Growth in Insurance Industry: Natural or Manipulated?

Kathmandu. Amidst all the chaos and the crashing economy caused due to COVID-19 and the lockdown implemented by the government, the insurance companies of Nepal were seen to be unaffected and rather had better performance than previous years.

As of the previous year the life insurance companies had earned net premium of Rs 75.80 billion. Whereas according to the last fiscal year, life insurance companies have earned the net premium of Rs 91.20 billion. They have earned 15.86 billion more than the previous fiscal year, having an increase of 20.93 percent.

The main source of income for the life insurance companies is the premiums. We have been seeing that various insurance companies are more hard-lined on expanding their business on the basis of their own premiums.

Currently Nepal Life earns the highest net premium. They have increased its premium by 19.78 percent. Nepal Life has earned a net premium of Rs 27.34 billion in the fourth quarter of the last fiscal year. This is an increase of Rs. 4.51 billion compared to the same period of the previous fiscal year.

Whereas Asian Life Insurance has the lowest growth rate, its insurance premium has increased only by 7.70 percent. Similarly, Jyoti Life increased its premium by 80.29 percent; Sanima Life increased its premium by 98.41 percent, IME Life increased its premium by 54.27, Citizen Life increased its premium by 70.65 percent, Union Life increased its premium by 52.52 percent, Reliance Life increased its premium by 87.24 percent and Mahalaxmi Life increased its premium by 57.65 percent. As of the last fiscal year, Mahalaxmi Life has had the largest increase in their business by 244.08 percent. Similarly, Prabhu Life Insurance has an increase of 155.62 percent in its business.

In the fourth quarter of the last fiscal year the average profit of life insurance companies has increased by 8.67 percent. Life insurance companies have earned a net profit of Rs 3.38 billion during the period. Asian Life Insurance has increased its net profit by 212.30 percent.

Similarly, , Gurans Life net profit has increased by 24.28 percent,  Surya Life 25.97 net profit has increased by percent , Citizen Life net profit has increased by 17.32 percent, Reliance Life net profit has increased by Insurance has 48.45 percent, Prabhu Life net profit has increased by 16.74 percent and National Life net profit has increased by 16.32 percent, IME Life net profit has increased by 24.01 percent and Sun Nepal Life’s net profit has increased by 11.90 percent.

On the other hand Mahalaxmi Life Insurance’s net profit has declined the most by 28.09 percent. Also, Sanima Life’s profit declined by 3.06 percent, Union Life’s profit declined by 2.29 percent, Prime Life’s profit declined by 4.64 percent, and , LIC Nepal’s profit declined by 25.84 percent.

Although an increase in premium is a good thing for the insurance companies, they have been skeptical about the increase in the premiums last fiscal year. Insurance fee has risen to Rs 22 billion in the last fiscal year. Of that, Rs 11 billion has been raised in July alone. The fact that half of the insurance fee has been raised in a month has raised doubts among the insurance companies. The insurance companies are happy with the increase in premiums but have expressed concern that such an increase would be a problem in the coming days.

Shivnath Pandey, president of the Life Insurance Association and chief executive officer of Surya Life Insurance Company, said that the insurance premium, which was suspended in April, came at once in June. He has analyzed that the collection of insurance fee has increased in June due to the sudden arrival of insurance fee which has been stopped for four months.

The Insurance Board of Nepal did address the issue saying that there is no need to worry about the insurance fee collected in July. However, after the insurance companies expressed their doubts, the board has also become aware that something may a have gone wrong. The board said that the number of life insurers has increased due to the increase in health concerns after the COVID-19 pandemic which caused deaths of many lives and that the insurance fee may have also increased due to the same reason.