Insurances is a Base of Social Development

Dr.Ravindra Ghimire

Insurance is associated with risk. The act of providing protection to the insured by sharing the risk is insurance in the general sense. There are two types of risk in the world. The first is the risk arising from natural causes, such as floods, landslides, earthquakes, volcanoes, hurricanes, snowfalls, droughts, epidemics, etc. Second, diseases caused by man-made or man-made hazards, such as violent wars, nuclear explosions, the collapse of large structures, contamination and waste.

Risk management is a very expensive and complex process. People are making every effort to protect themselves from such dangerous phenomena through scientific research and traditional methods.

One of the many ways to manage risk is insurance. It is not possible to insure all risks. Insurance is a structure or a way to bear the risk of some people together with many people or to share the risk of some people among many people (in the name of premium).

With the development of human civilization, insurance started to be used in a modern way. At that time it was not profitable. The premium was determined on the basis of the amount of damage incurred in previous years. All policy holders used to be shareholders of the insurance company. This method is called mutual insurance. Even today, mutual insurance is in operation in some countries in America, Europe and Asia.

Some people converted the mutual structure into a stock company with the sole purpose of making profit. Distribution of profit in life insurance started as bonus and dividend. In non-life insurance, only the distribution of profits would be received by the shareholders.

In the year 1666, when the fire in London, England, burned more than 13 thousand houses. This incident made the need for insurance felt globally. The need for insurance in Nepal was felt even during the Rana period. At that time, Indian insurance companies were providing services to Nepalese industrialists and businesses.

In 1947, Nepal Bank Limited established Nepal Insurance Company for its risk management. This is the first insurance company of Nepal. The history of life insurance began in 1968 after the establishment of the National Insurance Institute.

Before that time, Nepal’s needs were met only by Indian life insurance companies. Before 2014, Nepal’s reinsurance service was completed by foreign reinsurance companies. With the establishment of the Nepal Reinsurance Company, domestic reinsurance services have been available, albeit partially. Reinsurance is never a business in one country, one geography. According to the principle of risk diversification, such insurance business seems to be managed all over the world.

Many organizations are providing insurance related services outside the regulation of Nepal Insurance Authority. The Social Health Insurance Program run by the Government of Nepal is overseen by the Health Insurance Board. There are various insurance programs run by the Social Security Fund. The Deposit and Credit Protection Fund has also operated an insurance program.

In addition, if the employee provident fund covers the health treatment fund of its savers to the assistance provided by microfinance institutions to their savers and borrowers, it can be said that the insurance market is very large in Nepal. In this article, an attempt has been made to discuss the expansion of insurance access and the future of insurance under the jurisdiction of the Nepal Insurance Authority.

When discussing the current state of the insurance industry, it is important to discuss the premium income of insurance companies, access to insurance, and special agencies of the insurance industry.Premium income, capital and pension: The growth of life and non-life insurance by almost 16.5 percent is a good aspect. In the context of Nepal, this is not enough. The contribution of insurance to Nepal’s GDP is 3.67 percent. This is very low compared to the world average contribution. Nepal’s market expansion and growth score is good. However, common people are not able to get insurance services.

Table No: 1: Current Number of Insurance, Total Premium, Capital Status

1. Access to insurance :

Insurance should be considered as a basic need like gas, shelter and cotton. Human needs are unlimited. Not all problems can be solved with limited resources. Insurance is the only reliable financial tool to avoid sudden economic calamities.

Since insurance solves the economic crisis and helps people to return to their previous situation, it has not only financial and social importance, but also mental importance. There is no universal definition of access to insurance and no universal indicator to measure it.

Access to insurance and Coverage of insurance .

1. a) Access to insurance :

How easy is it to get insurance services for ordinary people? How far have insurance service providers come close to people’s homes? How much do the general public understand about insurance? Access to insurance studies topics like

Insurance companies have reached the homes of all Nepalis through their agents. But it doesn’t just happen that way. Access to insurance means how many people have received insurance services? Which services have been received or not, how much support the insurance has provided for their living plays a major role. Instead of buying too much insurance that you can’t afford, you should buy insurance services to manage all types of risks.

According to the statistics of Nepal Insurance Authority, 41.2 percent of Nepal’s population has sold life insurance policies. This is less than half of the total population. It can be said that many people in Nepal are beyond the reach of insurance. The insurance market is abundant, it can be said that there are many opportunities for insurance companies.

