- Tekraj Acharya
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The vision of a new government and a new Nepal is not only a political change but also a qualitative improvement in the living standards of the citizens. In this transformation, the insurance sector plays a dual role as a ‘financial safety net’ and as a ‘source of capital formation’. The need of the hour is to expand the scope of insurance from life insurance to agriculture, health, property and infrastructure.
Scope and multidimensional role of the insurance sector
The wider the scope of the insurance sector. The more resilient the national economy is.
Transfer of Financial Risk: Insurance covers physical damages caused by natural disasters (earthquakes, floods, landslides). This reduces the burden of the government’s reconstruction expenditure.
Protection of Agriculture and Entrepreneurship: In agricultural countries, crop and livestock insurance frees farmers from the fear of losing their investments. The security of small and medium enterprises (SMEs) encourages the youth to venture into the country.
Health Insurance and TAG_CLOSE_span_71Productivity: The effective implementation of the government health insurance program reduces the treatment cost of the citizens. This increases the efficiency and productivity of the people.
Investment in Infrastructure Development: is a ‘long-term capital’ premium collected by insurance companies. The government can mobilize it as a loan or share in the projects of national pride such as hydropower, expressways and airports.
Gross Domestic Product (GDP) and Contribution to the Economy
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Currently, Nepal’s insurance sector contributes around 3.5% to 4% of GDP. However, in advanced and emerging economies, the contribution ranges from 7% to 10%.
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- There is less need to rely on foreign countries for internal debt.
- Thousands of skilled workers get employment.
The presence of insurance companies in the capital market makes the market balanced and dynamic.TAG_OPEN_li_87
Attention and soil appropriate policy to be given by the state{
A ‘customized’ policy is needed according to Nepal’s geographical remoteness and social context:
Expansion of Scope of Compulsory Insurance: Fire and earthquake insurance should be made mandatory for large public buildings, factories and houses in dangerous areas, just like third party insurance of vehicles.
{{TAG_OPEN_span_65} Micro Insurance Revolution: To make insurance accessible to low-income groups, ‘insurance subsidy’ should be taken to the villages. It directly helps in poverty alleviation.
Digital Insurance Policy: Paperless insurance service should be legalized and a simple arrangement should be made to insure through mobile app and claim payment.
Self-sufficiency in reinsurance: In order to stop the flow of Nepali insurance premiums abroad, a policy should be taken to strengthen domestic reinsurance companies and conserve foreign currency reserves.
Concrete Plan and Action Line for New Nepal{
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The new government should give priority to the following points in the upcoming budget and plan:
Insurance education: To launch an awareness campaign at the local level to establish insurance as a social need, not just a business.
Insurance of government property: To reduce national risk by insuring physical infrastructures from Singha Durbar to government schools.
One Local Level, One Insurance Program: Each municipality should develop a model to allocate a certain budget for accident or health insurance of its citizens.
Conclusion: The Indispensable Basis of Prosperity
The expansion of the insurance sector makes ‘New Nepal’ financially secure and strong. The state should not only look at insurance as a source of revenue but also as a scientific method of risk management. The insurance sector is sure to significantly contribute to the country’s total GDP and take the country to a new height of prosperity if the policies suitable to the soil, technology-friendly services and people-oriented plans can be brought.
(The writer is the Sub-Provincial Chief of Himalayan Life Insurance, Sudurpaschim Province) )
