Insurance agents across Nepal are rallying against newly introduced provisions in the Insurance Regulation, 2081, which they claim threaten their livelihoods and could negatively impact the growth of the insurance sector.

The controversy centers on Clause 44(4) of the regulation, which allows individuals to purchase life insurance policies directly—bypassing agents—and mandates a discount on the premium equivalent to 50% of the commission typically earned by agents.

Previously, while non-life insurance could be purchased directly, life insurance sales were restricted to licensed agents. The new rule removes that requirement, prompting concern among the agent community.

Currently, agents earn a commission of 5% on non-life policies and between 5% to 25% on life insurance, often continuing for the policy’s full term or up to 10 years. Agents warn that the new system could drastically reduce their earnings and discourage new entrants to the profession.

NIA Responds with Review Committee

In response to mounting protests, the Nepal Insurance Authority (NIA), the regulator of the sector, has initiated a formal review of the regulation. An eight-member advisory committee, led by Shamba Raj Lamichhane, head of NIA’s Legal Department, has been tasked with evaluating the impact and recommending amendments.

The committee includes two insurance agents, along with representatives from the life, non-life, and micro-insurance sectors, and two additional members nominated by the committee. They are expected to submit a report within a month, following sector-specific studies and a review of international practices.

The NIA Chairperson has assured stakeholders that the authority will request amendments from the Ministry of Finance based on the committee's findings.

“We’re encouraged by the Finance Minister’s positive stance on our demands,” said Om KC, Secretary General of the Professional Insurance Agents’ Association Nepal.

Surge in Licensed Agents

According to NIA data, the number of licensed insurance agents rose to approximately 329,000 by the end of FY 2023/24, an 18% increase over the previous year.

Under the Insurance Act, 2079, aspiring agents must undergo formal training and pass an examination conducted by the NIA. The Authority is also developing new requirements that would mandate updated training during license renewal.

Renewals Now Tied to Agent Incentives

A separate provision—Regulation 43(b)—links the renewal of agent licenses and incentive payments to their policy renewal performance. While not yet enforced, the clause would require agents to prove they’ve achieved a minimum policy renewal rate to renew their licenses.

Additionally, new rules propose a tiered system for deducting incentive allowances based on policy renewal rates: Full allowance for agents with renewal rates above 75%, 5% deduction for 60–75% renewal rate, 10% deduction for 45–60%, 15% deduction for 30–45%, and 20% deduction for less than 30% renewal rate.

The government has defended the move as a way to curb non-renewals and ensure agents remain committed to long-term policy servicing.

However, KC criticized the measures, calling them “demoralizing” and “unfair to agents who work tirelessly to serve clients, often in challenging conditions.”

The Association submitted a formal memorandum to the NIA a few weeks ago, demanding amendments.

“We remain hopeful, as the NIA has assured us it will seriously consider our concerns,” KC added.