New Insurance Act will change scenario: Resta Jha (CEO, Prime Life Insurance Company)

FEB 27 -

Resta Jha is the chief executive officer of Prime Life Insurance Company. He talked to the Kathmandu Post about the current scenario of life insurance business in Nepal and Prime Life.

Excerpts:

Tell us about Prime Life Insurance’s journey so far.

We are marking our third anniversary in June. And, our journey so far has been successful. Life insurance business in Nepal has two aspects—general life insurance and insurance of migrant workers. We are the market leader in migrant workers’ life insurance business with 40 percent market share. As far as our market share in general life insurance business is concerned, it has increased to 13 percent from earlier 5 percent. The most interesting part is our performance between the fourth quarter of the last fiscal year and first quarter of the current fiscal year. While the industry witnessed a decline of 36 percent over the period because of the Unity Scam, Prime Life was the only company to register growth. In this year’s first quarter, we have collected Rs 55.3 million as first life premium.

What is the overall scenario of the domestic life insurance business?

Last year, life insurance business had grown remarkably. It recorded first life premium of Rs 370 million in the first quarter of 2009-10. The figure kept on increasing over the next three quarters. The most interesting fact is the growth was witnessed at a time when the country’s banking system was reeling under a serious liquidity crunch. However, the multi-billion Unity Scam posed a setback to the business. Because of the scam, the growth rate dropped by 36 percent in the first quarter of the current fiscal year. Despite this fall, the first life premium collection in the first quarter stood at Rs 430 million.

Prime Life’s ‘Sunya Ya Tin’ scheme attracted much attention. What is the exclusive feature of this scheme?

There are no such exclusive features in the scheme. All insurance companies offer such benefits. Under this scheme, either you get zero or three benefits—saving, life security and tax. You can get these benefits in whichever institution you insure your life. However, general people were not aware about life insurance benefits. Therefore, 15 months ago, we launched the campaign and it helped us cement our brand value. Today, we do not have to describe who we are. This scheme has played a great role in the success we have achieved so far.

What is your view about the upcoming Insurance Act?

The provision of increasing paid-up capital to Rs 2 billion will hamper some shareholders, as an increase in the capital base will lower the return on capital. It may take around three to four years to get back on track. On the other hand, with strong capital base, companies will become stable and strong. Generally, a company’s strength is measured by its capital base. Strong capital base will minimise risks associated with stakeholders—management, human resources and policyholders. So I am affirmative on this provision.

But most of the stakeholders are against the provision.

It is their individual opinion. Capital increment may impact insurance companies’ performance for around two to three years, but it is good for the overall growth.

How tough is it for insurance companies to raise their capital to Rs 2 billion?

It is not so tough. If any shareholders cannot raise their contribution, they will be replaced by the capable ones.

Recently, there were some talks of establishing re-insurance companies that insure insurance companies. What is your opinion?

I am against this idea, as capital requirements of re-insurance companies are higher. Such companies have to bear risks taken by other insurance companies. The country’s insurance business is not enough for running companies with higher paid-up capital. We also do not have competent human resources in Nepal to run re-insurance companies.

We also heard that Prime Life is starting micro-insurance policies. What is happening on this front?

We haven’t started mirco-insurance yet. We are about to receive a letter from the Insurance Board in this regard.

Posted on: 2011-02-27 09:03
http://www.ekantipur.com/2011/02/27/business/new-insurance-act-will-change-scenario/330205.html