KATHMANDU, April 8: The business of life insurance companies are found to have boomed amid declining interest rates on the banks’ fixed deposits.
According to the Nepal Insurance Authority (NIA), life insurance companies collected premiums on fixed deposit insurance policies 2.29 times more as of mid-March this year compared to the same period in the previous fiscal year. The amount stood at Rs 4.24 billion, up from Rs 1.28 billion in the corresponding period of last fiscal year.
Revised interest rate corridor system introduced
A fixed deposit life insurance incorporates the features of a fixed deposit with a guaranteed return offering financial security, while covering the protection of life insurance.
According to insurers, individuals might have been attracted to this segment of insurance citing a massive fall in interest rates of fixed deposits offered by banks. Citing the excess liquidity with them, banks have reduced the interest rate on fixed deposits to as low as 5.5 percent per annum.
Overall, the life insurers earned more than Rs 100 billion in premiums. The premium collections from new insurance policies surged 7.2 percent in the first eight months of the current fiscal year.