‘Tax on life insurance receipts must be scrapped’

Manoj Kumar Bhattarai is general manager of Nepal Life Insurance Company (NLIC), a leading life insurance company of the country. He holds Masters Degree in Business Administration and Commerce from Tribhuvan University and has served Nepali financial sector in different capacities for more than a decade. He has worked in Enabling State Programme (ESP) and also in United Nations Developments Program (UNDP), Malawi as UN Volunteers. He is a life member of Management Association of Nepal (MAN) and holds membership of about a dozen business and social organizations. In a recent interview with Prem Khanal of The Kathmandu Post, Bhattarai highlighted the growth, challenges and prospects of life insurance business in Nepal. Excerpts:

How has NLIC performed over the years?

We have grown steadily at about 24 percent over the seven years of operations. As of 2007/08, we have sold more than 164,000 policies. Our product niche ranges from regular endowment policy to children policy to money back policy. We also sell triple benefit and double benefit policies. We recently launched another product named Jeevan Sarathi, under which life of both husband and wife is covered. Of our total products, endowment policy makes up around 70 percent of the business. We have a sum insured liability of 18 billion rupee and earned a premium income of Rs 3.37 billion. We are presently operating with the strength of 9,000 active agents at the grass root level. Our investments are secured. NLIC City Centre building of the Company, a multiplex under construction at Kamalpokhari is about to get completed for commercial operations. We have successfully delivered a sound returns to our clients.

How has life insurance market grown in the country?

Well, the market has grown rapidly over the last eight years. Before we came into operations, only two companies were catering life insurance services to the people. The level of insurance awareness was very low. We sold mere 1,474 policies in the first fiscal year we operated, whereas in the recently concluded fiscal year we sold 40,000 policies. This shows how fast the market is being expanded. Of course, the awareness is still very low compared to what we would like to have. But today I can confidently say if you have a product and ability to sell, people will readily buy it. Also, the number of life insurance companies has increased to nine. They cover all the cities and are present in economically active towns as well.

How healthy is the competition in the market?

Life insurance is fairly operated business. Still some unhealthy practices have emerged of late. Few companies are competing by giving extra incentives on top of the regular business commissions to the agents rather than coming up with attractive products. This has created an environment wherein agents could be manipulated. It has put undue pressure on companies like us that focus on distributing the benefits to clients rather than siphoning earnings on other areas. It will also adversely affect the new companies. As for the business, I think the companies still need not to compete with each other, as there is a huge untapped market in the country.

What are the major challenges facing life insurance sector?

I think raising the level of insurance awareness among people is still the foremost challenge facing the companies. People's perception is not much positive towards the business, as it is related with death and posthumous social security. Whatever insurance market companies have tapped far, they have created it through their individual efforts. This has not proved enough. The government, regulators and companies must launch joint campaigns to make people realize the real benefits of life insurance. Apart from that, life insurance companies in Nepal have falling short of innovative product designs and good product mix. Our companies are still to develop a strong corporate image and create an environment of trust to start unit link products linked with various capital instruments like bonds, shares and mutual funds. I think attaining this trust and moving to a higher stage of product development is another major challenge of the industry.

How friendly in the insurance regulator and government policies?

Insurance Board, the regulatory authority, has become much more mature than in the past. However, the Insurance Act and Regulations are more focused towards non-life insurance businesses. This must be changed. The government regulations and policies must cater more to the needs of the life insurance business. More so because life insurance fills in the 'social security' gap, in which the government has no presence. The government is presently imposing tax on death claims and final insurance receipts of the clients. This does not match with insurance norms and must be scrapped. The regulator must also think seriously towards widening the investment areas for the companies.

What are your future plans?

Well, our immediate focus is to consolidate the market. For that we have develop our corporate slogan of Sabaiko Lagi Jeevan Beema (life insurance for all) and started 365 days life insurance service. We are also thinking of coming up with a single premium product, under which a client can pay the total premium in one installment. We are also working on a product that caters to the education financing needs of the clients.
Source: eKantipur