Renewal charges sustaining insurance sector

The insurance sector, like many other industries, has been impacted by the recent economic recession. While the sector’s surface performance might appear stable, a closer examination of the data reveals that renewal charges are primarily keeping the industry afloat.

Across the 14 life insurance companies operating in the country, a total of Rs 156.331bn was collected in the past fiscal year, surpassing the previous year’s figures. The overall insurance amount increased by 9.82 percent annually, compared to Rs 142.35bn collected in the fiscal year 2022/23.

Notably, renewal charges have contributed more to the total revenue than primary insurance charges. Renewal charges accounted for 78.03 percent of the total, generating Rs 121.982bn, while primary insurance charges contributed Rs 34.34bn, or 21.97 percent of the total.

In the past year, 13,774,635 active insurance accounts were recorded, though the number of accounts has decreased. Despite this, total insurance collections grew due to higher individual insurance amounts, as noted by the insurance authority. Despite ongoing economic instability, Manoj Lal Karn, CEO of Himalayan Life Insurance, stated that the industry has not been significantly affected overall. He emphasized that the increase in renewal charges has driven growth in total collections. “Compared to the previous year, with nearly a 20 percent increase in income from insurance amounts, we should be optimistic,” he said.

Nepal Life Insurance led the industry in total collections for the fiscal year 2023/24, contributing 26.13 percent of the total. The company alone raised Rs 40.85bn out of the Rs 153.33bn generated by the 14 insurance companies, with 1,467,128 insurance accounts.

National Life Insurance ranked second, raising Rs 19.203bn, or 12.28 percent of the total, with 1,598,268 insurance accounts. Other companies followed, with Life Insurance Corporation (Nepal) Ltd raising Rs 18.1bn, Himalayan Life Rs 16.6bn, and Suryajyoti Life Rs 9.5bn. Companies that raised less than Rs 9bn include Rastriya Jeevan Beema (Rs 8.79bn), MetLife Insurance (Rs 5.67bn), Asian Life Insurance (Rs 8.8bn), Sun Nepal Life (Rs 3.88bn), Reliance Nepal (Rs 4.2bn), Citizen Life (Rs 6.21bn), Sanima Reliance Life (Rs 6.18bn), and Prabhu Mahalaxmi Life (Rs 4.37bn). Despite these figures, 57 percent of the population remains uninsured. As of 2023/24, 43.26 percent of the population had insurance coverage, a slight decrease from the previous year, when 44.38 percent of the population was insured.

Nepal continues to lag in insurance awareness and coverage compared to other countries. Unless required by law, the general public does not prioritize insurance. The government mandates vehicle insurance for compensation in case of theft, accidents, or other incidents. However, despite the legal requirement for third-party liability insurance, many remain uninterested in additional coverage. Officials cite a lack of awareness as a key factor in the limited reach of insurance among the population.