Micro-insurance to be launched next fiscal

The Insurance Board (IB) has decided to permit micro-insurance under which insurance companies will be able to offer coverage of less than Rs 25,000.

The IB plans to issue a directive approving micro-insurance from the next fiscal year. The maximum amount for micro-insurance has been set at Rs 200,000.

Policy buyers will be able to obtain life insurance and accident insurance coverage under the plan. The upper limit for health insurance has been fixed at Rs 35,000.

IB Director Sriman Karki said they had been discussing providing coverage to crops, livestock and farm equipment under micro-insurance.

“However, we are yet to reach a conclusion as we have already introduced agro insurance to deal with these issues,” he added.

Insurers have been reluctant to provide micro-insurance due to the costs of operating small schemes.

And in a bid to reduce overheads, the IB has planned to allow insurance companies to work with local NGOs, community-based organisations and cooperatives and enlist them as agents.

“These local organisations will be allowed to sell insurance policies, collect premiums and settle claims up to a certain level,” said Karki.

“However, they cannot act as underwriter which means they will not be allowed to guarantee that they will buy unsold policies.”

Karki added that micro-insurance would give access to insurance coverage to the poorer segments of the population.

The IB has long been endeavouring to launch micro-insurance, but lack of policy has prevented it from doing so. A proposal to introduce micro-insurance has been sent to the Cabinet, but it’s been gathering dust there for 10 months.

“As the proposed regulation has been stuck in the Cabinet, we are preparing to introduce a directive for which we do not require its go-ahead,” said Karki.

Despite the tremendous efforts that have been made to promote micro-insurance, the IB itself is sceptical about the success of the programme. “A lot of promotional work will have to be done to ensure that lower-income people understand the importance of micro-insurance,” said Karki.

source: the kathmandu post,10 june 2014