Adding more insurers won’t be a wise decision: CEO Union Life

Union Life Insurance Company has announced IPO issue from July 8,2021. Union Life, which has been aggressively advancing since its inception, has managed to overtake some of the old companies in just two years of operation. With the arrival of 10 new companies at the same time, Union Life succeeded in establishing itself in the life insurance business of Nepal.

In this context, the edited excerpt of the interview of Arun Sapkota of with Chief Executive Officer of Union Life Manoj Kumar Lal Karna :


How are you preparing for the primary share issue?

It is going well. Prabhu Capital has been given the responsibility of issuance and management of securities. They are getting along well. For this, we have asked the branch heads and agents to be prepared.

When issuing IPO, the first concern of the investor is how much return the company can give in the future. How much return will the investor get in the coming year?

Companies are usually in the early stages while issuing IPO. Don’t think that this is a stage to expect some good return from the company right now. At this time, the investment, the growth, management team, the way the company is moving forward and what the company can do in the future remain main concern of the general investors. In this sense, Union Life is very good.

From the beginning, we have been moving aggressively. Our business has been doing well from the beginning. Naturally, if only 10 branches are opened at the beginning of the company, the cost will be less. The founder would have made a good profit from the interest of Rs 1.5 billion. But the company can not run on interest income only.

For that, basic infrastructure had to be built. A large number of branch offices had to be opened so that the company could do very well after 5/7 years. In this way, investors can estimate the company’s profit. In this sense, if the company’s profit is to be predicted, the company is very good and it can give very good returns in the future.

But looking at the business growth of the last one year, it seems that the pace of the company has slowed down. Is it because other companies have improved a lot or the company itself has slowed down?

No, no. The pace of the company has not slowed down. The speed is the same. Now all the companies in the market are seen slowed down. Covid19’s influence has been strong over the past year. This year too, the months of Baishakh and Jestha were completely closed. During this period, no one has been able to expand the business in the same way as other companies like us.

But as Covid’s influence gradually diminished, so did the air circulation. If we can move on as before, we will return to the old pace.

Not only life insurance companies but also the entire business has slowed down in the current turbulent times. What is your strategy for compensating for the losses during this period as the pendulum situation gradually subsides?

During this period, we trained the agents, branch managers, staff and agents through virtual media. No matter what strategy is used now, business does not come from virtual media activities. During the prohibitory order period, we have provided online services to our customers so that they would not have any problems. You also issued the policy from online. We have already opened 200 branch offices. Our strategy now is to move forward with how to get as many policies as possible from all those branch offices. I think as far as they are concerned, they have started bringing business, now there is no problem.

Some time ago, the Insurance Committee issued a guideline on institutional agents. Agents also strongly protested against this. How well can an institutional agent really play a role in business?

This does not affect the insurance companies in any way, good or bad. Because now the market is completely empty. Even if the license of the institutional agent is given in any way, it will not affect the existing agents.

Since this business is run through an agent, I opened an office and now customers come and insurance does not work. No one comes to insure by looking at the hoarding board of Union Life at Baneshwor Chowk. The insurance business will not work unless the agent goes to the insured 10 times and tells them about the insurance. Therefore, the absence of institutional agents does not have any effect.

In terms of investment diversification, insurance companies have not yet been able to see alternative except fixed deposits in banks. Now, in what areas should insurance companies invest so that the sum insured is safe and the return is high?

The wider the range of investment, the better for the company. In other countries, insurance companies tend to invest in apartments. But in the case of Nepal, those who invest in such areas are in trouble.

The kind of investment guideline that Beema Samiti has made is very accurate. Today,  eight percent is safe from investing in a bank. Investment can be made within the jurisdiction given by the committee. But it is not necessary to invest in such areas right now. Because you have to be safe while investing.

Is it possible for insurance companies to open subsidiaries and invest on their own?

It may be possible in future. Companies can open an investment company themselves and invest through it. Others may open up and we may invest. But in the current situation, investing in such areas is risky. What to do if you invest in that area and the area is trapped ? That’s why insurance companies look for a safe heaven. The safest investment area right now is the bank’s fixed deposit.

Beema Samiti has been issuing the regulations one after another. Whether it’s a single insurance policy or lending to an agent. How much will that affect the company’s business?

Being affected is not the biggest thing. The situation with which the single insurance policy was sold and the loan was issued yesterday was deplorable. Such an action would have a big impact on insurance companies tomorrow. On the one hand, if you take a single policy loan, it will have a big impact. The way Beema Samiti has done, it\ is commendable.

It is being heard that some more insurance companies including micro insurance are in pipeline to increase access to insurance. Saying that there are many insurance companies, how appropriate is it to issue new license?

In my opinion, the addition of new insurance companies will have an adverse impact on the total industries growth. New insurance companies can not sustain easily due to their excess operational cost. As we know that there is shortage of professional manpower in life insurance industry. In such situation, the new companies will be forced to hire manpower at high cost.

Where as the issue of micro insurance companies, we must welcome microinsurance companies. Because large scaled companies don’t pay attention to small policies. They do not sell a policy of  Rs.10 or 20 thousand sum assured. All kinds of companies should come to the market. Now one or two companies should be allowed to open and do business gradually. But if 5/10 companies are allowed to open at once, there will be chaos. On the other hand, the insurance ceiling of a microinsurance company should be microlevel. Microinsurance can happen not only in villages but also in the slum areas of cities.

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