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Second Individual Assignment Risk, Risk management and Insurance How did you find the current insurance marketing system in Nepal? Is it a healthy competition going on? What are the areas where you see to explore Life and Non-life insurance market? Now a days is of marketing, what would be your suggestion to the current market insurance CEO for the development of insurance market? First of all, Insurance market if to be defined in context of Nepal then it has a very high potential for growth.
In Nepal, there are only 25 insurance companies including 6 life and 9 non-life. These insurance companies have already sold out more than 1. 5 million life-policies and 400,000 non-life policies. That is accounted as only 5 per cent of the total population in the country buying insurance policies even though 30 percent know about it. Still, a large number of people are not covered by scheme of insurance. But still insurance industry is a fastest growing industry of Nepal.
The annual growth of insurance market in Nepal is 10-15 percent whereas it is 25 to 30 percent in countries like Sardinia and India. But after the liberalizing of 2046, the overspent has taken a number of initiations in the area of financial sector reforms including insurance. It is because insurance is also an important part of the overall financial system. A lot of insurance companies are being added due to which there has been an increased competition among the individual policy holders and market players, agents and surveyors due to which the insurance market is imperfect.
Besides that there are numerous schemes and products provided by the insurance companies at various rates ranging from 7 to More people are attracted towards insurance because of the coverage it gives for life and health benefits. What customers mainly seek is the variety in products that best suits their diverse needs, so this offers insurance companies to extend their area of operation.
There are a lot of insurance companies but only few have been able to innovate in the market by good expertise and better knowledge and also through the modern sources such as telemarketing and internet. Despite of these facts there is a growing competition among the existing insurance companies in Nepal. The insurance companies pirating either life or non-life or both services in Nepal have capacities of handling risks and larger handouts on various bases.
One of the outstanding companies in insurance market is “Prime Life” that gives covers insurance for life, the aggressive marketing campaigns launched by the company has not Just been beneficial for the overall insurance market but also but also disseminated a clear example about the in insurance but still because of the poor advertising skills the insurance companies are unable to attract more customers. Unlike prime life which came up with the naming “sunny WA teen” which had three basic features of savings with returns, financial security for unforeseen events and tax benefits.
Which helped the company to attract more clients and as well as gain their goodwill. The NIL Insurance Company topped the list of policy issuance, while the Shirks Insurance collected the most premiums in the last fiscal year 2012-13. According to the Insurance Board of Nepal , the company issued 1 59,1 56 policies in the segment last fiscal year, which is the highest among non-life insurance companies. Shirker, on the other hand, elected premiums worth RSI 922. 97 million, which is the highest among insurers.
Healthy competition is of course a part of an ethics but still the companies that are well off in market have meaner to attract the best human resources in Nepal. Better resources helps to make company successful and the other companies lack behind. So, boarder knowledge, more experience and better capacity is required to sustain a good position in market. There are a few companies that have dominance over the rest but the services and the products being provided by different insurance impasses is moreover the same. Only the rates and the marketing and corporate governance is what makes a difference.
In terms of area of exposure of both life and non life insurance, there could be possibility of introducing new and creative products in life insurance with high rate of returns, attractive features etc and in non life also. In life insurance, the major challenge is to introduce relevant products that reflect the needs and conditions of targeted regions, and also to maintain financial strength, The key drivers of insurance growth in a country are typically agronomic factors, regulatory factors and demographics, as well as the current maturity of the country’s insurance sector.
It therefore becomes a challenge to identify product trends that would apply to the region as a whole. Hence, life insurance products must be recognized on the basis of some of the key economic, demographic and political changes that are shaping the life insurance sector in various regions of Nepal and the suggestion for products. But the main determinants are the low interest rates, aging populations and rising middle-class populations are among the three main drivers of product trends.
In context of Nepal, whereas in the case of non life insurance also, especially the rural market of Nepal gives tremendous opportunity to insurance market. There is a scope for micro insurance in Nepal which can be used to protect the poor people of the country. Though the micro institutions have been providing with credit to the people but that is not enough. Since our country is an agriculture country, we have to protect people who are dependent in agriculture, that could be done by diversifying people from rural areas. People from rural areas have been mainly dependent upon three sub sectors-farming, animal husbandry and forestry.
So designing appropriate insurance programmer in context to it can help in broadening the market size and increase insurance awareness. Also as we know, Nepal has witnessed several major natural disasters in the last two centuries. A number of those highlighted are the 1833 and 1934 earthquakes, the Kiosk floods and the GOLF events in the higher Himalayas. Apart from these major disasters, Nepal also faces frequent landslides during areas. The combination of these multiple hazard events poses a severe threat to national development processes.
The national government is committed to take the necessary measures to avert these threats in the development process it has exposure to geophysical hazards and diversity and is prone to varied risks. Though the catastrophes like landslides, earthquake, flood occur in small part of the country only the damages are devastating and due to unplanned management there are chances of more occurrence of losses, but risks are to be taken. The risks must be managed well so as to build the business with sustainable profit Extensive marketing techniques and tools are being used for the promotion of the insurance industry.
But still it is ineffective due to many reasons such as the most common one being the lack of awareness about the services provided by insurance. It is due to lack of interest due to lack of awareness that further result of insurance companies inability to come up with new products. The current CEO of the current Naples insurance market must use various ways to exhibit the market growth of insurance. One way to do it is by using the funds that Restart BEMA Assam gets from different companies. It must be utilized to create awareness among the public.
For every 100 worth premium BEMA Smith gets Reel. Also a better model must be developed that of insurance companies by launching an online insurance system, since insurance companies in Nepal face a monumental task at present. The only reason is because they would be hindered by the problems such as poor internet network and infrastructure. In the same manner, due to the fact that majority of population is not educated, insurance companies have to contend with customer acceptance of insurance. Likewise, customers still feel more comfortable to have face- o-face deal with insurance company.
But still the high profile customers can be targeted for this purpose as in to make the insurance service easy and effective for them. In Nepal ,people usually generalize that insurance companies make late payments or don’t settle the claim in case of accidents. However, the claimants are not supportive at times, there are manipulations done and fake papers are brought due to which insurance companies don’t pay and creating customers. Due to an ineffective system the true and sound service given by insurance company cannot be effective.
There are a lot of cases that remains pending due to unsuccessful investigation process. Thus a good insurance regulation package must be introduced to overcome such problems. The size of insurance market is limited in Nepal. The main reason behind this fact is that there must be a government policy that requires one to insure all property as in developed nations. The only sector that is to be compulsorily insured is vehicle insurance. Thus there must be an introduction of such insurance policy that are compulsory which in return will benefit the related impasses.
But again it is against the norms to make people force to spend their money without their will. So the alternative would be that the companies must look for new ways to attract people to insure their assets. The major challenges faced by the insurance companies is the very low insurance backup system. The reinsurance is hired from foreign countries due to which their terms and conditions as well as their rate of premium must be met. Another problem that exists is for instance, there Nepal could take up one whereas the foreign insurance company could take two to here vehicles on liability alone because of their high capacity.
Instead of one if all companies could do so then there would be a growth in insurance market. For the growth of market is determined by a better liberalized economic policy that needs to be established in order to allow the insurance companies of our country to expand and increase their capacity in the market. Thus, creating awareness about insurance is the best way to improve insurance business in Nepal. Reduction of income tax rates for insurance companies can also be a solution to have more customers in Insurance sector.