Insurance landscape in Nepal

Background: Nepal's journey with insurance started in the 1950s with formal companies, but the concept of shared risk and collective protection through pooled funds dates back much further. Traditional 'dharma samiti' groups provided financial support during hardship, paving the way for the formal industry. 

Following democratic reforms and economic liberalization in the 1990s, the insurance sector saw significant growth. Local private players and foreign investors entered the market, leading to the establishment of new companies, particularly after the Insurance Act of 1992. 

Insurance Companies in Nepal  

• Life Insurance: Providing a range of term life and endowment products, life insurance companies focus on delivering financial security to families in the face of unexpected life events and for retirement planning. Following recent consolidations within the industry, Nepal currently has 14 operating insurance companies. 

• Non-life Insurance: Non-life insurance companies offer protection against a broad spectrum of risks, including property damage, vehicle accidents, business interruptions, and health emergencies. The non-life insurance sector too has undergone consolidation in recent years, leading to the existence of 14 non-life insurance companies. 

• Microinsurance: In an effort to extend insurance coverage to the uninsured population, Beema Pradhikaran has granted licenses to 7 microinsurance companies. These companies have just started operations and offering insurance products.  

• Reinsurance:  Two reinsurance companies operate in Nepal, serving as a risk-sharing mechanism for primary insurance companies. Reinsurance helps to distribute and manage risks across the industry.  

Insurance Coverage & Premium Collection  

The insurance regulator regularly provides the details of insurance coverage. The regulator claims 39% of the population enjoys life insurance coverage. Yet, Nepal Rastra Bank's survey reveals a lower usage rate - only 30.2% of adults actively use insurance. Among them, 26.8% of the adults have some form of life insurance while only 8.5% of the adults have some form of non-life coverage.  

Moving Forward 

Moving forward, a top priority for the insurance sector should be to expand the coverage of insurance. This can be achieved by focusing on several key areas, with a particular emphasis on raising awareness, digitizing processes, and building trust among the population. The persistently low insurance penetration and the prevalent tendency to opt for only mandatory coverage underscore the need for proactive measures. 

In this regard, eSewa, a pioneer in digital financial services, has been collaborating with the insurance sector to digitize various processes, making the purchase of insurance policies more convenient for consumers. Collective efforts from all stakeholders – are crucial in building a Nepal where insurance truly serves its purpose.