IB asks to settle 50pc claims within three months

KATHMANDU, JULY 19: 

The insurance regulator is hopeful that more than 100 per cent provisioning of unsettled insurance liabilities will not dent the companies’ balance sheets.

The Insurance Board has given insurance companies a three-month deadline to bring down number of unsettled claims to 50 per cent as instances of unsettled claims hamper the entire insurance business ––especially non-life insurance.

“Non-life insurance companies have to settle more than 25,000 insurance claims amounting to Rs 3 billion. Such a huge number of unsettled claims are the major reason for non-life insurance policies being unpopular in Nepal,” pointed out chairman of the board Prof Dr Fatta Bahadur KC. “That is why we have given them a deadline to reduce the number of claims,” he added.

However, the companies will not face any problem in settling half the unsettled claims in three months, as regulation requires them to provision 115 per cent of the total unsettled claims.

The insurance companies have set aside about Rs 3.45 billion as reserving risk for unsettled claims. “When the companies settle claims on a larger scale they will not become cash strapped due to the provisioned amount,” he said.

Even though such a large amount of provisioning has affected the companies’ profits, companies keep delaying settlements. Due to the large number of outstanding policies that need to be settled along with the long time taken for a settlement, the general public is discouraged to avail non-life insurance services.

Moreover, there is no assured return in case of non-life insurance policies as opposed to life insurance because of which non-life policies are unattractive. In addition, such undetermined delays in settlement has dented the insurance business as well. People purchase non-life insurance mostly if it is mandatory like in the case of motor insurance or the insurance of pledged properties.

The number of unsettled life insurance claims is about 600 as maturity of life insurance policies are predetermined and firms prepare cash flow accordingly.

IB frames guideline 

Insurance Board (IB) has directed insurance companies to ask for its permission before purchasing any fixed assets. If a firm has to buy or lease any land or building it has to be granted permission by IB. Likewise, firms have to seek IB’s permission to buy assets such as furniture and fixtures worth more than Rs 500,000, software more than Rs one million and vehicles exceeding Rs two million.