Kathmandu. Knowing that the micro insurance business will eventually lead to losses, why are traditional life insurers giving priority to the micro life insurance business?
At first glance, it may be that traditional insurers have a sense of corporate responsibility to serve the poor, even if they have suffered losses due to regulatory pressures. However, the insurer does not have to worry much about the sale of short life insurance. If a certain amount of the collected insurance premium is provided illegally as an incentive, the microfinance companies themselves take the initiative and ensure business.
Apart from this, the insurance premium collected from micro insurance also contributes to the income of insurance for new business. If the business data published by the authority or the insurer itself includes the business share of the micro insurance, the higher insurance premium income is seen. This helps the management to strengthen its position.
How long will the micro-insurance business last?
The data shows that traditional insurers are under severe pressure. Where the claim has almost wiped out the insurance premium. Although the proportion of micro insurance companies is good, it is doubtful that they will be sustainable due to the small size of the business. In particular, relying solely on remittance-based households and a lack of diversification in services has added to the risk.
According to experts, insurance companies need to strengthen their reserve funds, improve risk management and introduce new types of insurance plans. Increasing access to micro-insurance to low-income groups and using technology to streamline the claims process can bring stability to the sector.
Nepal’s life insurance sector is at a turning point. With a large portion of the collected premiums being spent on claim payments, there is a need for large companies, especially large companies, to increase their financial reserves. Micro insurance companies also need to broaden their business for long-term survival.
