Kathmandu. Recent data from the Nepal Insurance Authority (NIA) has revealed a “statistical contradiction” between the two most distinct regions of Nepal: Madhesh Province and Karnali Province. Madhes Province, which has the highest population in terms of access to insurance, is far behind in comparison to Karnali Province with the lowest population density.
Contradiction of Madhesh Province
Madhesh Province boasts the country’s most advanced road network, a high density of financial institutions, and a steady flow of remittance income. Despite these benefits, it currently has the lowest insurance penetration in the country at around 10%.
Many Madhesis still prefer Indian insurance providers like LIC instead of domestic life insurers. In addition, cooperatives have a major impact on the local economy. Cooperatives have savings and loan facilities and do not bear financial risk. The gap in financial literacy has put a large part of the country’s population at risk of economic shocks.
Another reason for the limited access to insurance in Madhes is the negative perception of insurance among the Muslim population, which constitutes 12 percent of the population. In the Muslim community, it is considered a sin to earn interest on investments. That’s why they don’t want to invest in savings or insurance, they don’t want to get the returns.
The diagonal paradox
Known for its geographical challenges and poor Human Development Index, Madhesh Province has surpassed the province with insurance penetration of 31%. This success is not a coincidence, but the result of a targeted intervention.
The high penetration in Karnali is mainly attributed to government-funded micro-insurance schemes and initiatives of the state and local governments. Accident insurance or crop insurance has taken the “safety net” of insurance to remote areas. Crop insurance scheme based on weather index was also implemented in the province as a master plan. In Madhesh Province, such projects have not been implemented by the federal government, provincial or local government.
“hypercentralization” to mirage
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Although Bagmati Province’s astonishing 160% insurance penetration exceeds the national average, this figure needs to be taken seriously. This statistic is a byproduct of the extreme centralization of trade, business, and opportunities from every structure of the state. Compulsory foreign employment insurance policies for thousands of migrant workers are issued from Kathmandu on a daily basis. Many corporate and micro insurance policies covering nationwide operations have been issued from the Kathmandu-centric headquarters, tarnishing the real picture of the province’s real insurance cover.
A one-size-fits-all mentality will no longer be enough to address the one-sided growth of Nepal’s insurance sector. For Madhes, the focus should be on competing with cross-border services and integrating insurance education into a cooperative-led economy. For the rest of the country, the lesson from Karnali is clear. When insurance solutions are introduced to address local needs, their ownership also increases.
