Micro insurance to be launched soon

KATHMANDU, FEB 14: 

The insurance regulatory authority is giving finishing touches to the much anticipated micro-insurance programmes meant for the rural populace. 

“The micro-insurance programme will take a concrete shape by next month as private insurance companies will soon design their products and launch it in the market,” said spokesperson for Insurance Board Shekhar Aryal, adding that the Board has resumed its homework for micro-insurance after a brief recess. 

Insurance companies were previously apprehensive about stepping into the micro-insurance area fearing losses as it meant more work and less profit. 

“However, they seem to be convinced now and are even ready to bear two to four per cent loss during the initial phase,” he added. 

Micro-insurance refers to the relatively short term insurances meant for health, accident, crop and livestock policies. 

The beneficiaries are the rural people who are mostly involved in agriculture which is subject to different external shocks. Along with agro insurance, the regulator is also encouraging insurance companies to insure micro enterprises such as water mills, tea shops, rickshaws and vending carts.

The budget for the current fiscal year 2011-12 had especially emphasised on the implementation of micro-insurance, saying, “with an objective to expand insurance service in rural area and poor communities, a micro insurance will be launched in some hilly districts on a pilot basis.”

Insurance Board has formed a taskforce to define micro-insurance products and identify channels for delivering insurance to rural and low income-households - the targeted population.

The committee comprises of two the Board officials and one representative each from six insurance companies. 

The committee needs to figure out the delivery channels for the insurance policies as setting up shops at villages to sell the policies is an expensive affair for the city based insurance companies.

The policies and delivery system has to be designed in such a manner that micro-insurance schemes are profitable to both the companies and the targeted population. 

“The companies might use local co-operatives, socially active groups or micro-credit groups that are already in existence at the local level to issue the policies and collect premiums along with creating awareness regarding insurance making it less costly for the insurance companies,” he pointed out. 

Moreover, the difficulty regarding valuation of crops and livestock are going to pose a greater difficulty for insurance companies. 

“There is no scientific calculation of the crop’s yield and of livestock, which will create ambiguity in the valuation of the property being insured,” expressed Aryal. 

The budget had also depicted that the arrangement of providing 50 per cent subsidy on the premium of crops and livestock insurance will be done. 

However, the Finance Ministry has not yet given a clear signal on whether the government will be providing any subsidy or not, according to the Insurance Board.

Source: THT