A total of nine life insurance companies collected premium worth Rs 10.44 billion in the last fiscal year ended mid-July 2011, making a contribution of 1.3 percent to the GDP, according to the figures provided by the Insurance Board -- the insurance sector regulator.[break]
In the previous year, the income of the life insurance industry stood at Rs 8.83 billion.
The premium collection went up in the last fiscal year, as companies started tapping emerging markets of most of the hilly region in the country, which are officially known as rural.
Life insurance business, until some time ago, was totally urban-centric. But after markets in these areas started saturating, life insurance agents started looking for other avenues of growth, eventually landing in far-flung places of the country.
Nepal Life Insurance Company -- the country´s top life insurance company in terms of premium collection -- told Republica that a good portion of revenue has now started coming from often-neglected rural areas. The company, however, declined to provide the weight of income from rural areas in its total revenue collection.
National Life Insurance Company -- the third largest player in life insurance market in terms of premium collection -- also told Republica that emerging markets of hilly districts like Lamjung, Gorkha, Makwanpur, Jumla and Okhaldhunga have started generating “good business” for insurance companies, which was unseen three to five years ago.
“These places, like throughout the country, consist of families with members employed abroad,” Arjun Khadka, assistant manager of National Life Insurance, said. “These families, which have significant chunk of disposable income, have seen or heard of other policyholders getting bonuses at regular intervals and huge chunk of money after expiry of the policy. This has been one of the biggest pulling factors.”
Khadka told Republica rise in general awareness on the benefits of buying life insurance policies, mainly money-back arrangement for beneficiaries in case of sudden demise, has also contributed to the growth of the life insurance sector.
Despite growing awareness, only 1.54 million people have been insured in the country so far. This is only 5.8 percent of the country´s total population of 26.62 million.
The Insurance Board has said the number of life insurance policyholders will not go up in the country unless companies introduce microinsurance policies, which provides coverage of miniscule amount like Rs 10,000 or Rs 20,000.
Currently, few insurance companies have introduced such products for low-income group, under which individuals can pay an annual premium of as low as Rs 500.
“We hope more of such products would be introduced once the government officially kicks off microinsurance project later this year,” an official of the Insurance Board said, adding:
“This will definitely contribute to life insurance penetration rate in the country.”
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