Kathmandu: The new directives on Life Insurance Policy 2078 has the provision of withdrawal of insurance within 30 days of it’s issuance. With this arrangement, the insured can return the policy within 30 days of policy purchase.
Article 21 of the Directives provides a 30-day repayment period on all types of insurance policies and that period is effective from the date of issue of the policy. This rule is in favor of the insured. They have the option to return or cancel the policy and ask for refund of the first premium within 30 days of the issuance. But in a place like Nepal where there is unhealthy competition, such rule will create distortion and create the trouble tomorrow, say the CEOs.
Experts say that such an arrangement will make money laundering easier. Insurance companies do not have to show the income source of client when selling an insurance policy with lower sum assured(SA). The purchase of numbers of policies with lower SA is possible with the black money. Later the money will be white once it is cancelled within 30 days grace period.
On the other hand, the commission and incentives are immediately paid to the agents once the policy is issued. In addition, taxes have been paid to the state from the commission and incentives credited to the agent. Due to such status, the insures admit that the provision is very impractical.
Sub-section 2 of Article 21 states, “If the insured/policyholder requests in writing to return the policy within the period specified by the insurer, in case no claim is received under the policy, the insurers will have to cancel the policy by refunding the entire premium.” A chief executive officer of the insurance company said, “How can the commission paid by the agent and the tax paid to the state be returned when the insurer has to return the entire premium?”
Similarly, according to subsection 3, the insurance companies can deduct the cost of medical underwriting, the proportional premium amount and the ticket fee for bearing the risk from the date of issuance of the policy to the date of request for return of the policy. It is seen that the companies will be in trouble if Beema Samiti makes such an arrangement without considering the current practice.
If such an arrangement is in place, an insured cum agent can go to different companies to get commission on new business.
It will also be a weapon to show high sales during the last month of any Financial Year. And then return the policy after 30 days of the policy issuance.