“If things go according to plan, we may launch the program as early as Sunday,” Binod Aryal, executive director of the IB, the insurance sector regulator, told Republica.[break]
Once the program is introduced, non-life insurance companies will have to launch products on livestock, health, personal accident and self-employment, while life insurance companies will have to introduce endowment and term-life policies in the market. The IB has given these insurers a target of generating at least three percent of the premium income through sales of these policies in the first year of the launch of the program.
Most of the country´s insurers are currently planning to mobilize microfinance institutions and cooperatives to sell insurance policies as most of these institutions have created effective networks in many rural parts of the country.
Apart from these, local clubs, NGOs, financial intermediaries and social organizations, like guthis, that have obtained license of insurance agent, can also work as agents and sell policies.
But unlike other agents in the insurance sector, microinsurance agents will have additional responsibilities of assessing loss liability and recommending compensation amount that insurance companies need to provide to policy holders.
The insurance companies will have to settle claims based on recommendation made by the agents, says the draft of a directive on Microfinance Promotion and Operation. Companies should not take more than 15 days to release payment, adds the draft directive.
“Although it is not a general practice to recruit agents as surveyors, we had to resort to this measure as deployment of a licensed surveyor to assess the damage would have added financial burden on companies making the program expensive,” Aryal said. “And since companies hold the right to reject the recommendation made by the agents, we don´t think this will create much problem.”
In case, the findings of the agents are unacceptable to companies, they can inform the client and conduct the loss liability evaluation survey again, the draft says.
But if the case lingers, a microinsurance pool - that insures risks of insurance companies selling microinsurance policies - can intervene and give a verdict.
The pool will be managed by a five-member committee headed by an official of the IB. The committee will also comprise three chief executives of different insurance companies and an individual selected by the IB, who will work as the manager of the pool.
It will initially have a fund of Rs 50 million, of which Rs 25 million will be contributed by the IB and the by 17 non-life insurance companies. If the need arises, the Board may also ask life insurance companies to make necessary contribution, says the draft.
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