Insurance Final Report

8/8/2019 Insurance Final Report

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CHAPTER 1

1.1Review of Insurance Company in NepalInsurance in Nepal is still in the growth stage despite being 62 years old. The first insurance

company was established in Nepal in 1947. Before that some insurance companies from

India were operating in Nepal. The development of insurance business is closely related to

the beginning of industrialization in Nepal around 1940. The first join stock company,

Biratnagar Jute Mills, was established in 1936. The first bank Nepal Bank Limited was

established in 1973. During that period many industries came up in the Terai belt. The

Second World War began immediately after. Indian entrepreneurs came to Nepal to establish

factories. There was a need for the factories to be backed by insurance. Indian companies

took the initiative to ensure those industries. Nepal bank provided loan to entrepreneurs. To

insure these loans, Nepal Bank established Nepal insurance and transport company in 1947

as its subsidiary which was truly first Nepal insurance company. That company now operates

as Nepal Insurance Company.

Now 62 years after the first Nepali insurance company set up, there are 25 insurance

companies with more than 300 branches throughout the country. In terms of number of

companies, number of policies sold and revenue earned, there has been spectacular rise in the

insurance business. There are still many areas that the Nepali insurance sector has not been

able to cover, but there is no denying the act that the sector is witnessing accelerated growth.

Beema Samiti (Insurance Board) an autonomous body, established to develop, systemize,

regularize and regulate the insurance business of Nepal under Insurance Act, 1992.

1.2 Introduction of Insurance

The insurance policy is a contract between the insurer and the insured, known as the

policyholder, which determines that claims which the insurer is legally required to pay, in

exchange for payment, known as the premium.


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The insurance policy is generally an integrated contract, meaning that it includes all forms

associated with the agreement between the insured and insurer.

Parties involved in Insurance Policy are

y InsuredA person whose interest is protected by an insurance policy: a person who contracts for

an insurance policy that indemnifies him against loss of property or life or health etc.

insured person may be individual, mortal, person, somebody, someone even soul of a

human being.

y InsurerInsurer is the insurance company which takes the risk of insured person.

1.3 Types of Insurance Policy

There are more than 150 different types of policies that people can choose from. But the

majors are classified under four categories. They are stated bellow:

y Life- InsuranceIn general, life insurance is a type of coverage that pays benefits upon a persons death or

disability. In exchange for relatively small premiums paid in the present, the policy

holder receives the assurance that a large amount of money will be available in the future

to help his or her beneficiaries pay debts and funeral expenses. Some forms of lifeinsurance can also be used as a tax-deferred investment to provide funds during a

persons lifetime for retirement or everyday living expenses.

y Non Life- Insurance Non life- Insurance is also called General insurance, which includes automobile and

homeowners policies. It provides payment depending on the loss from a particular

financial event. General insurance typically comprise any insurance that is not

determined to be life insurance.


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o Life, property and wealth are always at risk.o Risk of accidents, natural calamities, disasters, theft, riots etco The it-cant happen to me attitude is most unwiseo Insurance is the best safeguard to mitigate risko Insurance alleviates loss in the event of risk becoming a reality.o Insurance is sensible, practical and above all, the right thing to do.

1.5Insured and Insurer Inter-relation

There should be a good relationship between insured and insurer in order to prosper of

insurance company. Insurance companies, along with the brokers and agents who sell life

and non life insurance, are committed to safeguarding insureds rights when they shop for

insurance and when insured submit a claim for concerned loss. Insureds rights include the

right to be informed fully, to be treated fairly, to timely complaint resolution, and to privacy.

These rights are grounded in the contract between insured and insurer and the insurance laws

of insured people province. With rights, however, come responsibilities including, for

example, the expectation that insured person will provide complete and accurate information

to their insurance company. The policy outlines other important responsibilities. Insurers,

their distribution networks, and governments also have important roles to play in ensuring

that insured rights are protected.