1. b) Sum insured :

The function of insurance is to assume or transfer risk. If a person has an insurance of one lakh rupees, even if he has access to the insurance, there may be no coverage. In case of his untimely death, his dependents may not have enough money to solve their financial problems.

Apart from life insurance, if you need health insurance for treatment, property insurance for your home property, motor insurance for your vehicle, liability insurance, old age insurance, and employee insurance are essential. If there is not enough insurance, it is called under insurance. It doesn’t make much sense. Taking insurance that exceeds financial capacity, status and needs is called over insurance. Such work is done on purpose.

As this leads to misdeeds like fraud and forgery, the insurance amount should be of reasonable amount. There are three situations in Nepal. Common people get insurance for less amount. Some people’s insurances are of reasonable amount, while some of them are doing more than the insurance amount. Because of which we have seen heinous crimes. If you don’t know how to use insurance correctly, its results can be negative.

Insurance policy :

In order to make it easy to understand about the insurance policy, it has been classified on different basis. Every policy has a different purpose. As it is not possible to discuss all the products mentioned below in this small article, it will be discussed in detail in another article.

2. Insurance awareness :

Sometimes we become very emotional. We say; The development of insurance in Nepal was not as expected. Insurance companies seem to be trying their best. The insurance market is not expanding as expected. There are many reasons for this. The main reason is lack of insurance awareness. Mainly the following agencies should be more responsible for insurance awareness. It has many levels, below are briefly discussed in order from the most responsible to the least responsible.

1. A) Insurance awareness at the policy maker level: In order to expand the insurance market, the correct insurance policy should be made at the state level itself. The role of regulatory bodies is important in that. A national insurance policy has not been made till date. The state itself does not understand what insurance is and why it is necessary for everyone. Until the state is aware of the importance of insurance, does not write in the policy that insurance is a basic commodity and does not implement it accordingly, then there is no reason to complain that the common people do not understand about insurance.
2. b) Insurance awareness in regulatory bodies: It is important for regulatory bodies to be responsible for insurance. When high-ranking officials, officers and employees understand and assimilate insurance correctly, only then will they be able to explain it to the general public. Insurance authorities need to have deep knowledge of theoretical, technical and legal aspects of insurance. It is important to understand the sociological and psychological benefits of insurance.
3. c) Awareness at the level of the insurance company: From the board members of the insurance company to the employees working in the field, everyone needs to understand about insurance. When I say this, it is surprising to you, is this also a matter of saying? Before asking this question, I would like to ask you how many percent of employees have studied insurance and are working in an insurance company? Or learning by doing? What subjects are they learning?

How are they applying what they have learned? Unless the basic principles of insurance are memorized by all employees and their implementation is done correctly, it cannot be considered as insurance awareness.

1. d) Awareness at the level of insurance agents: How many things have been taught to the insurance agents who collect billions of rupees about insurance? Knowing how to do marketing and informing customers about product features is not just about being aware of insurance.

You should also know what kind of product, how many insurance policies to sell to whom. Giving the right advice or giving advice to meet your target? The insurance industry cannot take leaps and bounds until the agents are aware. It keeps getting stuck in a circle.

1. e) Insurance awareness of the customer: People who buy insurance at someone’s behest can never be an informed customer. Such a customer is an unconscious or lustful customer. The insurance industry does not thrive with such customers as they can make wrong decisions at any time and cheat the company. Can cheat the company. Therefore, it is the responsibility of the company and the agent to make the insured aware.
2. f) Insurance awareness among the general public: It is necessary to sensitize or sensitize the common man who has not become a customer, but is likely to become one in the future. A good customer is one who buys an insurance policy without going beyond the principle of insurance and keeps the policy for the whole time. One who does not even think about earning money from insurance in a wrong way and respects insurance with honesty, only then can he be considered as an insurance-conscious citizen. Therefore, the insurance industry cannot move in a positive direction without making all levels and levels aware.
3. Problems in the insurance sector :

There is no sector, no business without problems. There is no choice but to move forward facing the problems of every sector. Without identifying the problem, there is no solution. Since the insurance industry of Nepal is connected with the international insurance industry, some of the problems of the world market have become the problems of the insurance market of Nepal. Some internal problems are discussed here.

