to use the facilities provided by the government and furnish feedback to the concerned authority," he stressed.

Speaking on Nepal’s accession to the World Trade Organization (WTO), he reiterated that most of the laws of the country are compatible with the world trade regime and the government is ready to change laws if required.

Rajesh Kaji Shrestha, President of NCC, emphasized on the need to simplify existing laws and rules and regulations to facilitate business community thorough tough period.

Entrepreneurs, speaking on the occasion, expressed mixed opinion about much-debated issue of the right to ‘hire and fire’ the employees.

They urged for ‘right to hire’ rights to attract the foreign investment and fight off burgeoning unemployment and productivity problems.

Most of the participants asked the government to mobilize Nepali diplomatic missions abroad to boost up declining exports and to attract tourists in the country.

They also demanded the government to reduce tax rates during the state of emergency. They also said that requirement of business credibility information (BCI) for opening letters of credit valued over US$ 50 thousand has created problems to importers.

"Government should formulate long-term export policy to promote the exporters," they added.

They requested the government to initiate measures to discourage the Mafia regime at Kolkotta port, which overcharges on logistics services They also demanded with the government to slash telecom charges.

The business community also pointed out the need to remove the requirement of visa for Indian tourists to boost up tourist arrivals that has touched the lowest ebb.

Even as they asked the government to classify the employment agencies, they stressed for appointing honorary Consuls in the countries that have foreign employment opportunities.

Minister of State for Industry, Commerce and Supplies Prakash Bahadur Gurung too had shared his views on the occasion.