Rights and Interest of Insured Person

There are many interests and rights of Insured persons. Some of them are listed bellow:

y To be informedInsured can expect to access clear information about his/her policy, coverage and theclaims settlement process. Insured have the interest or right to an easy to understand

explanation of how insurance works and how it will meet his/her needs. Insured also have

a interest to know how insurers calculate price based on relevant facts. Under normal

circumstances, insurers will advise an insurance customer of the customers intermediary

of changes to, or the cancellation of, a policy at least 30 days prior to the expiration of the


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policy, if the customer provides information required for determining renewal terms of

the policy at least 35 days prior to the expiration of the policy.

Insured have the right to ask who is providing compensation to his/her broker or agent for

the sale of his/her insurance. Insureds broker or agent will provide information detailing

for he/she how he or she is paid, by whom, and in what ways.

Insurance companies should disclose their compensation arrangements with their

distribution networks. Brokers and agents are committed to providing information

relating to ownership, financing, and other relevant facts.

y Insured has interest to complaint resolutionInsurance companies, their brokers and agents are committed to high standards of

customer service. If insured has a complaint about the service he/she has received, then

he/she has a right to access Insurer Companys complaint resolution process. Insurer,

agent or broker can provide he/she with information about complaint is heard and

promptly handled.

y Professional service interestInsured has the right to deal with insurance professional who exhibit a high ethical

standard, which includes acting with honesty, integrity, fairness and skill. Brokers andagents must exhibit extensive knowledge of the product, its coverage and its limitations

order to best serve insured.

y Interest of privacyBecause it is important for insured to disclose any and all information required by an

insurer to provide the insurance coverage that best suits them, he/she has the right or

know that his/her information will be used for the purpose set out in the privacy

statement made available to insured by broker, agent or insurance representative. This

information will not be disclosed to anyone except as permitted by law. Insured should

know that insurers are subject to countrys privacy law.


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y Social insurance interestA person who is insured under social insurance scheme inside country, he/she is entitled

to a pension on the basis of his contributions in a country. A person should be provided

widows pension, orphans benefit, maternity allowance under social insurance scheme.

y Flexible standardInsured person may have the interest of flexible standard in insurance scheme. One

scheme should cover the many sub related area. For example, if wok related injuries has

been applied to anyone and he/ she is injured as a result of the hurricane, either while on

the way to work, or during work, or on the way home from work, payments have been

handed out to him/her and it should be classified as work related deaths.

y Simplified proceduresThe procedures of insurance company are taken as a load. In many cases, insured persons

have to wait for long time to complete the unwanted procedure. People are supposed to

wait long time to get payment from the insurance company. Therefore, these kind of

procedures have to be simplified.

y Speedy paymentsInsured people always want to have speedy payments. In many cases, customers have to

wait long time for payment even the claim is satisfied. The delay of payment should be

supervised by the concern authority.

y Health care Quality InformationPeople, who are insured under health insurance scheme, health care providers must

measure, analyze and report data on health care quality and effectiveness. Information

obtained by the insurer in the process of health care quality and effectiveness evaluation

must be annually communicated to the served population through mass media to the

insured people.


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Despite of all the objectives of Insurance Supervisory Authority, the major one is to

protecttherights andinterests ofinsuredentity.

1.6Number of Insured in Nepal

The number of insured in both life and non-life insurance is in increasing rate.

YearNo of LifeInsured

No of Non-LifeInsured Total No Insured

2061/62 305,000 239,000 544,000

2062/63 330,000 204,000 534,000

2063/64 350,000 246,000 596,000

2064/65 390,000 269,000 659,000

2065/66 470,000 307,000 777,000

Table: 1.1

Figure: 1.1

The total number of insured (Life and Non-life) at fiscal year of 2065/66 is seven hundred

seventy seven thousand. It was only six hundred and fifty nine thousand at fiscal year of

2064/65. The percentage has been increased this year is 17.90%, compared to 2064/65.

Similarly, the percentage has also been increased from fiscal year 2062/63 to fiscal year

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2061/622062/632063/642064/652065/66

NoofLife Insured

NoofNon-Life Insured

TotalNo Insured


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2065/66. But at fiscal year 2062/63, the percentage of total number of insured has been

decline by 1.87% as compared to the fiscal year of 2061/62.

