Kathmandu. The insurance service, which was formally started in 2004 BS with the establishment of Nepal Freight and Insurance Company, has now reached an important turning point in the financial history of Nepal. The government’s Financial Sector Development Strategy for the next five years (2082). 83–2086. 87) The insurance sector has been presented as the pillar of economic prosperity. However, in the backdrop of the poor implementation of past strategies and the slow pace of the Insurance Authority’s own five-year plan, questions have been raised in the insurance market about how effective this new document will be.
First Financial Sector Development Strategy 2073. 74–2077. 78 has certainly laid the foundation for some structural reforms in the insurance sector. The reduction from 19 life and 20 non-life insurance companies to 14-14 in both the sectors is considered to be the main achievement of the company. The Insurance Act, 2079 and Insurance Rules, 2081 have been issued to make the insurance sector more timely.
Statistics show that the expansion of foreign employment term life insurance has reached 48.33 percent of the population by mid-July 2082. However, while statistics show that access has increased, there is still a huge gap between actual insurance literacy and transparency in claim payments.
Contribution to GDP
The contribution of the insurance sector to Nepal’s economy is still low. Fiscal Year 2081. The insurance sector’s contribution to the Gross Domestic Product (GDP) is only 3.72 percent as of mid-July 2018.
A total of 1,01,51,484 insurance policies have been issued till mid-July 2082. Although the number of branches of the insurance company has reached 2,994, there is still a lack of physical presence in the rural areas.
Risk of becoming a paper horse
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Although mentioned in the strategy, some important funds are still not operating effectively. A strategy has been put forward to establish an Insurance Development Fund for the development of the insurance sector. However, in the absence of a clear roadmap for its functioning and implementation, there is a fear that it will be limited to paper only.
Apart from this, the issue of establishing the Insured Welfare Protection Fund for the protection of the rights of the insured has been announced and included in the strategy for a long time and has not been implemented in the Insurance Act lately. The insurance claim payment process is still cumbersome and opaque.
Eight decades later, the level of awareness is still low and the general public does not have full confidence that insurance will provide compensation.
Game Changer Aspects of New Strategy
The current strategy has put forward some points to make the insurance sector modern and technology-friendly. If implemented, it could prove to be a milestone for the sector.
There is a plan to make insurance mandatory for agriculture and infrastructure loans. The strategy is to bring the immovable property of the government and citizens under the ambit of insurance to provide protection against natural calamities.
The goal is to promote instruments such as micro-insurance and green bonds based on seasonal indices. A strategy has been set to make claim payment simple, easy and insurance-friendly through the maximum use of technology.
Ambitious targets for the next 5 years
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Strategy 2086. Some clear quantitative targets have been set for up to 87. The plan aims to provide insurance to 60 percent of the total population and to include insurance in the educational curriculum at various levels for financial literacy. Likewise, the contribution of the financial sector to the Gross Domestic Product (GDP) will be increased to 7.5 percent.
This strategy is an excellent document in itself. But its success depends not on the words it carries, but on its honest execution. The Insurance Authority needs to learn from the mistakes of the past and pay attention to the welfare of the insured, simplification of claim payment and real literacy. If this strategy is followed by compulsory insurance and technology-based services, it can be a real game changer for the insurance sector. Otherwise, it runs the risk of being left in the drawer as a beautiful book.
