The newly appointed chairman of the Insurance Board (IB) has said that he will try to find an amicable solution to end the protest by life insurance agents over the board’s cap on incentives and promotion spending.

“The ongoing protest by insurance agents is not a good sign for the insurance sector as it will hamper the industry,” said Chiranjibi Chapagain, chairman of the board. “I will immediately call them for talks and try to find a solution.”

Life insurance agents have stopped issuing new policies for more than a month to protest the IB’s move to limit agent incentive and business promotion spending to 6 percent of the annual gross premium income of insurance companies.

According to Chapagain, the strike by agents will affect the IB’s major initiative to extend insurance to a larger section of the population. 

“Currently, only 7 percent of Nepalis have access to insurance which is very low,” he said. “My first priority as chairman of the board is to increase the coverage, and such strikes will not help.”

Insurance agents held a number of rounds of talks with the IB and urged it to reconsider its decision. 

After their demand was rejected, they stopped issuing new life insurance policies at seven of the nine life insurance companies operating in the country. 

Insurance agents working for state-owned Rastriya Beema Sansthan and MetLife have not taken part in the protest. 

Life insurance companies sell all their policies through insurance agents. Many insurance companies also depute insurance agents as agency managers, who handle a group of agents working for a particular insurance company. These agency managers are generally given annual targets based on which they get paid. This payment is exclusive of the commission they get from sales of insurance policies.

The payment that insurance companies extend to agency managers is entered as incentive in the balance sheets of insurance companies. Although insurance companies are legally allowed to provide incentives to agents, the IB has found that this legal loophole is being misused to pay excessive amounts to insurance agents.

In July 2012, the IB had introduced a similar provision barring life insurance companies from spending more than 6 percent of their annual gross premium income generated through sales of new policies on guest entertainment, business promotion, advertisement and agent incentives.

The move was aimed at controlling extravagant spending and ending unhealthy competition among insurers to poach agency managers and agents. But the IB could not enforce the provision. 

This time, however, the IB has been closely watching whether insurance companies have been following the regulation. Insurance agents said the move had started “affecting their livelihood”.

Meanwhile, Chapagain has also vowed to work for the capacity building of IB staff and make the board a strong regulatory body. 

“I have come to the IB from Nepal Rastra Bank, a strong regulator, and I will try to make the board equally good,” he said.