The total number of insured in life insurance and non-life insurance are also shown in table

1.1. During 5 years, from fiscal year 2061/62 to 2065/66, the number of insured in both life

and non-life sector, has been increased remarkably.

1.7Role of Insurance Supervisory Authority

The Central Government has established the Insurance Regulatory and Development

Authority to regulate the insurance industry. This authority has formulated the Insurance

Regulatory and Development Authority. These regulations spell the various rights of an

insured and the protection of policyholders interests.

Many insurance companies are mainly focusing on increasing sales policy. However, insured

have an insurable interest in the policy, their interest were not identified in many cases.

According to Orans Dictionary of the Law (3rd

Ed.) Insurable interest is a persons or

entitys real financial interest in an object: the interest being the fact the person or entity will

suffer financially if the insured object is damaged or destroyed. Insurable interest is not

limited to simply an ownership interest.

An insured is the written identity in the policy of the person or entity that has an insurable

interest in the object subject to insurance. An insured may have an insurable interest in all

contents covered by an insurance policy.

Insurance companies, along with the brokers and agent who sell home, auto, business and

any kind of insurance, are committed to safeguarding insureds rights and interests when

insured shop for insurance and when he/she submit a claim following a loss. Insureds rights

include the right to be informed fully, to be treated fairly, to timely complaint resolution, and

to privacy. These rights are grounded in the contract between insured and your insurer and

the insurance laws of your province. Meanwhile, the insured also have the responsibility of


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providing complete and accurate information to the insurer.Insurers, their distribution

networks, andgovernments also have important roles to play in ensuring that insureds

rights and interests areprotected. Undervarious laws andregulatory, ISA issupervising

works ofinsurancecompaniesregardingtheprotection ofinsuredrights andinterests.

The activity performed by the Insurance Supervisory Authority since its setup and until now

was conducted in seven main directions:

i. The institutional and functional construction of the Insurance SupervisoryAuthority

ii. Elaborating and applying the secondary legislation for the insurance filed.iii. Licensing the insurers and the Insurance brokersiv. Managing the Compulsory Insurance- Motor Vehicle third party liability and

solving the policyholders claims

v. Supervising and controlling the activity of the insurers and the insurance brokersvi. Managing the Special Fund for the Policyholders Protection

vii. Nepalese Integration and International Relations

1.8 Instrument of the Insured Interest Protection

i. Right of the insured may be protected either through pre-court settlementprocedures or through filing a law suit at court.

ii. Cases of damage to the insured property may be decided both through pre courtsettlement and at court.

iii. Decisions about compensation for health and any moral damages are filed throughcourt only.


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Main objectives of supervision are to ensure that the undertakings business continues to

comply with the laws, regulations and administrative provisions with which the undertaking

must comply and to prevent or remedy any irregularities prejudicial to the interests of the

assured persons. In Nepal, Beema Samiti is an autonomous body which regulates the

insurance business of Nepal under Insurance Act, 1992.

1.9 Objective of Supervisory Authority

These are the main objectives of supervision.

y Adequate premiums and sufficient provisionsy Sufficient free assets to cover unexpected lossesy Reinsurance covery Balance sheets, profits and loss accounts and accounting standards are established on

the basis of uniform principles and correctly reflect the financial standing of the

undertaking.

y Detailed information about the object and conditions of the contract in order to judgethe product offered.

y Whether many insurance companies have held their AGMs for yearsy How well insureds interest is being protected by the concern insurance company.y How much risk would the company face derived from its current business and from

its future business plan?

y Does the company have enough assets to face this future risk?y Will the company need a capital injection in the future to support the risks?

Reasons forInsurance Supervision

y The social importance of insurance to both the private and commercial policyholdersy

The special features of the insurance producty The confidence requirement of the insurance industry.


