Life Insurance Industry Has Lucrative Growth Amid Intense Competition

Kathmandu: Four years ago, the Beema Samiti had allowed 10 new life insurance companies.  Samiti’s decision was widely criticized that domestic market can not support 19 life insurance companies. But contrary to that most life insurance companies have lucrative business growth.

During this period, the new 10 companies have managed to earn a total of Rs.51.48 billion insurance premiums. This is the total premium earned by new life insurers.

At the time the Samiti issued license for new life insurance companies, insurance penetration was only 7 percent.  The life insurance companies operating were concentrated in the city.  According to insurance expert Mr. Bhoj Raj Sharma, Nepal was a ‘virgin market’ for life insurance.  Sharma says that new insurance companies have been able to expand their business easily as demand always creates supply in the market.

At present, access to insurance has increased from 7 percent to 27 percent.  Experts say that there will be no though challenge in the operation of the companies as there is still room for market expansion. Mr. Sharma estimates that companies could improve double digits for some time to come.

In one year alone, total premium income has increased by 112 percent.  The market expansion of Union Life has been most aggressive during this period.  Of the 10 new companies, Union Life alone has a market share of more than 26 percent.  The company has managed to earn a total of Rs 13.81 billion premium since its inception.

Similarly, Citizen Life Insurance Company is in the second place with Rs 6.2 billion total premium earning.  Among the new companies, Citizen has a market share of 11.70 percent.  Reliable Nepal Life Insurance Company, which is at the third position, has earned a total premium of Rs 5.71 billion.  The company also has a market share of 11.11 percent.

Jyoti Life Insurance Company, which is in the fourth position, has earned a total premium of Rs 5.57 billion.  The company has a market share of 10.64 percent. In the fifth position IME Life has managed to earn a total premium of Rs 4.75 billion.  It’s market share is 9.24 percent.

Similarly, Reliance Life has earned Rs 4.14 billion, Sun Nepal Life Rs 3.85 billion, Prabhu Life Rs 2.91 billion and Sanima Life Rs 2.85 billion.  The youngest life insurance company Mahalakshmi Life has managed to earn a total premium of Rs 1.91 billion.

When new insurance companies came on the market, even the old ones were forced to revamp their marketing strategies to internal practice. In order to sustain in the market, the BOD of the news insurers have given priority to the competent chief executives and managers.

Newly arrived insurance companies also began to appear aggressively in market expansion.  However, insurance expert Sharma says that new insurance companies look better than some old life insurance companies. This has led to the development of business practice in the insurance sector, he admits.

As companies expand their business, they are strengthening their presence in remote parts of the country. Rural cooperatives are also acting as life insurance agents.  Nepal’s economic growth rate has had a similar effect on business expansion.

The budget for the coming fiscal year also aims to increase access to insurance to 35 percent.  Even if the target set by the government is met, the insurance business of insurance companies will be further expanded.

Insurance expert Sharma has analyzed that insurance companies’ merger is not necessary now as the market is expanding.

For some time now, the company seems to be able to expand its business.  Experts say that once the market is in place, the number of companies should be reduced.  You have to wait at least 5 years for this.  As the Samiti has introduced the concept of Risk Base Capital to the companies, the companies can increase their capital in proportion to their business expansion.

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