Inner-View

How do you assess the prospects of insurance business in Nepal where there is a very high level of poverty incidence and the percentage of population employed in the formal sector is so low?

See, every society has people. And when there are people, there will be problems. And the problems so far as this business is concerned, can be classified into three parts. The first is called the hazard of dying too soon. The second is called the hazard of living too long. And the third is called the hazard of living too well. Now every person has to provide against these hazards. And there cannot be any financial instrument better than life insurance. Secondly, I agree that the insurance purchased has a relationship with the earning as well as the financial potential of an individual. But even in Nepal, there are people who have money, there are people who have savings but have not been approached by appropriate, good organizations to channelise their savings. And therefore I find that Nepal has good potential for life insurance business.

Your company was initially in negotiation for joint venture with another Nepali party. Why couldn’t that deal be clinched?

It was not that we were negotiating with another party. We had sent a team here who had met all kinds of people who were interested in having a joint-venture with us. Now after talking to all of them, the committee recommended the name.

The committee has taken into consideration several aspects – the financial strength, the market potentiality, their own spread-out in the country, and so on.

LIC has already been getting a substantial portion of Nepal’s life insurance business because of a more attractive bonus being offered. Will this JV be able to offer similar kind of bonus?

Bonus has a relationship with the earning on the life fund. Now, if the potential to invest the money that we collect from the people insured is there, then certainly we should be in a position to declare the same rate of bonus. It is the question of the level of earning I can have on the money that I collect from the people.

How do you plan to face the challenge that is bound to come in the form of US life insurance company, ALICO?

LIC is a very strong company, not only in India but wherever we have operations. For example we are operating in Mauritius and Fiji where we are doing extremely well. We are also operating in the Gulf countries, through a subsidiary company in joint venture called LIC International EC, and there again we are doing very well. Our strength lies firstly in finances, secondly, the distribution network and thirdly, the training establishments of these companies. We have 134 training centres in India. I am sure that we will have the opportunity to train the people that we recruit for the company here. And fourthly, we have a great brand name. And along with our product line, we will be able to compete in any market including in Nepal.

Nepal is said to lack sufficient trained manpower. How do you think you will be able to overcome this problem?

So far as training people is concerned, we have two approaches. We can take the people from Nepal and train them in our training establishments. Like I said, we have 134 training centres of various kinds. What could also be done is to bring the faculties here for 8 or 10 days and then shift back. So I don’t see much difficulty.

I don’t foresee much of a problem. The Nepali legal framework is based on the Indian framework. We are not having any problem in India. We have had meetings with the Chairman of Beema Samiti, the Deputy Governor of Nepal Rastra Bank, and the Finance Secretary. And they seem to be happy with the joint venture. Therefore we do not foresee much difficulty in obtaining approvement and permission to do business here in Nepal.

The trend in developing countries is slightly different from that of developed countries. The reason being that in the latter, the stock markets have developed extremely well. With the result, the products of life insurance companies have also some kind of greater focus on the benefits related with the capital market. With the stock market developing in India, we are slowly getting into the same frame. But in places like Nepal, we will have policies that will have a mix of risk in premium as well as in investment returns.

Well, I find that the Nepali life insurance market is not yet fully developed. And therefore there are great opportunities of developing life insurance here. As far as challenges go, we will have to set up everything from the beginning. Trained manpower is not available here, there is no training establishment. These are the basic challenges. And also, there is lack of general awareness. So I have the challenge of creating awareness, creating trained manpower and the challenge of marketing our products.

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"We’ve successful operations everywhere"

The Chairman of LIC, GN Bajpai, was recently in Kathmandu to sign the MOU for setting up the new company. Excerpts of a brief interview that Business Age had with him on the occasion: