Kathmandu:Some non life insurance companies are still selling insurance policies on credit. Executive Director of the Insurance Board, Rajuraman Poudel, informed that all life and non-life insurance companies have been instructed to stop such activities immediately by issuing a circular today.
The Board had given such instructions to the chief executive officers of the entire company some time ago. Not only this, the Board has been requesting through various media not to sell insurance policies on credit.
Poudel said the Board would be forced to take action if companies continued to sell insurance policies on credit.
Insurance companies have been practicing this for a long time.
It’s the season of Construction Contract. Insurance companies have again started selling policies to the contractors in credit or just for formality. They need to insure now on a multi-year contract. It is also the season to insure various other projects. The insurance companies have been instructed to stop immediately saying that such work is being done in defiance of the Board’s directives.
An insurance policy is supposed to be void if the premium is not realized before it’s issue. Insurance policy is found to be more in non-life insurance companies than life.
The Board has further issued a circular instructing all non-life insurance companies not to insure below the prescribed rate. Due to unhealthy competition among non-life insurance companies, the practice of insuring at a cheaper rate to snatch business is on the rise.
Non-life insurance companies have been making such moves in search of new clients this summer. When insured for less than the tariff, the insurance company cannot get full reinsure support. Due to this, the insurance companies will not be able to pay the claims in future. On the other hand, the company cannot make a profit by selling the policy cheaply. Lately, non-life insurance companies have increased the trend of investing a large amount of money in the insurance fund in various sectors to make a profit from the money earned from it. Because of this, they have been making such a move to show more insurance fees and insurance policies than tariffs.