IB tells insurers not to hike premiums

KATHMANDU, MAY 21

The Insurance Board (IB) has warned non-life insurance companies not to increase their premiums in a circular issued on Tuesday. It has also barred them from stipulating new conditions and extending the apprehension period, the time after which an insurance policy becomes active.

The IB’s move followed reports that insurers had been hiking their premiums after encountering a surge in policy buyers in the wake of the devastating April 25 tremor.

“We came up with the step after receiving a number of complaints that insurance companies had increased their premiums by as much as two-fold,” said Shree Man Karki, director of the board.

Following the Great Earthquake, insurance companies are reported to have been besieged by policy buyers wishing to insure their houses. Taking advantage of the rush, insurance companies had increased the premiums. Karki said premiums could be revised only with the approval of the IB’s board meeting.

Meanwhile, insurers have stipulated a period of two weeks to activate an insurance policy when the law says that it becomes valid on the day of purchase. According to Karki, they have asked insurance companies to stick to the existing provision.

Insurers have defended the hike in premiums claiming that reinsurance companies were likely to revise their own rates. “Citing a surge in insurance claims due to the earthquake, reinsurance companies have been preparing to jack up the rates for Nepali insurance companies,” said an official of Lumbini General Insurance. “However, reinsurance premiums can be revised only at the start of a new fiscal year,” he added.

Similarly, insurers claimed that they had been forced to delay activation of insurance policies due to the continued occurrence of aftershocks. Karki said that insurance companies had the complete right to decide whether to insure a house or not after looking at its condition. More than 700,000 houses were partly or fully damaged by the Great Earthquake and repeated aftershocks.

Meanwhile, the Nepal Insurers’ Association said in a press release on Wednesday that the hike in premiums and apprehension period were applicable only to new insurance policies.

According to the association, they were compelled to increase the premium due to a rise in the reinsurance rate. The association also claimed that the planned apprehension period was a common international practice.

Source: The Kathmandu post