Unit 7
Insurance Industry in Nepal
Insurance Policy of Government of Nepal
The health system in Nepal is Characterized by a wide network of health facilities and community workers and volunteers. Nepal's Interim Constitution 2007 addresses heath as a fundamental right, stating that every citizen has the right to basic health services free of cost. But the reality is a far cry. Only 61.8% of the Nepalese households have access to health facilities within 30 min, with significant urban(85.90%) and rural (59%) discrepancy. In order to ensure people's right to basic healtn service, a new health policy will be framed and implemented. National health insurance program will be launched for people's easy access to medical service and treatment. National Health Insurance policy came out in 2013. The program has aimed to increase the access of health services to the poor and the marginalized, and people in hard to reach areas of countey though challenges remain with financing.
Social Health Security Program
(Health Insurance)
The Social Health Security Program (SHSP) is a social protection program of the Government of Nepal that aims to enable its citizens to access quality health care services without placing a financial burden on them. It is a family-based health insurance scheme that aims to address barriers in health service utilization and ensure equity and access of poor and disadvantaged groups as a means to achieve Universal Health Coverage. A semi-autonomous body Social Health Security Development Committee has been established for the implementation of SHSP. SHSP was initially rolled out in three districts (Kailali, Baglung and Illam) in 2016, and is gradually being expanded to other districts.
Objective:
➢ To ensure access to quality health service (equity & equality).
➢ To protect from financial hardship and reduce out-of pocket payments.
Need for Social Health Security (Health Insurance) Program
Social Health Security (Health Insurance) Program is needed to improve the health situation of the people of Nepal. Specifically, this program is needed to;
1. increase accessibility to, and equity in, the provision of health care services by removing financial barriers to use of health care services, focusing on the poor and marginalized;
2. promote pre-payment and risk pooling mechanisms to mobilize financial resources for health in an equitable manner;
3. encourage output-oriented expenditure in the health sector and improve the effectiveness, efficiency, accountability and quality of care in the delivery of health care services;
4. strengthen health systems in an integrated manner; and
5. improve the health seeking behaviour of the public through clear entitlement procedures, awareness raising and behaviour change communication.
Key Features SHSP
Following are the key features of Social Health Security Program:
➤ It is a voluntary program based on family contributions.
➤ Families of up to five members have to contribute NPR 2,500 per year and NPR 425 for each additional member.
➤ It provides subsidized rates for families whose members have a poverty identity card.
➤ Enrollment continues throughout the year in implemented districts.
➤ Insures have to renew their membership through annual contributions.
➤ Benefits of up to NPR 50,000 per year are available for families of up to five members with an additional NPR 10,000 covered for each additional member. The maximum amount available per year is NPR 100,000.
➤ Insures have to choose their first service point but can also access services from government PHCCS and hospitals and listed private hospitals.
➤ Insures can access specialized services elsewhere that are not available at the first service point on production of a referral slip from their first contact point.
➤ It is cash-less system for members seeking health services. Upon presenting their SHSP membership ID card at a health facility, members are able to receive the health services and drugs covered by the benefit package without having to pay at any stage.
➤ For emergencies, insurees can access services from any service point without a referral slip.
➤ The program is IT-based with enrollment assistants using smart phones.
➤ Purchaser-Provider Split: SHSDC acts as the service purchaser while government and listed private hospitals provide the services.
➤ 928 types of medicines (70 Free essential drugs +25 ayurvedic drugs+833 others) were included in the benefit package in F 2073/74.
➤ Premium amounts are subsidized by the Government at specified rates for the extremely poor, poor or vulnerable. Such concessions are based on the identification card issued by Ministry of Poverty Alleviation and Cooperatives. A family identified as impoverished, poor and get 100%, 75% and 50% discounts respectively.
