Life Insurers are playing unfair game for Microinsurance


Kathmandu: Life insurance companies, which are under the pressure of business growth, have started unhealthy competition for micro-insurance business. In the face of unhealthy competition, they have started insuring at almost half of the ‘standard rate’. The top management of both life insurance and microfinance institutions are found actively involved in such activities.

Some time ago, when a microfinance company called for bids for micro-insurance of its members, it was offered around Rs.4 per thousand of Suma Assured for 1 year term including ADB and funeral expenses. While the same policy was sold by life insurance companies at more than Rs. 8 per thousand few years ago.

The rates mentioned by the companies on the website and for the general public seem to be the same.But there is unhealthy competition for institutional customer. Lately, insurance companies have been taking business by giving various financial temptations and gifts to the BODs, top management and employees of microinsurance.

There are 70 microfinance institutions in Nepal. Most microfinance companies offer micro-insurance to their members. Most of them have made it mandatory as it will cost only Rs. 500 to 600 per member.

While Indian life insurance companies are increasing the rates of micro insurance due to increasing re-insurance premium, Nepali insurance companies are competing unhealthily to cut the rates. In the re-insurance, the companies have tightened the underwriting and the Nepali insurance companies may also face issues in near future.
In re-insurance treaty, if the companies receive more than a certain numbers of claims, conditions are set for non-payment of claims. In this case, insurance companies will be exposed to financial risk.

Few months ago, the Insurance Board of Nepal had to intervene in the non-tariff section of non-life insurance industry and fix the rate for it. If life insurance companies move forward in this regard, the Board may be compelled to fix the minimum rate of micro-insurance products sold by life insurance companies.

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