Kathmandu: More than a decade has passed since Nepal introduced microinsurance programs aimed at protecting low-income households, marginalized communities, remote regions, and small-value assets from financial shocks. It has also been over three and a half years since the country licensed dedicated microinsurance companies to expand access to insurance services. Yet despite these efforts, the sector’s overall progress remains underwhelming.
The concept of microinsurance was first introduced in 2014 by the then Insurance Board, now the Nepal Insurance Authority. In 2022, seven companies were granted licenses to operate exclusively in the microinsurance segment. The objective was to bring insurance services directly to underserved populations, including rural households, small businesses, and marginalized groups. However, the sector has struggled to achieve meaningful penetration in those intended markets.
In practice, many of the newly established microinsurance companies remain narrowly concentrated and have yet to fully reach their target communities. Large insurance firms continue to dominate a significant portion of the microinsurance market. Under the Microinsurance Directive 2022, life insurance policies with coverage below Rs 500,000 and non-life insurance policies with coverage below NPR 5 million are classified as microinsurance products.
Data from the Nepal Insurance Authority through June 2025 show that more than 351,000 non-life microinsurance policies have been issued nationwide. Of these, micro non-life insurance companies alone accounted for 339,214 policies, representing 96.63 percent of the total. Larger non-life insurers issued only 11,826 policies, or 3.37 percent, indicating that specialized microinsurers dominate the non-life microinsurance segment.
The situation is very different in life microinsurance, where large insurance companies continue to hold the upper hand. A total of 5.07 million life microinsurance policies have been issued so far. Large insurers accounted for 3.41 million policies, equivalent to 67.23 percent of the total market, while micro life insurers issued 1.66 million policies, or 32.76 percent.
A study report published by the Nepal Insurance Authority titled “Microinsurance Regulation, Outreach Expansion and Impact Enhancement in Nepal” further highlights this imbalance. Out of total life microinsurance premiums worth $19.88 million, 14 established insurers collected $14.91 million, or nearly 75 percent, while newly established microinsurance companies collected only $4.97 million.
The dominance of large insurers is even more pronounced in terms of risk coverage. Of the total $3.84 billion insured amount in life microinsurance, large insurers held $3.10 billion, representing 80.85 percent of the market. Newly established microinsurance firms accounted for just $735.5 million.
Non-life microinsurance, however, tells a different story. New microinsurance companies have significantly outperformed larger insurers in both premium collection and risk coverage. Of the total $6.27 million in non-life microinsurance premiums, new microinsurers collected $6.15 million, or 98.24 percent. Larger insurers accounted for only 1.76 percent. Similarly, out of $707.19 million in insured risk, microinsurance companies covered over 90 percent.
Despite this progress, newly established microinsurance companies continue to struggle with weak public trust, low awareness, and high operating costs. Questions also remain regarding the effectiveness and clarity of the policy requiring large insurance companies to allocate 10 percent of their business to microinsurance.
According to Chirayu Bhandari, Chief Executive Officer of Guardian Micro Life Insurance and president of the Nepal Microinsurers Association, convincing people to buy insurance remains one of the sector’s biggest challenges.
“Even people who understand insurance in Nepal often do not purchase it,” Bhandari said. “So it becomes even more difficult to explain insurance to people in rural and marginalized communities who have never heard of it or understood how it works.”
He stressed that stronger government policies are needed to support the sector’s expansion.
Industry experts argue that simply downsizing traditional insurance products is not enough to build a successful microinsurance market. Instead, insurers need to develop products specifically tailored to the needs of low-income and underserved populations, with affordable premiums and simplified benefits.
The Insurance Authority’s report recommends regular reviews of existing products to ensure they remain relevant to evolving risks, customer needs, and market conditions. It also urges insurers to improve service delivery through digital platforms, fintech partnerships, local community groups, member-based organizations, and small and medium-sized enterprises.
The report further emphasizes the need to clearly define the roles and responsibilities of conventional insurers versus microinsurance providers while encouraging the development of innovative, customer-focused products. Regulators have also been advised to facilitate bundled insurance products and create formal guidelines for partnerships involving digital platforms, cooperatives, SMEs, and technology service providers.
The study calls for faster and more transparent claims settlement systems with minimal paperwork. It also highlights the importance of financial literacy campaigns and community awareness programs to strengthen public trust and expand insurance coverage, particularly in remote and underserved regions.
The Authority has also been advised to improve data reporting systems by incorporating gender-disaggregated data, impact-focused indicators, claims settlement timelines, customer outreach metrics, and geographic coverage details.
The report notes that microinsurers have still not adequately focused on their intended target groups. It recommends expanding index-based insurance products, bundled policies, and mobile-based insurance services that allow customers to complete most transactions digitally. It also points out the need for more flexible coverage limits and clearer pricing guidelines.
Women’s participation in microinsurance remains another area requiring attention. The report suggests that insurers should separately track gender-based business performance and impacts to design more inclusive strategies.
Newly established microinsurance companies also face intense competition from larger firms despite operating with limited capital. The report warns that without innovation and regulatory support, these companies risk being crowded out of the market.
“Companies should not remain concentrated in urban areas,” the report states. “They need to introduce mobile-based and index-based technologies to reach remote and low-income communities.”
It also recommends that the Insurance Authority establish a regulatory sandbox framework to test new microinsurance products and make the regulatory definition of microinsurance more practical and adaptable.
The study additionally calls for stronger consumer protection mechanisms, closer monitoring of compliance with microinsurance-specific provisions, mandatory disclosure requirements, fair treatment of customers, and simpler grievance-handling systems for policyholders.
The report was based on an online survey involving 13 participants, including representatives from microinsurance companies, life insurers, and non-life insurers. Most respondents said the provisions of the Microinsurance Directive 2022 remain unclear, creating confusion that could hinder the effective implementation and growth of inclusive insurance in Nepal.
The Nepal Insurance Authority has already prepared its second strategic plan for 2023–2027 to modernize, regulate, and strengthen the credibility of the insurance industry. One of the plan’s core pillars focuses on insurance accessibility and inclusion, with particular emphasis on promoting microinsurance, agricultural insurance, livestock insurance, and herbal insurance products.
Under current regulations, micro life insurers can offer whole-life, term-life, endowment, and other life insurance products, while micro non-life insurers can provide home, property, business, motor, engineering, liability, and monetary loss insurance products.
Coverage limits vary depending on the product category. Life microinsurance is capped at Rs 500,000. In non-life insurance, home, property, business, motor, and engineering insurance policies can provide coverage up to NPR 5 million, while liability and monetary loss insurance are capped at Rs 500,000.
Nepal first introduced microinsurance guidelines in 2014 and later required insurance companies to allocate 5 percent of their business to microinsurance in fiscal year 2016/17. The mandatory threshold was raised to 10 percent in the 2018/19 budget.
However, larger insurance companies showed little enthusiasm for microinsurance because of high operating costs and relatively low returns. This eventually led the government to establish separate microinsurance companies to drive the program forward.
In November 2022, the Insurance Authority granted licenses to three micro life insurers and several micro non-life insurers. Licensed micro life insurers included Guardian Micro Life Insurance, Crest Micro Life Insurance, and Liberty Micro Life Insurance. On the non-life side, licenses were granted to Nepal Micro Insurance, Star Micro Insurance, and Protective Micro Insurance.
More than three years later, concerns persist that Nepal’s microinsurance sector remains heavily urban-centred and has yet to fully achieve its original mission of reaching the country’s most vulnerable communities.
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