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1.3 Statement of Problems

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108 views2 pages

1.3 Statement of Problems

Uploaded by

mdlife407
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Insurance companies collect their funds from premiums, which are amounts paid by the

insured to the insurer for bearing risk and uncertainty. Premiums can be gross or net, and
further divided into single or level premiums, depending on the company's corporate
objectives.

There are two main types of insurance: life and non-life. Life insurance requires a refund of
the collected premiums with bonds, while general insurance does not have such a burden.
Investment is a major part of all financial institutions, including insurance companies. They
invest excess funds after paying claims and managerial expenses, aiming for maximum
returns.

The Insurance Board of Nepal regulates the investment portfolios of insurance companies.
Companies must invest 75% of their investable funds in compulsory sectors and the
remaining 25% in other sectors.

1.3 Statement of Problems

Nepalese insurance companies have been successful since their establishment, but face
several challenges. The volume of transactions is increasing, but net earnings are not growing
proportionally due to intense market competition. Another significant challenge is mobilizing
collected funds in suitable sectors. Many people in Nepal are illiterate and live in villages,
making it difficult to expand insurance businesses. Additionally, there is a lack of trust in
insurance among the Nepalese people, and companies are not sufficiently addressing these
issues.

This study aims to provide suggestions for overcoming these challenges and improving the
efficiency and profitability of Nepalese insurance companies.

1.4 Objectives of the Study

The main objective of this study is to analyze the current situation of premium collection and
investment positions of insurance companies in Nepal. The specific objectives are:

1. To evaluate the premium collection and investment patterns of Nepalese life


insurance companies.
2. To examine the relationship between premium collection & investment, net profit &
investment, and claims paid & premium collection.
3. To examine the trends in premium collection, investment, and net profit of life
insurance companies.
4. To analyze the views and opinions of insurers and clients of life insurance companies.

1.5 Research Questions

The study aims to address the following questions:

1. What is the condition of premium collection and investment patterns of Nepalese life
insurance companies?
2. What is the relationship between premium collection & investment, net profit &
investment, and claims paid & premium collection?
3. What are the trends in premium collection, investment, and net profit of life insurance
companies?
4. What are the attitudes of life insurance insurers and clients towards life insurance
companies?

1.6 Significance of the Study

Insurance is a growing service industry in Nepal, with 25 insurance companies currently


operating (www.bsib.org.np till 2016). Among them, 16 are general insurance, 8 are life
insurance, and 1 underwrites composite business. Most companies focus on urban areas and
main cities, capturing each other's market without creating new policies or potential markets.
They invest in traditional sectors, but a new study is needed to evaluate their premium
collection and investment positions.

This study is important for understanding the premium collection and investment conditions
of Nepalese insurance companies. It will help reveal the utility of insurance in Nepal,
focusing on market expansion potential and identifying weak areas that need improvement.
The study's findings will provide valuable insights for both the insurance companies and their
clients.

1.7 Limitations of the Study

The study has some limitations:

1. It deals with selected life insurance companies' premium collection and investment
patterns.
2. It concentrates on premium collected from sample companies, with data primarily
from the insurance board and some primary data.
3. It focuses on data from fiscal years 2010/11 to 2014/15.
4. Time and resource constraints limited the scope of the study.

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