Kathmandu:The Insurance Board has fixed the minimum rate of engineering insurance amid the unhealthy competition among non life insurers. The move came following the request of non life insurance after there were excessive claims in hydropower.
In this context, the Board has fixed the minimum rate for non-tariff business. The board has fixed the rates for about 36 non tariff policies, said Rajuraman Poudel, executive director of the Board.
Due to the floods and landslides this year, the hydropower companies have made huge claims. Even in that, foreign reinsurance companies do not agree to reinsure Nepali hydropower. The main reason for this is to have insurance at cheaper rates due to unhealthy competition of among insurance companies. On one hand, the reinsurance company refused to reinsure, on the other hand, the Nepal Insurance Association agreed to fix the minimum rate of engineering insurance.
After mutual consent of the companies, they were urging the Insurance Board to fix the minimum rate. In this context, the Board has fixed the minimum rates of about 36 policies on Thursday.
The rates for non-tariff residential and commercial buildings such as offices, schools, universities, hotels, motels, restaurants, hospitals and airport buildings have also been fixed with Hydropower.
Construction businessmen had been insuring for formalities. As there was no minimum rate, companies used to make insurance policies for a small fee. If you really insure such area, the insurance fee will be very expensive. Excessive claims can be made for physical damage to bridges, roads, dams, etc., so the fee can be expensive. There was a lot of practice of making a policy for formality by charging a nominal fee.
In the last financial year, the Board made a big effort to stop them from selling insurance policies on credit.
This time, the Board has also fixed the minimum rate of the insurance. With the minimum rate set, companies will no longer be able to sell policies in an internal agreement with contractors. With the Board setting the minimum rate, companies are forced to insure at real and reasonable rates.