Panel to define micro-insurance products

REPUBLICA

KATHMANDU, Feb 19: Insurance Board (IB) has formed a taskforce to define and identify ways for implementing micro-insurance products that target rural and low income groups, aiming to widen and deepen insurance services in the country.

The taskforce was formed after insurance companies refused to implement the board´s instruction of adding at least one micro-insurance products in their products portfolio.

The board about a month had issued the directives, asking both the life and general insurance companies to unveil products to tap business potentials of the groups that have so far remained out of the insurance business net.

However, top brass of the insurance companies challenged the idea, arguing that it will raise their cost of operation and also make control of fraud claims difficult, among others.

They had also opined that micro-insurance was a vague term and needs to be defined in Nepal´s context, identifying the extent of premium amount for a product to be termed a micro-insurance product.

“Instead of dictating the implementation procedures, we have allowed the insurers themselves to define micro-insurance and identify the products they could safely execute to start with,” said Shekhar Kumar Aryal, spokesperson of IB.

He told Republica that the task force, formed under the leadership of Deep Prakash Pandey, president of Nepal Insurers´ Association (NIA), will suggest upper limit of premium for the companies to define that products charging premium less than that will be micro-insurance.

The taskforce will also identify sectors and target groups wherein the companies can launch micro-insurance products. The taskforce has also been asked to suggest the delivery channel and claim settlement procedures so that due insurance obligations could be fulfilled effectively.

Sources at the IB said the board decided to ask the insurers to suggest workable mechanism mainly because the insurance companies, which are largely concentrating toward catering the needs of the corporate and urban well-off clients, did not like the idea of taking steps to serve the under-served groups.

“Besides, detail study on the matter will also help them identify area to focus on and design micro-insurance products accordingly,” said the source.

Micro-insurance products are schemes of smaller sizes, in which premium are set at lower rate so that even the rural and low income group that cannot afford regular insurance products could buy the social security cover.

Life insurance coverage of Rs 50,000 or less with shorter maturity period and smaller health and accident insurance plans are popular micro-insurance schemes of other South Asian countries.

Agricultural, livestock, retail shops and smaller businesses insurance are popular schemes that have drawn rural populace towards insurance business in the region.

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