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Kathmandu Saturday February 09, 2002 Magh 27, 2058.
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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.
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