National Life aims to become country's largest insurer
National Life Insurance Company (NLIC) is celebrating its 25th anniversary this year. Established in 1988, NLIC currently has a capital base of Rs 260 million and a life fund size of over Rs 6 billion. Republica recently caught up with the company´s CEO, Bharat Basnet, and talked about the company´s performance, its products and weaknesses of insurance companies. Excerpts:
How is the financial performance of the company?
It has been satisfactory as we have put in a lot of efforts to diversify our product range in the last three to four years. In the last fiscal year, National Life was the top company in terms of premium collection through issuance of new policies.
Although insurance companies are making huge profits, most of them, including yours, do not seem to be interested in raising their capital base. Is it because of excessive focus on dividend distribution?
The Insurance Board has instructed all life insurance companies to raise their paid-up capital to a minimum of Rs 500 million by the end of the next fiscal year, from the current floor of Rs 250 million. Keeping this in view, we have already made provisions to raise our capital base to Rs 310 million. Within the end of the next fiscal we will be able to meet the regulator´s new capital requirement.
Considering the transaction of individual insurances companies, which has reached tens of billions of rupees, do you think the new capital requirement is sufficient?
The difference between the business of banks and ours is that we do not extend credit. We do make investments, but those investments are made in areas approved by the regulator. Besides, we do not invest in highly risky instruments. So, most of our investments are safe. That´s why I think the new capital floor fixed by the regulator is enough for insurers.
But there are claims that because of weak capital buffers, insurance companies are not able to retain risks themselves and have to depend heavily on reinsurance companies?
Actually the concept of absorbing the risks on our own by raising the capital has not taken roots in the country. Besides, the Insurance Board is also not clear on this concept. That´s why we are currently limited to covering risks of up to Rs 200,000. If the insured amount is higher than this, we resort to reinsurance companies (firms based abroad that sell insurance policies to insurance companies).
Talking about your company, how are you planning to steer it in coming days?
We are planning to become the biggest life insurance company in the country in terms of premium collection from the present third position. In the last fiscal year, our premium collection touched Rs 1.60 billion and interest income was recorded at Rs 500 million. That´s why we are aggressively mobilizing our agents to various parts of the country and trying to improve quality of our services. Currently, our bonus rate, at 5.6 percent per annum, is among the highest in the life insurance market. This factor has also helped us promote our products easily.
What products are most favored by clients?
The tradition endowment life insurance policies are still the most favored product in the market. Almost 60 percent of the products that we sell are endowment policies. Lately, child policies are also becoming popular. These policies make up almost 25 percent of the total policies that we sell. Recently, we also introduced pension plan and money back policies. Except for ULIPs (unit-linked insurance policies in which premiums are invested in debt or stocks chosen by customers), we have introduced all kinds of insurance policies available in the international insurance market.
Are you planning to introduce new products this year?
We have recently designed micro-insurance products for rural markets. We are currently waiting for the Insurance Board´s approval to introduce those products, which I do not want to disclose at this moment. We are planning to work in cooperation with microfinance institutions to sell these products.
It is said rural areas have emerged as one of the lucrative markets for insurance companies? Is it true?
That´s correct. That´s why I do not agree with claims that rural population is not aware about insurance. The sales of insurance policies are increasing in rural areas because of rising remittance flow. So it wouldn´t be appropriate to say that rural markets are, to some extent, playing an important role in boosting businesses.
Republica had recently exposed that one of your corporate agents was operating pyramid scheme to sell insurance policies. Could you please give us an update on the matter?
After the news was published, National Life Insurance sought clarification from the agent. But the corporate agent told us that it was not involved in illegal activities. Currently, the Insurance Board is investigating the matter. If it finds the company guilty, we will take action against it.