Kathmandu. The Chief Executive Officer (CEO) of IME Life Insurance Company is Pawan Kumar Khadka. Before IME Life, he had high management experience in Nepal Life, the then Surya Life, Surya Jyoti Life Insurance after the merger of Surya and Jyoti Life, including Chief Executive Officer and Senior Deputy Chief Executive Officer. Khadka also has experience working in the insurance, hydropower and cement sectors. Khadka, who is an ACCA from the UK, has a master’s degree in management from Tribhuvan University. Summary of the conversation with the same CEO Khadka on ##Insurance Talk##:
##It seems that the business growth in the insurance sector has not been able to grow as expected or satisfactorily. It is said that the premium is not coming in that much. Surrender has also increased significantly. Why is this happening?
##
## The growth in premium has increased slightly compared to last year, now that it has reached the second quarter. The average growth rate of the insurance sector compared to last year is around 13 percent. After I started at IME Life, it has suddenly gone from a negative growth rate to around 18-19 percent in the past 2 months. So it is not that premiums are not increasing or not coming.
But, surrender is also increasing! The number of people going is also increasing, right?
Surrender was not measured earlier. Many things have developed in the last 4 years. There have been many improvements in the insurance sector. Now many things have started to be measured. Surrender is also included. After the measurement started, the numbers started to appear. It is natural to wonder if this number is too high when you start seeing numbers. The economy has been sluggish lately. Due to which many sectors are in trouble. In such a situation, a large amount of money is needed. It is natural to have a hard time paying when you are insuring a large amount of money. Now, it is a situation where it is difficult to sustain. Even for the insured. Therefore, I am not saying that surrender has increased, but a process of insurance can also be called correction or improvement. Or exiting is also a matter of someone’s right. If I want to surrender, I can understand what I am not satisfied with or that I have a better option. However, looking at the companies in the insurance sector, it is also seen that one or two companies are surrendering more than their premiums. However, this does not apply to all. For example, when talking about IME Life, which I am affiliated with, the surrender percentage is very small. Moreover, if we look at the broader picture, some of the older companies, established before 2008, have already begun to mature. There have also been many policy issues. Therefore, it is natural that the number of surrenders is high.
Should there be more maturity or maturity at that time?
As the number of policies is increasing, it can be seen that the surrender situation is now more when compared to a certain year. However, if we look at the long-term, I have analyzed some companies to see why surrenders are happening. What is seen from that is that we give loans. In insurance, the policyholder can take loans. In our country, the practice of collecting interest rates and collecting loans is not so much. The loan can be paid off gradually. That is why it seems that we need to spread a little more awareness that loans are a better option than surrender. That percentage is only about 20 percent.
The Insurance Authority has been saying that the access to insurance is between 40 and 50 percent. There is also a perception that more than 60 percent does not go to the insurance market. Because some people are very rich. They do not invest in life insurance. There is another group, who cannot pay the insurance premium. So, in a country like ours, it seems that the market does not go above 60-65 percent. Where are we now? What is the current situation?
It also depends on how you look at it. Whether you insure for the purpose of savings or from the perspective of risk management. We are currently claiming 43-44 percent. In which the role of foreign employment is significant. About 11 million of the total population is included in this scope. Meanwhile, about 2.3 million citizens have foreign employment insurance. That is, about 7-8 percent is occupied by foreign employment. Apart from that, another 20-21 percent is micro and 18-19 percent is conventional policy. The population of Nepal is about 30 million. Out of that, we say 52 percent is genji. This means citizens born between 1997 and 2012. Not much insurance is being done for citizens under the age of 18. There is child insurance, but it is done by the family or guardian. Now, when looking at it this way, we also have to distinguish how much of the insurable population is. Now, if 20-25 percent of the population is not even insurable, then it should be understood that around 60 to 70 percent has access to insurance.
If we look further, there are four families in a family. If we divide the population of 29 million by 4, it seems that the scope of insurance is even greater. However, we are currently talking about 42-43 percent access to insurance. There may be two or three insurance policies for the same person. If we look at it narrowly, the main thing is how many life insurance policies there are. Only then does the real picture emerge.
The capital has been increased to such a large extent. Now, where will the policies be sold?
Talking about myself, I have 5-6 policies. It does not mean that only one policy is enough for me. Because an insurance policy should be seen as covering risks, on the one hand, it is about protecting the family, on the other hand, it is about making the future easier, making financial management easier, improving the social aspect, improving health, etc. Insurance is also done for the purpose of saving. In the future, if they have to get married, build a house, etc., then there are things like their health education when children are born, etc. Similarly, when I start my career, I try to save some money, which is very little after deducting my expenses, for that there is a small insurance. Later, I become more mature in my work. My salary increases. I become more recognized. Then my needs also increase and a situation arises where I need more insurance.
A family, which has the capacity to pay 60-65 thousand premiums in 1 year. There is a husband and wife and they have two children aged 12-15. Who will insure in such a situation?
Adding to the above, the family had to be safe first. For that, whoever earns in the family should be insured. In the next section, even when we talk about insuring children, the main question is who will cover it. If the main earner is not there, then the question is who will look after the child’s education. We have brought such policies in a way that benefits the children. Policies targeted at children are for education, health, future or according to their needs. After buying such policies, it is also a safe savings when viewed for the purpose of savings.
Recently, various options for savings have been seen, including SIP, stock market, social security fund. In such a situation, why buy policies created or sold by insurance companies?
Not everyone knows everything or has knowledge. In the stock market, you also need both information and time. When talking about SIP, there is a risk in it, whether you bear the risk or the company says it is risky. Having said that, in the insurance sector, investments are made in risk-free sectors as much as possible. The Insurance Authority is watching directly. In this way, looking at everything, insurance is the sector with the least risk compared to other sectors. Insurance is the best option for those who think that they will save a little money for a long time and then work with a lump sum.
Looking at some of the work being done by the Social Security Fund, Citizens Investment Fund, etc., it seems that your business has been taken away a little, doesn’t it?
It is not like the business has been snatched away. Because they are organizations established with a specific purpose. In which regular income earners are targeted. They also work to create convenience so that they have some savings after retirement. Now they should also come to direct and indirect insurance for risk management. They are not authorized to operate insurance. Even if you look at it in terms of getting returns, the nature of the loan you take while saving there is somewhat compatible, not incompatible, but there is no access to security funds and investment funds or provident funds. Even if there is access, it is more in urban areas. Currently, we insurance companies directly have more than 12,000 employees. Talking about IME, there is a branch network in 70-72 districts. Now, it is different because there is not such a large network of organizations including the security provident fund. That’s why I don’t see them snatching our market. Another thing is that our business is different.
How can a citizen who earns about 30-35 thousand rupees per month get insurance?
It is said that even if you deposit a small amount of money in social security funds, many insurance matters are covered. There is an easier way for this, insurance. Even if you invest 3-4 thousand monthly in insurance, you can get an annual insurance of 60-70 thousand. Also, the longer you insure, the easier and cheaper it becomes.