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CHAPTER 2

2.1 Methodology

This report is prepared on the basis of data available. Methodology basically deals with the

source of data i.e. from which sources data has been collected. Data required for the

preparation of this report were collected from mostly secondary source. Because of the time

constraint, I was not able to go through primary source.

2.2Secondary SourceThe different secondary sources that are used while preparing this report are listed below:

o Internet: Google, various WebPageso Companys broachero Annual report of Beema Samiti and others

2.3LimitationsThere are several limitations that hindered the proper analysis of this study. These are:

Difficult in analyzing the information obtained from different secondary sources dueto the qualitative nature of information.

Another limitation to the study is the lack of statistical data. Report is mainly basedon the secondary data.

The deep comprehensive analysis and study couldnt be done due to time constraints.The report is mainly based on secondary source. There are many types of insurance policy

provided by the insurance company. But this report is mainly focused on the life and non life

insurance on surface. The total premium collected under life and non life insurance, claim

ration, no of agents, no of insured persons and analysis is done base on this information.

2.4Purpose of this PaperThis paper has been prepared as per the requirement of academic purpose. It tries to outline

Insurance Company in Nepal, Insurance Supervisory Authority, and its objectives and how

well insureds interests are protected by ISA.

To analyze various activities of insurance company To understand how organization works towards insureds interest protection To indentify the various services and facilities offered by the insurance company.


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CHAPTER 3

3.1 Total Number of Agents

An agent is a person who represents a principal, who can be another person or a company,

and act in the principals behalf. An insurance agent represents the insurance company and

he/she mush be licensed by the state in which they conduct business.

The main duty of agents is to sell insurance. They also explain the benefits of insurance, and

give their insured information as to what is covered and what isnt. He/she may also provide

service after a loss, informing the insured what steps need to be taken to have the claim paid.

The insurance company is responsible for the acts of its agents, and it can be assumed by the

insurance applicant that any information or payment of money to the agent will be received

by the insurance company.

Year Registered Renew Total

2056/57 800 1323 2123

Table: 1.2

The total number of Agents at the fiscal year 2056/57 was two thousand one hundred and

twenty three only. Among this, registered and Renew are 800 and 1323 respectively.

3.2 Total Number of Surveyors

Surveyors are professionals who assess the loss or damage and serve as a link between the

insurer and the insured. They usually function only in non-life business. Their job is to assess

the actual loss and avoid false claims. Surveyors like agents, are not employees but are

independent professionals hired by the insurance company.

Year Registered Renew Total2052/53 41 52 93

2053/54 26 44 70

2054/55 26 55 81

2055/56 20 57 77

2056/57 31 59 90

Table: 1.3


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Figure: 1.2

At fiscal year 2056/57, the number of surveyors is 90. This was only 77 at the fiscal year

2055/56. The percentage has been increased is 16.88 in fiscal year 2056/57 as compared to

2055/56. Among 90 numbers of surveyors, 31 are registered and 59 are renewed.

Similarly, if we see the table 1.3, the total number was greater in fiscal year 2052/53 as

compared to 2056/57. It was 93 which have been declined to 90. The comparison of these

two fiscal years, we can notice that the number of surveyors in registered is decreased by 10

in fiscal year 2056/57; in contrast, the number was increased by 7 in renewed part, as

compared to fiscal year 2052/53.

3.3 Total Premium Collection

Premium is the payment made by the policy holder (typically) to the insurance company to

maintain a policy and keep it active.

Premium Collected

YearLifeInsurance Non-Life Insurance Total Premium Collected

%Increased

2052/53 26.15 72.95 99.1 9.19%

2053/54 28.85 81.33 110.18 11.18%

2054/55 34.08 99.55 133.63 21.28%

2055/56 44.94 106.48 151.42 13.31%

2056/57 49.43 130.2 179.63 18.63%

Table: 1.4 (In Crore)

