Kathmandu. With banks and financial institutions reducing the interest rate on fixed deposits to the lowest level in the last seven years, life insurance has become an investment option in search of a fair return.
This time, life insurers have increased the business of term insurance by promoting the single insurance insurance policy, which can be paid only once during the life insurance period.
The interest rate on fixed deposits published by commercial banks for the month of July ranges from 2.75 to 5.5 percent. The average return rate given by life insurers has been around 6 percent.
The agents have lured the insured by assuring them that they will get a return of 9 to 10 percent on a single insurance life insurance for a period of 15 years. The agent calculated the rate of return received by the insured by returning the commission amount to the insured.
According to life insurers, this time the insurer has achieved an average growth rate of 20 to 30 percent. In the case of some insurers whose turnover size is small (3 to 4 percent market share), a growth rate of 50 to 70 percent has been recorded.
According to the agent, a person between the ages of 35 and 40 years will have to pay a lump sum of Rs 2.4 million for insurance of Rs 3.5 million. Apart from this, non-commercial agents have also been lured to insure the insured by paying the amount of commission they get.
Fearing that they would be left behind by selling single insurance policies in the market, most companies made single insurance insurance a tool to meet business goals in the last financial year.
In the life insurance business, 40 to 55 percent of the total first insurance income of the insurer, which is declaring to make history in meeting the business goals, is accounted for by the money received from the single insurance fee.
Achieving positive growth during a recession is in the interest of both the insurer and the agent for the time being, but in the long run, there is a risk that it will be harmful to all three parties of the insurer, the insured and the agent.
As the bank interest rate is not in a position to improve immediately, even bankers themselves have started giving priority to life insurance instead of fixed deposits. It has been chosen due to the characteristics of getting a fair return than the bank and bearing the risk of double the sum assured.
If the interest rate of the bank is more than the rate of return given by the life insurance company, there is a strong possibility that the insured will return this amount to the bank by taking an insurance loan or surrendering the insurance policy.
Life insurers have a bitter experience that most single insurance policies are intended to be surrendered after three years.
