Why micro insurance is still in a poor state in Nepal?

Kathmandu: Government of Nepal has aimed to provide insurance coverage to the thirty percent population. Micro insurance is supposed to be one of the effective means to spread the benefit of insurance to majority of population. Despite policy level efforts are made by Government of Nepal and regulatory authority Beema Samiti, the coverage of micro insurance is still in poor state.

According to Beema Samiti, insurers are reluctant to sale micro insurance product. The micro insurance products are a loss to the insurer. The budget statement of FY 2077/78 has mentioned the provision of 5 per cent micro insurance of insurer’s business portfolio.

As per the study of the Beema Samiti, except maintaining the  compulsory portfolio of micro insurance, insurers have not found interested for the effective implementation of the micro insurance product.

It is estimated that still 18.7 per cent of the total population is living under poverty line. Government of Nepal is hopeful that micro insurance products can benefit large size of population living under poverty line.

As per the study of Beema Samiti, the challenges of micro insurance are mentioned below:

  • Lack of Awareness.
  • Lack of technical knowledge about micro insurance
  • Poor Presence of Insurance Companies in rural area.
  • Supply derived market
  • Lack of Cost Effective Distribution
  • Limited area covered
  • Lack of trust on Insurance
  • Complicated claim process
  • Lack of knowledge among agency about micro insurance.
  • Lack of Institutional Infrastructure and Training
  • No subsidy for Micro Insurance
  • Poor competition among insurers etc.

Recommendation made by the study to meet the challenges of micro insurance:

  • Detail study of micro insurance is necessary for effective implementation.
  • Need based product design and implementation.
  • Simplifying the claim procedure of micro insurance
  • Prioritizing digitalization to minimize the cost of distribution of micro insurance
  • Mass awareness of micro insurance
  • Involving insurer, agency and employees in micro insurance related training
  • Coordination and cooperation among three level of government to run micro insurance.
  • Designing micro insurance product suitable for all sector.

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