Insurance Pool of Nepal
Insurane Pool, Nepal herein after referred to as "Pool", was established pursuant to Sub-Rule 1 of rule 3 of "Akasmik Beema Kosh Sanchalan Niyamawali, 2060" enacted by The Government of Nepal, having exercised the power conferred by Section 2 of the "Prasasakia Karyabidhi Nimayat Garne Ain, 2013. Insurance pool of Nepal was established in 2003 with 50 percent equity participation of the Nepal government and the rest of Nepali insurance companies, mainly non-life companies, to cover damage caused by terrorism. Insurance Pool, Nepal has been established with an objective to make arrangement of reinsurance for bearing the claim of risk groups Riot, Strike, Damage, Malicious Damage, Sabotage and Terrorism (RSDMDST) supposed to be fallen within the geographical territory under a non-life insurance policy issued in Nepal and to make
payment of other insurance risks relating to the same. Nepal Re-Insurance Company Limited (Nepal Re.), the successor of insurance Pool that was set up in 2003 with the aim to cover damages caused by the
terrorism, was incorporated on 7 November 2014, under the Companies Act, 2006 of Nepal in accordance to the decision of Council of Ministers (Nepal) dated 7th August, 2014 to convert the Insurance Pool, Nepal into Reinsurance Company.
Vision:
1. To provide quality reinsurance service to our valuable clients
2. To be the professional reinsurer in Asia.
Mission:
1. To become one of the esteemed re-insurer in the region.
2. To be customer-focused and committed to growth profitability and satisfactory returns to our stakeholders.
Emerging Issues (Trends) in Insurance Industry
Digitization — the Way Forward in the industry:
➢Online policies picking up in a big way — Term policies are becoming popular.
➢Web Aggregators use online space, providing comparable quotes and
generating leads for insurers and brokers.
➢Usage of Tablets for demonstrating product details to customers with ease
(with various returns and charge structures etc.).
➢Proposal Form Filling has become a less painful exercise and anywhere any
time insurance through mobile applications has also become popular.
➢Comparing products of various Insurers has become easy and faster. Premium
payments made online —Instant Payment through online portals have
revolutionized the premium process.
Evolution of Alternate channels of Distribution:
➢Individual agency channel was the only mode of distribution in insurance days.
➢Agencies system introduced framing regulations allowing Corporate form
ofAgencies (e.g. Bancassurance)
➢This was followed by the Insurance Broking model which allowed the entity to
be a distributor for multiple insurers.
➢Direct Marketing is a popular method of reaching customers and generating
leads or selling through a telephone.
➢Web Aggregators are online operators who provide choice of products to
customers online. Insurance Marketing Firms — insurance brokers + ability to
sell other financial products like mutual fund — financial powerhouse.
➢Common Service Centers -- an attempt to take insurance to the remote areas
throughVillage Level Entrepreneurs — potential to focus on micro insurance.
Evolution of Technology for Customer Acquisition, Retention and Managing Data :
➢Increased use of software as a Service (SAS)
➢Increased interest in Business Process Management in the Cloud (Cloud
computing as a new technology application in life insurance)
➢Leveraging big data and analytics based solutions using service providers
Product innovation:
➢With customers asking for increased levels of innovation is one of the best
strategies for companies to increase their market share. As companies can
maintain reduced unit costs, offer improved services, commissions and generate
higher sales.
Claims management:
➢Claims is crucial for performance in the industry. Delay in claim settlement
generally results in higher claims cost.
➢Some insurers have managed to limit the claims ratio by deploying in-house
team of surveyors, engineers etc., stringent and sophisticated underwriting
policy, geographical focus in certain segments and higher reinsurance cession
especially for more complex lines of business.
Challenges of Insurance Industry in Nepal
Increased Competition:
Liberalization will create acute competition in the insurance market. Fierce competition to increase volume and market share will continue as more and more players join the race for the greater Nepalese insurance.
Customer Relationship Management:
Customer behavior will be influenced by environmental factors as well as intrinsic
personal aspirations. The environmental factors are socio economic and demographic factors, inputs of insurance advisors, the company's efforts to manage customer satisfaction and experience.
Distribution of Products:
Segmentation of markets, selling segment oriented products, focusing on fuller satisfaction of customer's aspiration misstates multiple distribution networks.
While the traditional channel of tied up agents or advisors would be the most important distribution channel, insurers should innovate and find new methods of delivering products to customers. E.g. Bancassurance.
Risk Management:
With the environment changes in the economic scenario of the country the risk
landscape has undergone significant changes. With the opening up of economy
and the entry of MNC in almost all sectors, there has been a surge in the income
levels, especially in the middle class. The globalization has also resulted in cultural exchanges more than in the past.
