Traditional insurance policies fall short, domestic small enterprises need integrated and flexible insurance
A joint study by UNDP and the Nepal Insurance Authority shows that traditional insurance policies are becoming irrelevant for small and medium enterprises. Entrepreneurs in agriculture and tourism are demanding an integrated insurance plan that covers multiple risks.
Kathmandu – Traditional and limited-scope insurance policies currently sold by insurance companies are becoming irrelevant for small and medium enterprises. According to a study report titled 'Risk Management in Small Businesses in Nepal: Insurance Protection Gap' jointly released by the United Nations Development Programme (UNDP) and the Nepal Insurance Authority, entrepreneurs in agriculture and tourism are waiting for a single integrated insurance plan instead of purchasing separate policies for different risks.
The report states that non-life insurers have failed to introduce insurance policies that address the risk-bearing needs of small and medium entrepreneurs. Small entrepreneurs are frustrated because insurance covers only direct damage to livestock and crops in agriculture, but does not cover losses during storage, damage to goods in cold storage due to power supply interruptions, or the risk of unpaid loans.
Similarly, in the tourism sector, although vehicles and buildings are insured, there is no insurance policy available in the Nepali market to cover income loss when bookings are cancelled due to roads being blocked by floods and landslides. Small entrepreneurs have demanded an integrated insurance policy that covers crops, livestock, equipment, business continuity, and loan risks under a single umbrella.
This report is based on extensive field research. It involved consultations with representatives of 134 small and medium enterprises across all seven provinces of Nepal through surveys and focus group discussions. Important information and insights were obtained from interviews with policymakers, regulatory bodies, and insurance sector representatives.
Desk research (study of available data and documents) was conducted to prepare the necessary context and background for the study's conclusions. The report identifies various sectoral risks, insurance-related barriers, and misconceptions about insurance.