Vijay B Shah(CEO)
Nepal Insurance Company Limited
BY BIJAYA LAXMI DUWAL
Right from its establishment 72 years ago, returning good profits to its shareholders has been one of the hallmarks of the first insurance company of the country- Nepal Insurance Company Limited (NICL).Vijay B Shah, the company’s CEO, admires its journey, “We are glad to share that Nepal Insurance has been successful in making profits and distributing dividend and bonus to its shareholders every year since its establishment in 1947.”
Moreover, the month of May, 2019, has become even more remarkable for NICL. On May 19, the company raised its paid-up capital to Rs 1 billion by issuing 65 percent rights shares. This was possible because of the investor’s trust in the company, according to Shah. “Having faith in NICL, Nepal Bank, IME Group, Vishal Group and a few other promoters have supported us to achieve the new paid-up capital requirement of Rs 1 billion, as directed by the Insurance Board,” adding, “Now, the challenge is to provide fair returns to all our stakeholders for the increased capital.”
The last fiscal year (FY2017/18) was also significant for the company as it scaled new heights. Among other remarkable achievements in the year, the company was able to expand its customer base by 300 percent and branch network by more than three times. “We are achieving many successive milestones one after another. This is why, we have decided to propel the company to the next orbit,” shares Shah.
At present, NICL is introducing new technologies in its management and seeking to take the insurable risks of Nepali entrepreneurs for the promotion of entrepreneurship, besides maintaining its legacy in the insurance sector.
NICL was established by Nepal Bank Limited, the country’s first commercial bank, in 1947 when it was called ‘Nepal Malchalani Tatha Beema Company’. The company’s name was changed to ‘Nepal Insurance & Transport Company’ in 1959. In the initial years when there was no other insurance company in Nepal, it used to provide insurance as well transportation services to cover the risks of goods imported from abroad. “Apart from providing insurance services, NICL helped in the promotion of trade in Nepal in the initial years of its establishment. We are proud to be the pioneer company in the insurance sector providing these services in Nepal,” says Shah.
The company was developed into a full-fledged non-life insurance company in 1991 when its name was again changed to the present ‘Nepal Insurance Company Ltd’, with the aim of providing general non-life insurance services.
NICL certainly enjoyed the first mover's benefits. But it also had to face many hurdles and overcome them. “Back then, there was almost no awareness about insurance in the country. Similarly, there was no regulator and no trained manpower,” shares Shah.
The company is a witness to many changes in the country’s insurance sector over the years. “After 1989, the insurance sector in Nepal gradually started to become vibrant. In the following years, the awareness level as well as market penetration increased with the emergence of many private insurance companies in the market,” reminisces Shah.
In the absence of a regulator for the insurance sector in the beginning, NICL was governed by its internal rules and the Acts which were applicable to any company. “When the sector-specific regulator (Insurance Board) was eventually formed, we started following its directions and guidelines,” says Shah. NICL gives the credit for its success to the customers, traders and entrepreneurs associated with it from the beginning. Besides, the company considers its partner bank, Nepal Bank Ltd, as a blessing for its sustainability.
3 Turning Points
According to Shah, developing the Nepal Malchalani Tatha Beema Company into a full-fledged insurance company, NICL, was the first turning point in the over seven decades long journey of the company. Shah observes that the company saw another turning point when Nepal Bank Limited offloaded its shares in the company to attract private investors. “Two years back, Nepal Bank reduced its stake in the company from 51 percent to 15 percent to rope in private sector entrepreneurs who brought professionalism, expertise and technologies in NICL. After that, everybody started looking at things differently.”
Shah says the third turning point came very recently when NICL successfully raised its paid-up capital to Rs 1 billion, as directed by the Insurance Board.
Recent years have been quite fruitful for NICL. The company which had only 18 branches till fiscal year 2017/18 has already increased the number of branches to 51 in the current fiscal year. Similarly, it increased its customer base from around 40,000 to about 150,000 in the period. The company also increased its extension offices from 0 to 29 across the country last year. “Our next target is to reach 100 branches,” notes Shah.
Products and Services
Today, NICL provides a range of non-life insurance products and services, including Property Insurance, Motor Insurance, Micro Insurance, Engineering Insurance, Aviation Insurance, and Marine Insurance, among other various insurance schemes. It is the only non-life insurer which provides insurance against cyber loss and crime. The Property Insurance Policy, among other policies, proved to be the most lucrative policy for NICL in 2018, says Shah. The Motor Insurance Policy has become the largest grosser these days due to mandatory third party insurance. Shah says, “Almost 50 percent of the total premium the company collects is being received from motor insurance policies, while 30 percent of the total premium is from fire insurance policies.” The remaining, around 20 percent of the total premium, comes from cattle and agriculture insurance and other policies such as engineering insurance, aviation insurance, marine cargo insurance etc, according to Shah.
“On the basis of the number of policies sold, we have a 10 percent market share while we have seven percent market share in terms of the gross premium collection,” remarks Shah. “We receive around 300 to 350 insurance claims per month,” reveals Shah.
The sudden explosion in the branch network expansion and customer base last year has aided the company’s growth.
Exploring Untapped Areas
According to Shah, non-life insurance penetration in the Nepali market is only around 15 percent. “Almost 85 percent of the market in Nepal is still untapped. Government property is the biggest untapped sector, followed by the monuments, cultural heritages, hydropower projects etc,” he says, adding that the government should encourage transferring the risks of businesses like agribusiness to insurance companies so that it would contribute to promoting entrepreneurship in the country. NICL has signed reinsurance agreements with about half a dozen different reinsurance companies such as Nepal Re-Insurance Company, General Insurance Corporation of India (GIC Re), Hannover Re and Swiss Re etc. The company is constantly upgrading its operational security as well as its own risk management system.
Shah says NICL attaches high priority to its corporate social responsibility (CSR), supporting communities hit by natural disasters and sharing their grief. The company helps such people keeping in the mind that immediate relief is crucial during such tragedies.
For example, just four months ago, the company distributed blankets and clothes to fire victims in Jumla under its CSR. Similarly, it has been providing free meals, drinking water, and other essentials to the needy people on various occasions.
•First insurance company
•Over seven decades long journey
•Seasoned and knowledgeable employees
•Laidback attitude leading to lack of business reinvention
•Not fully utilising technology
•Unfair market practices
•Lack of clarity on the scope of insurance at the provincial level