1. a) Lack of a clear national insurance policy: The state has not formally accepted insurance. Not having an insurance policy is the first example of this. The second example is that the implementation is not agile and correct. For example, third party motor liability insurance is mandatory. There is no policy regarding what should be the punishment if the blue book of the motor is renewed even without the said insurance.
2. b) Lack of adequate legal system: The Insurance Act, 2079 has recently been implemented. There are many shortcomings in this Act. The Insurance Authority Act, the Insurance Business Act, and the Insurance Offenses Act are a must. The regulations have not been made, even if you look at the draft that is being prepared, it seems that many subjects and regulations are lacking in it.

c) Lack of skilled manpower: Insurance is a complex subject. Special knowledge about insurance is required for efficient and successful operation of insurance. In the history of 75 years, there is no body that has a special study of insurance. Insurance is taught in a university. Many things are only theoretical. Practical matters are not included in the course.

Even the teachers who teach have not been provided with competence. There is no provision to have a basic education or degree related to insurance while hiring employees in the insurance authority and companies, nor is experience or degree related to insurance mandatory for the minimum qualification of the officials of the insurance authority. How can the insurance market take the right direction and develop without skilled manpower.

1. d) Lack of public awareness: From the officials of the relevant ministries to the general public, there is only one understanding of insurance, with no exceptions. Most of the people have a negative opinion, they feel that they have wasted their money. It is important to remove this misconception. The main role of journalists is seen in this work. It is necessary to think seriously about how to present the insurance.
2. e) Decrease in the quality of service of insurance companies: Apart from exceptions, most people complain that the claim payment process of insurance companies is very complicated. Insurance is easy to give but very difficult to get. Without eradicating this complaint, it is not possible to bring about a change in the thinking of the general public towards insurance. The reasons for the low quality of service are lack of efficiency of employees, lack of experience, lack of science and technology, lack of uniformity in working style, ethical problems etc.

Some problems are common all over the world.

1. a) Increased damage caused by increased vulnerability due to climate change,
2. b) Tension between countries, war and the damage it causes
3. c) Internal war and the damage it causes
4. d) Increase in reinsurance charges
5. e) Lack of skilled manpower
6. f) Cyber ​​risk
7. g) Increase in insurance premiums due to increase in fraud and forgery

The future of the insurance sector :The history of insurance is not very long. Its use is increasing widely. Even if we look at Nepal in the last few decades, the access to insurance has increased a lot. Insurance has become connected with the daily life of common people. In the insurance sector, there is an annual turnover of billions. It can be seen that the future of insurance is broad and beautiful.The lack of skilled manpower in the insurance sector has always been pressing. Newcomers, students who want to study insurance, Nepali insurance sector is an area where they can confidently advance their career as a field with high potential and future.In terms of business and potential, insurance is a sector with high potential.

There are still many topics that need to be covered by insurance in Nepal. If there was unemployment insurance for employees, millions of workers would not have to starve. The employer should not have taken a loan from the bank and paid the salary. If there was insurance for the loss that occurs when the operation of the industry business is interrupted, then the industries would not have collapsed.

It is necessary for Nepali insurance companies to introduce such policies in the market so that the Nepali economy can be saved from many future risks.

Information technology in the insurance sector can be considered as a field with great potential and scope. Insurance companies can overcome the current problems and challenges by making maximum use of information and technology.

Conclusion:

In the modern era, the risks of human race are increasing day by day. As the risk increases, the scope of insurance is also widening. Insurance in itself is not an option. It is definitely a state-of-the-art tool to reduce the impact of risk. Therefore, its effectiveness, importance and future are increasing.

Insurance has become an integral part of human life today. The future of insurance, which has become an integral part of human society and human life, is growing not only in Nepal but also internationally. First there was only insurance, later reinsurance and insurance. Not only that, life insurance and non-life insurance became available. Not only that, it was said that micro insurance is also needed. The issue of risk diversification is not only about insurance, retro also started coming together with insurance. Therefore, insurance continues to be divided into smaller units day by day.

Equally, the use of insurance to provide relief to the people is increasing on a large scale. The role of all of us is becoming indispensable to build an equitable society by protecting the risks of common citizens through insurance. Quality development of the insurance sector with a bright future is the need of the day. For this, there is a need for insurance studies, teaching colleges and universities in Nepal.

As the process of insurance risk transfer is a technical and complex process, increasing insurance literacy and skilled manpower related to insurance is the main requirement today.

(Ghimire is an associate professor at Bimabid and Pokhara University.)

Courtesy of Nafiz Journal Arthachitra

25 November 2023