Kathmandu. The Insurance Board is going to revise the deadline given for the provision of future bonus of life insurance companies.
According to a source, the Board is preparing to extend the deadline for two more years for 100 percent provisioning of future bonus.
Now life insurance companies have to manage 100% future bonus in the period of 7 years from the fiscal year 2076/77. Earlier, the Life insurance companies were given a respite by the Board to manage 100% future bonus within five fiscal years at the rate of 20 percent per year.
The Board had issued a Directive on Actuarial Valuation of Life Insurers, 2077 BS. According to the Directive, life insurance companies were required to make provision for future bonus at the rate of 20 percent for the next five years.
However, the life insurance companies have been urging the regulatory board to extend the deadline as the current bonus rate will be very low if 100 percent provisioning is made within 5 years.
The insurance policy bonus has been declining in recent years as some life insurance companies are increasingly selling costly life insurance policies and incurring unnecessary expenses, taking huge risks to expand their business. That is why these insurance companies have been taking initiative to relax the provision of future bonus.
The life insurance companies have requested the top officials of the Board to reconsider, saying that there would be problems in attracting the insured for sale and retaining the old insured if the lower bonus rate is made public.
The Board has implemented the provision of future bonus with the objective of ensuring the bonus amount to be given to the insured in the future years. Prior to the introduction of the future bonus, insurance companies used to distribute bonuses from the profits earned within a certain financial year to distribute bonuses for the same year. However, after the implementation of the provision of future bonuses, it is necessary to allocate some amount of distributable profit for the future.