0

10

20

30

40

50

60

70

80

90

100

2052/53 2053/54 2054/55 2055/56 2056/57

Registered

Renew

Total


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Figure: 1.3

The total premium collect at fiscal year 2056/57 was Rs. 179.63 crore. In which the non-life

insurance has the contribution ofRs. 130.20 crore where only Rs. 49.43 from the life insurance

business. Similarly, at fiscal year 2052/53 the total premium collected was Rs. 99.1 crore. In

which the non-life insurance has the higher contribution ofRs. 79.95 as compare to the life

insurance business. The table 1.4 shows that the percentage of total premium collected was

increased in each year than previous year. During the five year from fiscal year 2052/53 to

2056/57, the percentage of total premium collected has been increased as 9.19%, 11.18%,

21.28%, 13.31% and 18.63% respectively. If we compare the nonlife insurance to life

insurance, the premium collected during the five years from non-life insurance business was

more than life insurance business.

3.4 Total Claim Paid

A liability of Insurance Company that is to be paid if insured reported his/her claim or injury

or damage. In order to get claim from insurance company one must has to have the evidence

of losses occurred.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Claim Ratio


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Claim Paid

Year

Life

Insurance Non-Life Insurance Total Claim Paid

%

Increased

2052/53 4.6 10.96 15.56 25.99%

2053/54 5.22 12.84 18.06 16.07%

2054/55 6.28 16.4 22.68 25.58%

2055/56 18.05 18.25 36.3 60.05%

2056/57 18.04 24.48 42.52 17.13%

Table: 1.5 (In Crore)

The total claim paid at fiscal year 2056/57 was Rs. 42.52 crore. In which the non-life insurance

has the payment ofRs. 24.48 crore where only Rs. 18.04 from the life insurance business.

Similarly, at fiscal year 2052/53 the total claim paid was Rs. 15.56 crore. In which the non-life

insurance has the higher payment ofRs. 10.96 as compare to the life insurance business. The

table 1.4 shows that the percentage of total claim paid was increased in each year than previous

year. During the five year from fiscal year 2052/53 to 2056/57, the percentage of total claim paid

has been increased as 25.99%, 16.07%, 25.58%, 60.05% and 17.13% respectively. There was a

tremendous increment of the percentage of claim paid at fiscal year 2055/56 as compare to other

years during five years. If we compare the nonlife insurance to life insurance, the claim paid

during the five years from non-life insurance business was more than life insurance business.

Figure: 1.4

00.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Claim

Ratio


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3.5 Claim Ratio

Claim ratio is the ratio between total losses paid out in claims by the insurance company and

total premium collected during the year. For example: if an insurance company pays out Rs.

60 in claims of every Rs. 100 in collected premiums, then its claim ratio is 60%.

Claim Ratio

Year

Life

Insurance Non-Life Insurance

2052/53 17.59% 15.02%

2053/54 18.09% 15.79%

2054/55 18.43% 16.47%

2055/56 40.16% 17.14%

2056/57 36.52% 18.81%

Table: 1.6

The claim ratio of life Insurance Company at fiscal year 2056/57 was (36.52%) double as

compare to Non-Life Insurance Company (18.81%). Similarly, at fiscal year 2055/56, the

claim ratio was more then doubles of Life Insurance Company as compare to Non-Life

Insurance. During five years, from fiscal year 2052/53 to 2056/57, the claim ratio has been

increased in each year as compared to previous years for both Life Insurance Company and

Non-Life Insurance. The claim ratio of Life Insurance during first three years as shown in

table 1.6 was slightly higher then Non-Life Insurance Company.

Figure: 1.5

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Claim Ratio


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CHAPTER 4

4.1 Challenges

In Nepal, the insurance companies have, generally, posted healthy growth over the years. But

only 4% of the countrys population has life insurance policies. Challenges are:

o The insurers in Nepal have been alleged of being more urban centric and reluctantto do business in rural areas. The reason may be the lack of skilled insurance

workers.

o Lack of coordination among other money market regulators like Nepal RastraBank and Securities Exchange Board of Nepal is seen as another problem for the

healthy growth of the sector.