Untapped Market Segments:
It is important to increase the customer base in semi-urban and rural areas which offer a huge potential. The fact that a major chunk of business for LIC comes from these areas stand as a testimony to this indisputable fact. There are difficulties in approaching this segment which will take us back issues of
customer education.
Relationship Management:
The relationship management of insurance companies is mainly trapped by individuals as well as corporate agent. The relationship of the clients should be ever maintained, but the mistakes of the agent are the major causes in the relationship management.
Human Resource Management:
The insurance market is now filled with players, who are mature, globally prominent and big players in the Trans-Nationally competitive global competitive insurance market. Each of them has ability to influence the market. The human resource competency will be another big challenge.
Managing the Regulatory Authority:
As the competition acute, the customer becomes more vulnerable to the vagaries on market environment. The regulators have a duel responsibility. They has to ensure that the insure adhere to sound insurance principles and practices as well as maintain adequate financial resources to meet their liabilities.
Buyer issues:
Generally very low awareness of the value of insurance Compulsory insurance often seen as a burden.
Capital market issues:
-Market small or nascent
-Rather low capital base and solvency margins
-After adjustments on the asset side, many companies are insolvent
Insurance market issues:
- Small and highly fragmented market -in terms of insurance premium
- Lack of awareness of importance of reserving
- Lack of data and lack of awareness of value of data
- Competition on prices should be replaced with competition on quality of service
Claims payment standards:
- Low claims payment capacity, particularly for smaller companies
- Long delays in settling claims - which undermines consumer confidence and
results in low insurance penetration (trust)
- Absence of a regulatory process to ensure good claim settlement standards.
Oppurtunities of Insurance Industry in Nepal
Increase Customer’s Awareness:
It is necessary to promote more awareness among public about insurance. Because
the level of insurance penetration is very low. Customer needs a good deal of customer education in which the insures have to invest a lot of their resources in terms of time, effort, infrastructure and money. Though a known ledged customer is a challenge for the company to convince and sell a product to him, the brighter side is that his awareness had brought him to the threshold of insurance.
Multiple Channels of Distribution:
Distribution being a key determinant of success for insurance companies. Because
at more member of distribution channels the insures have a large database of their
disposal. By data mining prospects can be accurately together for business. Linking
insurance with allied finance products like housing loan, mutual fund investment in
companies, banks credit cards etc. are the new channels for life insurance. It is
definite that the new channels will help the insurance companies to reach out
farther, wider and deeper.
Professionalism in Insurance Marketing:
There are quality insurance advisors in this field due to the passing of IRDA bill. To
obtain an agency license training and written test are necessary. Many educated youth, retired officials are taking insurance agency as a career. They guide the customers so that they can select products according to their need, rather than to force selling.
Huge Untapped Market:
There is a lot of untapped market in the country. This gives space for all players to
grow and expand the insurance industry. Middle class people are having more awareness than the lower class and high class people. They want to provide money
for the education and marriage of their children and also to meet their old age needs.
So there is market expansion for pension plans and child career plans.
Threat to Health and Life:
People die due to natural calamities and terrorism unexpectedly. The environmental
pollution affects the health of mankind. In cities people got employment in industries like Cement factory, coal industry etc. Due to heavy work and occupational stress they get diseases. Hence there is a growing need for these people to go for different kinds of insurance.
Crops and Cattle Insurance in Nepal
➢The Crops and livestock Insurance Directives, 2013 was introduced by the
Insurance Board with the focus on crops (paddy, vegetables, potatoes, apples and
banana among others), livestock and poultry, making it mandatory for all the non life insurance companies to come up with insurance policies for these products.
➢Agriculture and livestock insurance was launched in January 2013 which facilitated the insurers to sell vegetable, fruits, cereals and livestock insurance products.
➢Agriculture and livestock insurance would further receive a fillip as there was increased awareness about the product.
➢Crops insurance covers the production cost that a farmer invests till the crops or
horticulture is harvested while livestock and poultry insurance were launched to provide coverage Of domesticated animals and birds like buffalos, cows, goats, sheep, pigs, chickens and others. Under the agriculture and livestock insurance framework, insurers and customers will bear 90 per cent and 10 per cent of the actual loss respectively.
➢Though the government has announced 75 per cent subsidy as agriculture insurance to farmers, only a handful have benefitted. Still farmers in large numbers belonging to remote areas are unaware of insurance policies.
0 Comments