Kathmandu. According to the latest statistics of the Nepal Insurance Authority, insurance penetration in Nepal has crossed 50 percent. However, a deeper analysis of this growth paints an interesting and somewhat contradictory picture. Especially given the participation of women and the predominance of term insurance, its real aspects are revealed.
According to the NRA, 50.31 percent of the population is covered under the insurance scheme. However, this issue is the result of a “binding and legal” system rather than “voluntary and conscious” participation. Term insurance and foreign employment term insurance account the largest share of insurance companies sold by insurance companies.
There are two main reasons behind this: the necessity of foreign employment and the condition of loan security. It is mandatory for every Nepali going for foreign employment to have temporary insurance for obtaining work permit. The number of insurance policies in the region is high due to the number of young people going abroad every year. Apart from this, while taking loans from banks and financial institutions, there is a mandatory condition for insurance for the safety of the borrower. Many people have opted for term insurance at a cheaper premium when taking a real estate or business loan.
Therefore, they are doing term insurance to fulfill the government process and the ‘condition’ of the loan rather than understanding the importance of insurance or for future savings.
Women’s Participation Fact
The data shows that the number of insurance policies issued in the name of women is higher than that of men (about 50.96% of the total insurance policies issued). In Nepal’s economic environment, where men are the main source of income, they have to go out of the house regularly for employment, and there is a risk in the workplace. However, in Nepal’s social environment, most women are limited to the role of housewives and their risk to life is less than that of men. Despite such contradictions, more insurance policies have been issued in the name of women than men.
However, microfinance has a big role to play behind this. More than 90 percent of the members of microfinance groups in Nepal are women. Even if you take a small loan from these institutions, you have to mandatorily have to take ‘micro-term insurance’. If the borrower (a woman) dies, the insurance company will repay the loan, so the institutions provide such insurance in the name of the woman.
For women who do not have their own earnings or savings, insurance has increased access to insurance, but it does not fully reflect women’s “economic empowerment” or “saving capacity”. This loan has become just a tool to reduce the risk of investment.
How much is in the interest of marginalized communities?
Term insurance is useful for the poor and disadvantaged as it carries a big risk with a small amount of money. However, this alone is not enough to include the insurance cover under the umbrella of those who are compelled to use loans or go for foreign employment.
Nepal’s insurance market is yet to shift from ‘compulsory’ to ‘voluntary’. Statistics show that term insurance is a major contributor to 50 percent of the population. Unless an environment is created for the common man to insure himself not only when he takes a loan or goes abroad, but also to protect his daily life and save his future, it cannot be considered the result of ‘full awareness’.
