Proposes NRB to forge a tie-up between banks and insurance companies
KATHMANDU, June 24: Beema Samiti - the insurance sector regulator - has proposed to the central bank to make needful arrangement for forging a tie-up between commercial banks and insurance companies to expand insurance services at the local level.
The request comes in the wake up the central bank's preparation to send at least one commercial bank in each local unit.
The Beema Samiti's proposal is aimed at expanding coverage and penetration of insurance in rural, where insurance companies are yet to reach, through the bank insurance model commonly known as bancassurance.
“The government has announced to have at least one commercial bank in each local unit through the budget speech for upcoming fiscal year. The Nepal Rastra Bank (NRB) is also planning to send at least one bank in every local unit. So, we have decided to propose the central bank for collaboration between insurance companies and commercial banks to expand insurance services in those units,” Beema Samiti Chairperson Chiranjibi Chapagain told Republica.
Through the budget speech for the Fiscal Year 2017/18, the then finance minister Krishna Bahadur Mahara had announced that the government would make needful arrangements to open a branch office of commercial bank in each local unit. In line with the government's announcement, the central bank and commercial banks are now preparing to get at least one commercial bank's branch in each 744 local unit.
“Our proposal to the central bank is that the branch offices of those banks, which are heading to the local unit as per the government policy, will also be a part of the insurance distribution channel through bancassurance model and sell insurance policy directly to their clients,” he added.
Through this model, banks will be able to mobilize deposits and get insurance commission from selling insurance policy, while insurance companies will be able to get business without having a direct presence or operation cost of finding clients to sell their policies.
“This model will help to expand coverage and penetration of insurance at the local level. People at the local level will get both insurance and banking services under one roof,” he added.
Though some banks say that they also provide bancassurance services, they are only working like an agent where they help in selling insurance products of insurance companies to their clients as part of an ancillary service. “Through collaboration between banks and insurance companies, we now want to allow banks to directly sell insurance product through their branch offices,” said Chapagain.
Executives of insurance companies say that the idea proposed by the regulatory body can help in taking insurance services to rural areas in a very cost-effective manner. “So far, some banks are working as agent of insurance companies. But, bancassurance model can be replicated at the local level which will help to enhance insurance coverage,” said Shivanath Pandey, the CEO of Surya Life Insurance Company Ltd. “However, this needs a collaboration and understanding between the Beema Samiti and the NRB to avoid any risks,” he added.