Experts seek reduction in cost of micro-insurance to uplift poor

Kathmandu, September 26

Insurance experts and leaders have called for reduction in premium cost of micro-insurance that they say could work as a ‘lifeline’ for low-income people.

Speaking at a session organised during the 21st Association of Insurers and Reinsurers in Developing Countries (AIRDC) Conference 2018 held here today, they said that high transaction cost and high premium for micro-insurance services have become the major challenges for expanding micro-insurance business.

“Micro-insurance may not necessarily uplift people out of poverty, but it can provide a safety net for low-income people who have come out of poverty line and are highly vulnerable to falling below the poverty line in case of any shock,” said Dirk Reinhard, vice chair of Munich Re Foundation, a charitable organisation founded by reinsurance company Munich Re, addressing the conference which concluded today.

The two-day conference had brought together 400 delegates, including 88 foreign delegates from 20 countries, aiming to discuss building financial resilience, disaster risk financing, and insurance.

Lorenzo Chan, president at Pioneer Insurance Group of the Philippines, said that partnerships with other institutions like banks and financial institutions, cooperatives, supermarkets, malls and travel agencies, can help in offering micro-insurance service to the low-income people. “Other institutions may have stronger network and reach, which can be utilised by insurers to provide people with micro-insurance services,” he added.

For Chunky Chhetry, the CEO of Sagarmatha Insurance Company Ltd, there is a huge business prospect in micro-insurance sector despite various challenges. He said that the Insurance Board’s directive to insurance companies to generate a minimum of five per cent of their total premium from micro-insurance services have helped increase the insurance penetration in the country.

“While the micro-insurance business has been largely driven by the regulatory requirement, most of the insurance companies are now seeing huge prospects of such services,” he added.

The government, through the budget speech of the current fiscal year 2018-19, has announced that all insurance companies will be required to extend the limit of micro-insurance transaction to at least 10 per cent of their total insurance transaction within the next two years.

Some experts also suggested that technology and digitisation can be leveraged to not only increase the access to insurance but also reduce premium for insurance policies.

“With less paper works and everything being done instantly — from policy issuance to claim settlement to communications — digitisation can help the insurance sector grow faster,” said Jimmy Molyneux, senior vice president at Strategic Advisory Asia-Pacific, Guy Carpenter, citing various insurance innovations in recent years.

Addressing the inaugural session on Tuesday, Minister for Finance Yubaraj Khatiwada had urged insurance companies to diversify their businesses to insulate themselves from various catastrophic shocks. He had also said that the insurance industry can play a very important role in providing
financial security to the people from losses and damages due to adverse impact of climate change and other external shocks.

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