Impact of Operational Risk on the Insurance Industry of Nepal

Abstract

This paper discusses the impact of operational risk in the insurance industry. The risk related to operational cost represents a financial challenge to the insurance companies in Nepal and beyond. The primary objective of this article is to explore variables that cause operational risk in financial institutions in general and in the insurance industry in Nepal in particular. The risk of high operational costs impacts insurers’ financial performance. The finding of the study reflects in the risks and their impact on Nepalese insurance companies associated to claims management costs, technology infrastructure, fraud and risk management, customer acquisition and retention, and disasters and losses. The research paper centers on only five arenas wherein the risk is faced by almost all the insurance institutions in Nepal. The researcher has used secondary sources of information in order to meet the objective. The mixed research design method has been employed to analyze the data. The exploration reveals that most of the insurance companies in Nepal suffer high risk when operating the cost for technology infrastructure and disasters and losses out of numerous operational costs.