May 3: The uncertainty caused by the fear of coronavirus and the extension of lockdown have been affecting the insurance sector.

Usually around this  time of the year, the insurance companies make good business due to various schemes they announce. But, due to the lockdown, insurance companies are getting very less clients who want purchase insurance policies.

The main source of revenue for insurance companies is insurance premium. The officials say that even the insurance renewal hasn’t taken place as the government has postponed the renewal deadline till mid-June. Earlier, the deadline for renewal was mid-May.  

According to Shiva Nath Pandey, president of Nepal Insurers Association, the insurance sector may lose Rs 13 billion due to lockdown. “Had it been normal times, we would have invested in various sectors to expand revenue horizon,” said Pandey.

Due to chances of decreasing revenue of companies, it is expected that people’s income will reduce. In this situation, it is very difficult for the insurance companies to get new businesses. Apart from that, it is also certain to affect the renewals of insurance policies.

“Because of decreasing income, people will give less priority to insurance,” says Pandey.

The insurance sector had set a target to collect insurance premium of Rs 100 billion in the current Fiscal Year. In the last Fiscal Year, insurance premium of Rs 70 billion was collected.

Due to the slowdown of business in the insurance sector, the profit of most of companies will be affected.

The affect is also seen in the non-life insurance sector. According to Noor Pratap Pradhan, vice-president of Nepal Insurers’ Association, the renewal of non-life insurance is not so exciting.

“The employees haven’t got salary from their offices. It is normal that the insurance holders have not been able to deposit the amount during this period,” said Pradhan. “Presently, the business is only 45 percent compared to normal times. All these transactions have taken place through online medium.”

Similarly, the insurance companies have further been affected due to the reduction of interest rate by the commercial banks. The insurance companies deposit almost the entire amount in the banks. So, they gain profit from the interest. But, due to Covid 29, the interest rate on deposits has been reduced to 7 percent from 9.75 percent. According to data from Nepal Rastra Bank, the insurance companies have deposited around Rs 200.63 billion.

According to Pandey, the effects won’t be seen in the financial report of this year. “Because the business was really good for first 8-9 months of this fiscal year. However, the effect will be seen in the next fiscal year,” he said.