Life Insurers are under pressure to recover loan from Agents

Kathmandu:The life insurance companies are under pressure to recover the loan provided to agency.Drawing the conclusion that a remarkable amount of premium earning has been provided to the agency under different heads of loan.

Due to tough competition among life insurers, agencies are enjoying additional benefits from beside the cap of commission/incentives.
Beema Samiti has directed to recover all the loan issued to agency by the end of the Asar 2078(15 July 2021). Insurance companies issue loan to the agency for motorbike, four-wheeler, housing and other softlaon on the basis of their commission and incentive earning.

Beside that to retain prominent agency like senior business manager other facilities are also provided. Such facilities may be issued with or without collateral.

Further,Beema Samiti has strictly directed not to provide loan facilities to the agency without prior written consent from the regulator.The chairman of Samiti,Mr. Surya Prasad Silwal has admitted that, the action has been taken to safeguard the policyholders’ interest.Samiti has instructed not to issue loans and borrowings to anyone other than the policy loans.

There are 19 life insurance companies.

Article 49 ‘B’ of the Insurer’s Good Governance Directive 2075 issued by the Beema Samiti stipulates that an insurer conducting life insurance business shall not be deemed to have obstructed his reinsured insurance agent from giving loan as specified by the committee on time. This instruction has been given after finding that excessive loan has been issued even in case of non-payment.

Insurance companies have been disbursing crores of rupees for selling insurance policies to agents.
As per the insurance act, the insurers have to get pre approval for making any capital investment or assets purchase beyond their limit. But there wa no evaluation of the crores of rupees that the companies flow to the agents as loan., the Nepali version of this media house, has been continuously raising the issue about the flow of risky loans to the insurance agents. Such acts are distorting the insurance sector.
Life Insurance companies are under pressure to expand their business volume. There is a growing trend of among companies lending crores of rupees to agents to obtain more new business and later returning the same money(premium) by surrendering the policy next year.

Since, the life insurance business in Nepal is solely dependent on the agency network, the agents are reluctant to pay off their loans to the insurer. The unions of the agency are about to raise the issue of agency loan facility collectively.

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