Kathmandu:The Insurance Board is preparing to hike the ‘insurance premium rate’ of non-life insurance. The board has been doing homework to increase the insurance rate saying that there has been no revision in the premium rate for a long time. The board is preparing to submit the proposal to increase the rate to the board in a few days.
Some premium rates have remained the same since 2050 and some rates need to be made upto date. The minimum rate for non-tariff will also be fixed from this year. Companies have been insuring non-tariff businesses at insufficient rates. The board has not fixed the rate for insurance for hydropower and engineering. Insurance Companies can set their own rates through risk assessment.
The insurers have been bargaining with the companies to reduce the rates and the companies themselves have been saying that they will insure cheaper than other companies. The board alleges that in the process of unhealthy competition, they started insuring for free.
They cannot reinsure with a good reinsurance company without adequate insurance premiums. The backbone of insurance is reinsurance. Reinsurance also determines the rate of risk you bear. Nepali companies are reaching out to the weak financial reinsurance companies as they cannot get insurance at the prescribed rate. Weak reinsurance claims cannot be obtained by reinsuring the company. After months of waiting for claims, companies are unable to pay their customers on time. Due to which, insurance in Nepal has become known as an institution that does not pay financial claims.
Although the board wants to raise rates, the company’s chief executive officers are not in favor of raising rates. They also want to keep the business afloat as it can grow through non-tariff. The term of office of the Chief Executive Officer is 4 years. Movements have been going on in this field for a long time, from insuring on credit to attracting customers of another company to reduce the rate to show one’s tenure.