Sushan Thapa. TAG_CLOSE_span_90 Nepal’s insurance sector is now at a critical juncture. Where there are old rooted problems. However, there is still immense potential. However, the insurance sector has seen little growth in the last few years. Structural weaknesses are hampering overall progress. Now the main question is, “Can strategic reforms, adoption of technology and restoration of public trust make insurance a life-saving system for millions of Nepalis?”
Low access and lack of information: The biggest obstacle
The state of insurance service usage in Nepal is still relatively low. According to the Nepal Insurance Authority( NEA), insurance penetration has reached 47.39 percent as of Mid-May 2025. It grew by 2.75 per cent from 44.64 per cent in April. However, traditional life insurance covers only 16.77 per cent of the population except for temporary insurance such as foreign employment. 52.61 percent of the population is still uninsured. Which confirms the huge gap in the financial security network.
According to the Insurance Authority, the total penetration of life insurance and non-life insurance has stabilized from 3.47 percent to 3.47 percent of gdp (of which life insurance is 2.74 percent and non-life insurance is 0.73 percent). Similarly, the per capita density insurance cost has increased to Rs 6,444. Which shows that the amount of insurance coverage has increased at the public level.
At the root of this problem is not only the ability to pay but also the lack of financial literacy. According to the 2080 survey of Nepal Rastra Bank, only 28 percent of Nepalis have basic knowledge about insurance and are lagging behind in rural areas.
Confidence crisis: People disappointed by delayed claim payment
The delay in payment of claims, especially during emergencies, has led to a sharp decline in public confidence in insurance. After the 2072 earthquake, many insurers had to wait for months, sometimes years, for claims. During the corona epidemic, corona insurance claims were caught in a long process and unnecessary verification problems.
Data from the Insurance Authority shows that the number of claims paid by life insurers has reached 280,151 (7.46 percent growth rate) and the amount is Rs 66.59 billion (14.79 percent). However, the claim amount in non-life insurance has come down to Rs 17.9 billion (a decline of 13.57 percent). Which shows problems in health or non-life sectors such as animals, agriculture.
In this way, questions are being raised in the public, ‘I have paid to pay the insurance premium, but will the insurance help in case of an emergency?’
“Insurance is only for the rich!”
Laxmi Chaudhary (name changed), a farmer from Bardiya district, lost all her goats in the flood. His animal husbandry insurance by paying an annual premium of Rs 500 was applicable to this risk. However, she was not aware of it, so she did not make a claim.
Why is this awareness important?
72% of rural Nepalis do not know about insurance (Rastra Bank, 2023).
India’s ‘Bima Triniti’ (PMJJBY, PMSBY, APY) scheme covers 30 crore poor people. Can’t Nepal do anything like that?
Possibility of regulatory disruption and micro insurance
While regulation is necessary, too much strictness has hindered innovation. Micro-insurance programs that can be life-saving for the rural poor in Nepal have not been able to spread due to excessive licensing procedures and operating costs.
However, there are plenty of successful examples in the world:
Kenya’s M-Tiba: Access to insurance to 4 million users from mobile.
PMFBY of India: Crop insurance to 4 crore farmers at 2% premium.
Delta Life of Bangladesh: Policy to provide insurance based on flood and drought risk.
In Nepal too, insurance can be extended to risky places such as Terai (flood) and mountainous areas (landslides) by adopting such models.
Weak governance: systemic weakness
Many insurance companies lack good governance. Which reduces functionality and customer confidence. According to the Insurance Authority’s 2023 report, 30 percent of the insurance related complaints are related to mis-selling or lack of transparency.
Saraswati Ghale (name changed), 55, of Dhading never claimed her buffalo insurance funded by the government. “The agent raised the premium, but never told me how to make a claim,” she says.
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68% of micro insurance policies in Nepal become inactive within two years (UNDP).
India has kept the insurance claim active by informing the farmers through SMS. June has reduced the inactivity rate to 22 percent.
Digital technology: device of change for the insurance sector
Technology can completely change nepal’s insurance sector. The use of mobile banking, blockchain and artificial intelligence (AI) can make the claim process easy, fast and reliable. Digital technology has played a key role in transforming the insurance sector by making it modern, effective and inclusive. The use of mobile apps, websites, chatbots, digital claim systems and data analysis technology has made insurance services simple, fast and transparent.
Increasing access to rural areas, reduced spending, improved customer service and possible development of innovative insurance plans are the impact of digital technology. Digital insurance has the potential to become an important step in supporting financial inclusion in countries like Nepal.
The message is clear, ‘Digital conversion is no longer an option, it is mandatory.’ ’
What can you do right now?
for insured
Ask these 3 questions:
In how many days can your average claim process be completed?
Can I submit documents via WhatsApp or online?
“Where is the helpline number of the insurance authority in my policy?
for agent
Show the claim process using mobile or tablet, the understanding increases by 65 percent.
for regulator
Publish the insurance company’s scorecard. Usage : ‘Company ‘X’ pays 92 percent of the claim within 30 days’. Make government subsidies and subsidies for micro and agricultural insurance long-term.
Conclusion: Insurance sector on the brink of change
Nepal’s insurance sector is now at a critical juncture of transformation. Where only the right decision can make it reliable, accessible, and sustainable. If the sector embraces technology, serves customers at the centre, and values responsibility more than profits, it will become a strong foundation for economic development, social security and disaster prevention infrastructure.
Insurance is not just business, it is a collective protection against the uncertainty of life.
Equipped with digital technology, prudent rules and insurance products that cover all, the insurance sector can carry a ray of hope for the future of millions of Nepalis. The region, which is on the verge of change, has no time to turn back. It’s time to move forward, with faith and technology.
Thapa is the manager of Nepal Micro Insurance Company. )
