The decrease in interest rates in banks and financial institutions has started having a positive impact on the insurance sector. Experts say that citizens have started getting insurance after they started getting low interest even on fixed deposits in banks. They say that insurance provides protection for life and property and provides higher returns than interest, which has increased the attraction of insurance. 

Insurance companies have collected Rs 21.36 billion in insurance premiums till last Baisakh. The insurance premium collection of companies till Baisakh this year has increased by 14.27 percent compared to last year. Insurance companies had collected Rs 176.21 billion in insurance premiums till Baisakh last year. 

For the last three years, banks and financial institutions have accumulated excess liquidity. Interest rates have fallen to an all-time low. Praveen Raman Parajuli, president of the Life Insurance Association, said that the decrease in interest rates has had a positive impact on insurance business. 

‘Insurance business has increased in recent months. "People seem to be attracted to insurance because they get low interest rates when depositing in banks," he said. "There are two reasons for this. First, it protects life and property. Second, it provides higher returns than bank interest." But insurance companies often keep their money in fixed deposits, and when bank interest rates are low, the company's returns decrease, says Parajuli. 

"If this trend continues for a long time, the company may have to either increase insurance premiums or reduce returns," Parajuli said. "On the one hand, increasing insurance premiums reduces the purchasing power of citizens, so there is a risk of reducing access to insurance." Although insurance business has increased in the short term due to the current decrease in interest rates, neither the company nor the insured will benefit until the overall economy is in motion. 

Compared to the previous year, the insurance premiums of life insurance companies have increased by 13.98 percent and the premiums of non-life insurance companies by 15.42 percent until last April. The National Statistics Office has projected that the growth rate of the financial and insurance sector will be 9.16 percent in the current fiscal year due to an increase in the collection of renewal premiums for non-life and life insurance. 

Insurance Authority spokesperson Pujan Dhungel Adhikari also said that the positive impact of the reduction in bank interest rates has been seen on insurance business for the time being. ‘Insurers may have seen more benefits from insurance than the interest earned from keeping money in banks when analyzing the cost-benefit,’ she said, ‘But even when interest rates are low in banks, the demand for loans has not increased. However, due to low interest rates, insurance business seems to have increased immediately. But this does not make this sector strong in the long run.’ She said that the entire economy should be made dynamic to strengthen the insurance sector. As of last Baisakh, insurance access in Nepal has reached about 50.5 percent. The Authority has monthly data showing that overall insurance access has also increased due to the expansion of insurance services. As of last Baisakh, 49.34 percent of the country’s total population was outside the reach of civil insurance, the Authority said. 

The data also includes insurance taken out by temporary, short-term and foreign employment. However, the NRA has stated that only about 18.45 percent of the citizens have access to insurance by last April when temporary, short-term and foreign employment insurance is excluded. When temporary and short-term insurance is included in the data, the figure is about 42.97 percent, and when temporary, short-term and foreign employment insurance is also included, the NRA says that the insurance access is 50.66 percent. Experts say that it is difficult to say that only about 50.5 percent of the total population of Nepal has access to insurance, as a person can have more than one insurance policy, just like a deposit account in a bank and financial institution.

Nepalis who have gone for foreign employment must have insurance. Insurance for those who have gone for foreign employment is kept separate in the data on insurance access. When calculating the data on insurance access, only the population who have taken life insurance services is included. This is an international practice.

Non-life insurance is not included in insurance access because it is for a fixed period (term). A person may have taken out more than one life insurance policy. Therefore, it does not mean that the facility has reached the same number of citizens based on the number of issued insurance policies. Such duplication should be removed when calculating insurance access data. For this, there is a global practice of calculating insurance access by subtracting 5 percent from the total issued insurance policies and comparing the remaining insurance policies with the total population of the same period.