o Lack of awareness and access to agriculture insurance amongst farmers.o Lack of legal and regulatory framework.o Limited financial capacity of private insurance companieso Lack of exposure to international insurance technologieso Non availability of data and informationo Lack of rural branch network of the insurers.o There are certain fundamental principles of insurance. The insured and insurer

both need to be aware to respect them. The extent to which these principles are

being followed among the companies. Even the insurers in the developed

countries have not been able to strictly follow these principles. This is also the

same in Nepal.

o Lack of education and awareness.o The Insurance Act is over 17 years old and it should be revised in order to cater

the new changes in insurance sector.

o Absence of avenues for long term investment for insurance.o One of the greatest bottlenecks of the sector again is in finding the trained human

resource. There is a lack of availability of national insurance training institute.

o Some managers in insurance business have migrated to the banking sector makingthe situation worse. There is a severe shortage of middle level and higher level

managers in insurance company.


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CHAPTER 5

5.1 Solutions

Based on Analysis

Based on analysis part of chapter 3, I felt myself for these solutions.

The number of insured persons in life insurance is greater in comparison to the nonlife insurance company. So that insurance business should go for more marketing of

non-life insurance policy to increase the sales of policy. In addition they also need to

find out the reasons why the sales of non life insurance policy have been decreasing

so that perfect initiation they can start. (referring table 1.1)

In comparison to fiscal year 2052/53, the number of surveyors was declined in2056/57, It was 93 in 2052/53, but it was declined by 3 in 2056/57. As surveyors are

the person who have the direct link to the insured persons. The reason for declining

might was lack of proper training, good incentives, and other facilities, they were not

provided. Therefore, insurance business should have the proper understanding of

surveyors and agents need. (referring table 1.3)

The premium on policies is the main source of fund for the insurance company.Because they can invest collected premium into productive area and take advantage

of it. Therefore, insurance companies always try to collect more premium thorough

the sales of policies. The table 1.4 shows that the premium collected on life

insurance was very low in comparison to non-life insurance, during five years. So

that necessary steps need to be taken to increase the premium from life insurance

sector.

Total claim paid by the insurance companies has been increased in each year. Thetable 1.5 shows that it was only 15.56 at fiscal year 2052/53, but it has been reached

to 42.52 crore at 2056/57. Whether the claim made by insured is genuine or not, why

the claim payment has been increased in each year, how can it be reduced. These

questions should be addressed first.


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Claim ratio is the payment of claim, out of premium collected during the year. It has been increasing highly in life insurance Company in comparison to non-life

insurance sector. For instance, it is beneficial to have minimal claim ratio to the

insurance business. Lower the claim ratio higher the opportunities of fund

investment. Therefore, insurers need to be active at the time of policy sold. Because

there are many examples that insurers are been to the part of fraud by the insured

persons. (referring table 1.6)

Others

Despite all above challenges (chapter 4), the insurance business in Nepal has by now become

an industry with lucrative returns. There are many areas that the Nepali insurance sector has

not been able to cover. There are some solutions to face those challenges.

There is no denying the fact that insurance companies have been successful inincreasing the awareness level among Nepalese about the merits of an insurance

policy. However, the insurance penetration into deed and wide corners of the country

is still very low. For example, according to one widely accepted data, only 4% of the

countrys population has life insurance policies. And, this too limited to the big cities

only. But given the fact that insurance companies report good earnings even with

such minimal market penetration, one can only imagine the scale to which the

business can grow. So that the insurance company should focus on marketing their

policy all over the Nepal, not just only in cities.

Unfortunately, Nepalese insurance companies dont sell policies specific toagriculture sector.

For example, there is no crop insurance. This is a big paradox to a

country known as agriculture economy. The reason according to the insurance

companies for their reluctance to provide such insurance is the lack of regulations for

such business. The other hand regulators say that because of high risk of moral hazard

in this business they are not able to come up with the regulation. Therefore, such

regulation should be implemented as soon as possible by the government.


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Farmers in Nepal are forced to take the risk of crop failure every year as the monsoonis getting more unpredictable. If the farmers have access to crop insurance, the

productivity will definitely increase. The insurance companies will be forced to share

the metrological data easily available to them to the farmers so that they can precisely

know about the forthcoming weather conditions.

