Year III Semester V Contents Introduction to insurance Key Components of insurance Significance of insurance Business Model of Insurance Companies Regulatory Aspects Types of Insurance Companies Insurance Products Bancassurance Trends and Issues Risk Risk refers to the uncertainty or potential for loss, damage, injury, or any adverse outcome that may affect an individual, organization, or system. In various contexts, risk is an inherent part of life and decision-making, and managing it effectively is crucial for making informed choices and minimizing negative consequences. Introduction to Insurance Insurance is a financial arrangement that provides protection against potential financial losses. It involves the transfer of risk from an individual or entity to an insurance company in exchange for the payment of a premium. The basic idea behind insurance is to pool risks among a large number of policyholders, with the understanding that not everyone will experience a loss at the same time. Key Components of Insurance Policyholder: This is the person or entity that purchases the insurance policy. The policyholder pays a premium to the insurance company in exchange for coverage. Premium: The premium is the amount of money that the policyholder pays to the insurance company at regular intervals (such as monthly or annually). This is the cost of obtaining and maintaining the insurance coverage. Insurance Policy: This is a contract between the policyholder and the insurance company. It outlines the terms and conditions of the coverage, including the types of risks covered, the limits of coverage, and any exclusions or conditions. Key Components of Insurance Insurer: The insurance company is referred to as the insurer. It assumes the financial risk associated with the covered events in exchange for the premiums paid by policyholders. Coverage: This refers to the protection provided by the insurance policy. Different types of insurance policies cover various risks, such as health events, property damage, liability, life events, and more. Claim: When a covered event occurs, the policyholder can file a claim with the insurance company. The insurer then evaluates the claim and, if approved, provides compensation to the policyholder to help mitigate the financial loss. Significance of Insurance Companies Risk Management: Individuals: Insurance allows individuals to transfer the financial risk of unforeseen events, such as illness, accidents, or property damage, to the insurance company. Businesses: Companies use insurance to protect against various risks, including property damage, liability claims, business interruption, and employee-related risks. Financial Protection: Insurance provides financial protection and a safety net for policyholders. In the event of a covered loss, the insurance company helps mitigate the financial impact by providing compensation or coverage for the damages. Significance of Insurance Companies Wealth Preservation: Insurance contributes to the preservation of wealth by preventing significant financial setbacks due to unexpected events. It helps individuals and businesses maintain financial stability in challenging times. Encourages Economic Activity: The existence of insurance allows businesses to take calculated risks and invest in growth opportunities. Insurance coverage provides the confidence and security needed for entrepreneurial endeavors. Crisis Response and Recovery: Insurance plays a vital role in responding to and recovering from crises, including natural disasters, accidents, and other catastrophic events. The financial support provided by insurance facilitates recovery efforts. Significance of Insurance Companies Facilitates Investments: Insurance companies are major institutional investors. The premiums collected are often invested in various financial instruments, contributing to capital markets' liquidity and supporting economic development. Promotes Stability: By spreading risks across a large pool of policyholders, insurance companies contribute to overall financial stability. This diversification of risk helps prevent the concentration of financial losses in specific sectors or regions. Encourages Responsible Behavior: Insurance policies often include incentives for policyholders to adopt responsible behaviors. Significance of Insurance Companies Supports Legal and Regulatory Compliance: Insurance companies operate within a regulatory framework, ensuring compliance with laws and regulations. Social Safety Net: Insurance serves as a social safety net, providing financial assistance to individuals and families in times of need. Life insurance, health insurance, and disability insurance, for example, help support individuals and their dependents. Innovation and Adaptation: Insurance companies continually innovate to address emerging risks and changing customer needs. They develop new products and services to adapt to evolving economic, technological, and environmental landscapes. 01. 02. Pricing and Interest Assuming Earnings and the Risk Business Model of Revenue 03. Insurance 04. Companies Reinsurance Evaluation of Insurers Nepal Insurance Authority Nepal Insurance Authority is the sole Regulatory Agency established to systematize, regularize, inspect and supervise insurance business in Nepal. It is an autonomous institution, established as per section 3 of the Insurance Act, 2079 BS, having a legal personality with perpetual succession. The Authority is entrusted with the objective to ensure a fair, competitive, reliable and credible insurance service in Nepal. Similarly, the Authority is also responsible for the regulation of insurance business effectively to protect the rights and interest of policy holders. To carry out these broad objectives, the Authority cooperates and coordinates with various national competent Authorities, private sector, stakeholders, foreign counterparts and international organizations. It is a founding member of International Association of Insurance Supervisors(IAIS). As a separate Regulator of the Insurance Sector, Insurance Board (Beema Samiti) was established in 2026 BS for the first time which with the enactment of Insurance Act, 2079 BS is converted into Nepal Insurance Authority. Insurance Act 2079 Formation and Management of Board Functions, Duties and Power of Board Registration of Insurer, Cancellation of Registration and Liability ProvisionsRelatingtoInsurance Agent,SurveyorandBroker Fund and Audit Types of Insurance Companies
01. LIFE INSURANCE 03. REINSURANCE
NON-LIFE/ 02. GENERAL INSURANCE 04. MICRO INSURANCE Life Insurance Companies Life insurance is a financial contract between an individual (the policyholder) and an insurance company. In exchange for regular premium payments, the insurance company agrees to provide a specified sum of money (the death benefit) to the designated beneficiaries upon the death of the insured person. Life insurance is designed to provide financial protection and support to the policyholder's loved ones or dependents in the event of their death.
There are currently 14 life insurance companies in Nepal
Non-Life Insurance Companies Non-life insurance companies, also known as property and casualty (P&C) insurance companies, provide insurance coverage for a wide range of risks other than those related to human life. Unlike life insurance, which primarily deals with providing financial protection in the event of death, non-life insurance focuses on protecting against various risks, damages, and liabilities.
There are currently 14 non-life insurance companies in
Nepal Reinsurance Companies Reinsurance is a practice in which an insurance company (the primary insurer) transfers a portion of its risk to another insurance company (the reinsurer) to reduce its exposure to large financial losses. The primary insurer cedes a portion of its insurance policies or portfolio to the reinsurer in exchange for a premium. Reinsurance is a key component of risk management for insurance companies, allowing them to spread risk and ensure financial stability.
There are currently 2 reinsurance companies in Nepal
Micro Insurance Companies Microinsurance is a type of insurance specifically designed to meet the needs of low-income individuals or those with limited access to traditional insurance products. The goal of microinsurance is to provide financial protection to vulnerable populations, often in developing countries, against specific risks at an affordable cost. It addresses the unique challenges and economic circumstances faced by individuals with limited resources.
There are currently 4 micro insurance companies in
Nepal Insurance Products Endowment Life Insurance Whole Life Insurance Term Life Insurance Property Insurance Auto Insurance Travel insurance Accidental and Medical Insurance Transit Insurance Bancassurance Bancassurance is a financial services model in which insurance products are distributed through banking channels, typically within a bank's branch network. It involves a strategic partnership between banks and insurance companies to offer a range of insurance products and services to the bank's customers. Bancassurance aims to provide customers with a one-stop-shop for their financial needs by integrating banking and insurance offerings. Trends & Issues Insurtech Parametric Insurance Micro-insurance Ethical Considerations
