Despite the policy-making level cutting down on agent commissions and discounts, the reality is that not even 5 percent of the insurable assets in Nepal are insured.
Kathmandu. The discount that the insured used to get when insuring motor, property, etc. directly through non-life insurers has been reduced by 75 percent. Through the Insurance Regulations 2081, the government has reduced the direct discount to 2.5 percent (two and a half percent).
In Section 44, Sub-section 1(b) of the Insurance Regulations 2081, the commission rate of non-life insurance agents has been fixed at a total of five percent. In Sub-section 4, there is a provision that if the insured himself comes to insure directly, the insurer must give a discount on the insurance fee of fifty percent (2.5 percent) of the commission as per Sub-rule (1).
The Insurance Regulations have also made a comprehensive reduction in the commission rate previously enjoyed by non-life insurance agents. Non-life insurance agents were receiving a 10 percent commission and when the insured took out direct insurance, an amount equal to the commission was being discounted on the insurance fee. Even before the issuance of the Insurance Regulations, the Nepal Insurance Authority had limited the amount of discount that the insured can get in direct property insurance to 5 percent through the Property Insurance Directive 2080.
#Ten most risky countries:
As mentioned in the Global Climate Risk Index 2000-2019, Nepal is the tenth most affected country in terms of human casualties and economic losses caused by adverse weather events. In Nepal, which is on the top list of countries with high risk of earthquake risk and climate change, instead of providing concessions and incentives to the general public for property insurance, the government has made insurance more expensive by cutting commission rates. Apart from the direct impact, there will also be an indirect impact on the general consumer. The fees will also increase as the burden of insurance premiums is added to the services they use, including public transport, freight transport services, and aviation services.
The Nepal Insurance Authority and the Ministry of Finance have concluded that the role of agents in the non-life insurance business and the encouragement of the general public are both unnecessary, and have cut the agent commission by fifty percent. Despite the policy-making level’s efforts to cut commissions and discounts, the reality is that not even 5 percent of the insurable assets in Nepal are insured.
Previously, agents used to receive ten percent of the insurance premium as commission for providing non-life insurance business. In cases where the insured contacted the insurer directly, they used to enjoy a ten percent discount on the insurance premium. With the new provision, the insurance premium will be more expensive for the insured, while the commission of the insurance agent will be reduced immediately.
Due to the insurance regulations, the commission expenses of non-life insurers will be reduced significantly. In addition, since the insured will also have to be given a small discount on the insurance premium, the insurance premium income will increase.
For example, if the total insurance premium of a vehicle is Rs 40,000, the insured would have to pay a total of Rs 36,000 in insurance premium after deducting the discount of Rs 4,000. According to the new provision, instead of Rs 4,000, the amount of discount will be reduced to Rs 1,000, so now Rs 39,000 in insurance premium will have to be paid.