According to insurance companies, due to lack of skilled human resources will towork in rural, insurers in Nepal have been alleged of being more urban centric and

reluctant to do business in rural areas. The company not only has to bear the expenses

of running an office but also for the accommodation of the staff involved. Despite

these challenges, if a company manages to setup its business outside the cities, it

would have to bring innovative micro insurance schemes suitable for the village

people and rural economy. Therefore, in order to encourage insurance company to set

up their business even in villages, government should provide them different facilities

like tax subsidy, financial support and so on.

To increase the skilled human resource, there should be an availability of nationalinsurance training center. Training will be given not only to the existing and

prospective employees and agents of the insurance companies but also to the

members of the insurance board and the investors interested to enter into this

business.

There must be economic benefit for the insured from the insurance policy if there isprofit. If there is any loss the insurer should also bear a part of it. If it were not the

case, then it would have been similar to gambling.

Insurance companies should have adequate financial backing to withstand a potentialcrisis. There is a very small capital requirement for establishing insurance companies

in Nepal. Like Rs 100 million for non-life insurance and Rs 250 million for life

insurance. Therefore, the decision of the samiti not to issue new license should taken

and should increase the need of capital.


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In order to expand the market, insurance should be made compulsory for everyone.For example, the compulsory third party insurance has expanded the market.

Similarly, the insurance company should come out with new products and cover

wider geographical areas.

Information on insurance is so limited in the college curriculum. It is only in the BBSthird year that insurance education is available but that too as an elective subject

conjoined with banking. Therefore, the subject has to be considered as major by the

universities.


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CHAPTER 6

6.1 Summary

The insurance business in Nepal has by now become an industry with lucrative returns. This

is supported by the fact that big business houses are either already in to the business or are

planning to do so. There has been an exponential growth in a number of insurance companies

operating in Nepal. For instance, in fiscal year2004/05, there were only 18 insurance

companies, life and non-life combined, in Nepal. The number now stands at 25. Over a dozen

more companies are seeking permission from insurance board to start their operation.

The insurance companies have, generally, posted healthy growth over the years. The total

premium collected by insurance business grew by 9.19%, 11.18%, 21.28%, 13.31% and 18.63%

in each year, both combined life and non-life insurance, in Nepal.

Similarly, the total insured persons have also been increased remarkably over the period of

five years. It was 544,000 at fiscal year 2052/53, but now the number is 777,000 (FY

2056/57).

Total claim paid by the insurance companies has been increased in each year. It was only

15.56 at fiscal year 2052/53, but it has been reached to 42.52 cror at 2056/57.

The robust growth in insurance business is only natural as starting a company requires a

minimum capital of Rs 250 million in life insurance and Rs 100 million for non-life

insurance company.

The insurance industry in Nepal is small in terms of size, and relatively young. The industry

had been also opened up at around the same time, but doesnt seem to have made such

progress as its southern counterpart. This is due to many factors.

y The problem of logistics, making areas of the country not easily accessible.y Low level of insurance awareness among the rural folk


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y Absence of avenues for long term investment for insurance companiesy The relatively young and small stock market.

Potential in Nepal insurance market is high, as only around 4.5% of the population is

covered. There is therefore scope for growth and that will augur well for the country as well.

The International Association of Insurance Supervisors (IAIS), which is the international

body of insurance regulators, has laid down 28 core points as the principles for insurance.

There principles provide guidelines for cooperation among companies, safeguarding of the

rights of the insured, corporation among governance and operational aspects. These core

principles have not been effectively implemented here in Nepal.


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Abbreviations

ISA Insurance Supervisory Authority

AGM Annual General Meeting

IAIS International Association of Insurance Supervisor

ED Edition

Bibliography

New Business Age

The Boss Magazine

AnnaPurna Post

www.google.com

Hope page of Beema Samiti

www.answer.com

Annual Report of Beema Samiti

Website of IAIS

Website of IRDA

www.nrb.org.np

Documents

Insurance Final Report