A tough road ahead for the Life Insurers

Kathmandu: The chief executive officers of life insurance companies are tensed over the business target achievement at the moment. The third and fourth weeks of Asar (Mid June to Mid July), which accounts for more than 30 percent of the total business for the year, are very important for life insurance companies.

Asar is not only an opportunity for the company’s chief executive officer to prove his skillful management, but also a perfect opportunity for the marketing department staff and branch and sub-branch managers to perform well and prepare for promotion in upcoming FY.

Even the passive agents are now seen on field for new business during the last month of the FY. At the end of the FY 2077/78, the agents are working day and night to ensure the additional benefits to be received from the insurance companies for the coming FY by fulfilling the business target.

In the years before the Covid19 pandemic, agents were found busy in convincing their potential clients at the corner of the hotels and restaurants by offering drinks and meals. The agents used to arrange free tour package to the international tourist destinations including Thailand once a year from the amount of commission received from the premium paid by the life insured.

Agents receive an additional 18 percent additional benefit from insurance companies in addition to the 25 percent commission from the first premium collected in the first year.

As the growth of the life insurance business has slowed down since Baisakh (mid April) this year due to the Covid19 pandemic, insurers are struggling to achieve the expected business target. The decline in first premium income in Jestha (mid May to mid July) compared to Baiskah (mid April to mid May) also indicates the same.

Reasons for life insurers worries:

As in the previous FY, this time the regulatory authority Beema Samiti has not allowed the life insurers to do any mal practice. Since taking over the chairmanship of Beema Samiti, Mr. Surya Prasad Silwal has been issuing directives and circulars to close the loopholes of insurance industry. The regulatory body has implemented the provision that the loan can be disbursed only after three years of the issuance of the insurance policy. in the single insurance premium insurance scheme which has become a means for the life insurance company to earn large amount of premium in a short period of time. Earlier, insurance policy loans were issued on the second day of issuance of insurance policies. Similarly, Beema Samiti has also restricted the flow of loans from banks on the security of insurance policies.

Earlier, the insured used to get surrender value and policy loan facility in the policy as soon as the second year renewal premium is paid, but since last year, the trend of financing a new policy has been partially curtailed as Samiti has directed to flow the loan only after paying the third annual installment.

Another constraints for the life insurance is the implementation of new directives for the sales of Child Plan. It has implemented the provision of issuing insurance policy of equal sum assured for all children of a guardian(proposer) for Child Plan. The regulator has taken strict action against the representative incident of killing of children.

The annual money back policy, which pays back the premium at the rate of 5 percent per annum, has entered the life insurance companies of Nepal like a powder-boost beetles. The fact that this insurance plan is harmful has been confirmed by the poor bonus rate of some insurers.

Curb on Agents Loan:

Beema Samiti has also tightened its grip on the fact that insurance companies are providing unsecured loans and other facilities to the agents. Though it has withdrawn the directives to collect all the loans from the agents by mid-July under the institutional pressure of the agents but has not allowed the flow of new loans. When this was not the case, there was a tendency for the insurer to give a loan to the agents without any collateral and the agent to insure his or someone else’s life by inserting the loan amount.

BS has also prohibited the insurance companies from distributing promotional materials in advance without achieving the business goals of the agents. And on the last day of every month, the insurers are obliged to submit the details including the number of agents who are eligible for the incentive for that month. Prior to such a provision, insurers had a tendency to continue trading on the same date till the 10th of the next month.

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