Kathmandu. The number of people buying life insurance policies by paying a lump sum amount has increased after banks and financial institutions reduced the interest rate on fixed deposits to a single digit even for a period of five years. The single insurance premium collection of life insurers has more than doubled in the last one year.
According to Nepal Insurance Authority, the current fiscal year 2081. Life insurance companies have collected a total of Rs 4.91 billion as single insurance premium till Mid-March 2018. In the same period of the last fiscal year, a total of Rs 1.56 billion was collected from the sale of single insurance policies. The collection of single insurance has increased by 2.14 times.
Not only the collection of insurance fees, but the number of insurance sales has also increased. A total of 84,643 active insurance policies with single insurance premium stood at the end of Mid-March of the current fiscal year. Till the same period of the last fiscal year, the number of such active policies was only 70,374.
In a single insurance policy, the insured pays a lump sum insurance fee only once during the period of the insurance. They do not have to pay the installment of insurance fee every year. After the completion of the insurance term, the insured receives a lump sum payment of the sum assured and the ripe bonus amount.
In any case, agents and insurance employees, who are forced to meet their business goals, are suggesting that it would be wise to insure rather than fixed deposits by calculating the amount to be invested, bonus and sum insured by the insured, even if all the amount of agent commission and incentive is returned. The average rate of return of the insurance company is 6 percent, while the interest rate on the bank’s five-year term deposit is also limited to about 6 percent.
If the amount equal to the fixed deposit should be kept in the bank, then the insured who gets the commission in life insurance and the amount of incentive will have to pay less money than the deposit sum assured. With unhealthy competition among life insurers, there is a growing tendency to return the agent’s commission and incentive amount to the insured.
There is an old trend in the insurance market of Nepal to make single insurance insurance policy for 5 years and surrender within 3 years. In order to control the distortion through the sale of single insurance policy, the AUTHORITY has also limited the commission rate for the insurance fee to 10 percent. Despite such regulatory provisions, distortions in the cover of single insurance insurance policies have not been stopped.
