Kathmandu. The Nepal Insurance Authority (NIA) has concluded that despite the institutional expansion of micro insurance in Nepal, there are signs of deviation from the target. This conclusion is stated in the study and analysis report of Nepal’s micro insurance business published by the NEA.
According to the report, even after 3 years of the establishment of micro insurance, the access of micro insurance is more concentrated in accessible cities but it has not been able to reach the remote and extremely poor people. The committee has also concluded that policy and regulatory intervention is necessary for the overall improvement of micro insurance.
The report states, “Mandatory provision of branch expansion and portfolio diversification should be made mandatory within a certain time frame targeting the low-income, economically, socially and geographically backward classes and communities.” ’
The report concludes that microinsurance should be bundled with new technology such as mobile and digital wallets, expansion of partner agent model through microfinance institutions and cooperatives and digital system for improvement in claim payment.
The report recommends urgent reforms to expand access to micro insurance and improve micro insurance. The suggestions given in the main 4 points range from policy reforms to improvement in insurance services.
The recommendations included in the study report are as follows
Legal and Policy Reforms
According to the spirit of the Insurance Act, 2079, there should be a clear definition of ‘target group’ in the directive to target the poor and low-income group. To make it mandatory for micro insurers to expand their business in the specified provinces or in remote and disadvantaged areas and to adopt alternative distribution system where there are no physical branches.
Micro insurers working in remote areas will be given concession in risk-based capital and tax exemption will be given to make insurance premiums more accessible. Diversification of agriculture, health, accident and property insurance for low-income groups by setting minimum limits, not limited to motor third party insurance. In order to make the business sustainable, simple and economical, life and non-life insurance will be sold as a single bundle as per the international practice.
Institutional Good Governance Reforms
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The chief executive and senior managers will work from the central office and give priority to the expansion of business in the province where the central office is located. Mobilize human resources by prioritizing low-income groups, develop their capacity and formulate long-term action plans. To attract people who understand the local language and culture, to conduct training, public awareness and social responsibility programs to improve the quality of agents.
Technology and Delivery System Improvements
To delegate authority by entering into agreements with institutional agents to reduce costs and increase accessibility. To build an integrated distribution system by entering into agreements with microfinance, cooperatives and local bodies. Increase investment in digital infrastructure to simplify insurance services, premium payment, claim settlement and renewal through mobile banking, digital wallets and telecommunication channels. Establish funds at the municipal level and make policy arrangements to link them with micro-insurers for risk transfer.
actuarial diversification
To address the risks of climate change, develop insurance policies based on weather indices and link them with government grants. To bring an affordable health insurance scheme covering hospitalization, accident and maternity expenses for the remote and low-income groups. Formulate women-centred micro-insurance plans to cover women entrepreneurs’ safety and maternity health. Digital claim settlement, online tracking, toll-free helpline (complaint management) and terms and conditions of insurance in local language.
