High insurance coverage but low utilization of schemes, RMA survey


As per the Royal Monetary Authority (RMA), the country has an impressively high insurance penetration rate, accounting for 77 percent of adults owning at least one policy.

This is particularly in rural areas, where people struggle to understand their policies, hindering their ability to use them, and where ownership surpasses urban areas. This lack of knowledge threatens financial security and underscores the need for clearer communication and education from insurance companies.

However, despite this positive start, there are areas where improvement can be made, especially in raising awareness and understanding of insurance products and streamlining the claim settlement process. “While life insurance reigns supreme, many other types of insurance, such as retirement savings and crop insurance, remain underutilized, particularly in rural areas,” according to RMA’s demand slide survey, 2022.

Moreover, many adults participate in traditional retirement savings options like provident funds and pensions; a recent demand slide survey paints a concerning picture for rural residents. Despite national statistics showing relatively high participation rates, the survey exposes a significant knowledge gap regarding insurance products, potentially jeopardizing the financial security of rural populations in their potential years.

This highlights a knowledge gap that insurance companies can address by tailoring their services and educational efforts to reach the entire population, as suggested in the report.

As the majority of adults in the region achieved insurance coverage, a recent survey revealed a disconnect between policy ownership and understanding the claims process. Despite 87.8 percent of the population having insurance, only six percent have utilized their policies, and a concerning three percent remain unsure about the status of their claims.

Interestingly, the vast majority accounting for 64 percent prefers claiming directly through the insurance company, suggesting a desire for direct interaction and personalized service. However, the underutilization of mobile apps and agents, accounting only for 3.3 percent and 7.7 percent respectively, indicates potential opportunities to leverage technology and intermediaries for a more streamlined experience.

The survey sheds light on areas for improvement within the system. While most individuals have policies, understanding their specifics and navigating the claims process remain burdensome.

The data reveals that over half of claim refusals stem from coverage exclusions or incomplete documentation. Nearly 60 percent of denials occur because the claim falls outside the policy’s scope, highlighting the importance of carefully reading and comprehending policy details. Additionally, 50 percent of refusals involve missing or inadequate documentation, underscoring the need for clear and thorough guidance on required paperwork.

Furthermore, around 20 percent of denials result from policy lapses, emphasizing the importance of timely premium payments to maintain coverage. Interestingly, the survey also uncovers a concerning 10.9 percent of refusals due to suspected fraudulent claims, highlighting the ethical responsibility of policyholders.

Additionally, over 92 percent of the claims filed were successfully settled. It further states that some policyholders report a lack of clarity leading to confusion and frustration.

The report suggested findings that underscore the need for increased transparency and education from insurance providers. Initiatives like simplified policy booklets, readily available Frequently Asked Questions (FAQs), and educational campaigns can empower individuals to make informed decisions and ensure proper documentation. Additionally, clear communication regarding claim procedures and timelines can foster trust and reduce confusion combined with an improvement in policyholders and a reduction in claim refusal.

The primary hurdle for the uninsured majority which accounts for 50.4 percent lies in perceiving no need for insurance. This highlights a potential knowledge gap, where individuals might not fully grasp the value of insurance in mitigating financial risks associated with illness, accidents, or other unforeseen events. Addressing this gap through targeted financial literacy campaigns and awareness programs, particularly in rural areas where “not knowing about insurance” was also cited as a barrier with 6.30 percent, could be a reason.

Affordability also emerges as a significant concern, with 33.5 percent of the uninsured population citing insufficient income. Tailoring insurance products with flexible premiums and exploring micro-insurance options could make coverage more accessible to low-income groups.

Interestingly, urban residents display different motivations for not having insurance. While some share similar reasons like affordability accounting for 28.4 percent, a higher percentage with 11.1 percent prefer alternative saving products. This suggests urban populations might have different financial priorities or access to diverse investment options. Understanding these preferences can inform the development of insurance products that cater to their specific needs and financial goals.

Despite these challenges, the overall satisfaction level with insurance services in the country is positive. Policyholders are generally satisfied with the helpfulness of staff, the documentation required, and the fees charged. However, there is room for improvement in areas such as the time taken to receive services and the clarity of the information provided.

Fast forward to solving the problem, approximately 81.8 percent of insurance products and services are available through RICBL. Bhutan Insurance Limited (BIL) and the National Pension and Provident Fund (NPPF) represent only a small fraction of the entire insurance market in the country at 2.4 percent and 1.4 percent respectively.

Overall, the Bhutanese insurance industry presents a promising picture with high coverage rates. However, by bridging the knowledge gap, streamlining claim processes, and focusing on customer satisfaction, insurance companies can ensure that everyone in Bhutan has access to the protection and security they deserve.

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