Kathmandu: Privileged cash loans provided by life insurance companies to insurance agents are at risk of default. It has been estimated that more than Rs. 50 crore of unsecured cash loan is at risk of non-recovery.
Such loans are provided without any collateral and the interest rate too is much lower than the prevailing market interest rate. It has been found that the life insurers have been compelled to bear the extra burden of tax against the gain received by insurance agents amid differences in market interest rate and privileged loan. The Inland Revenue Office(IRD) has already slapped penalty and tax burden to the life insurers who couldn’t calculate the tax liabilities of insurance agencies enjoying privileged loans.
The Insurance Board has issued circular for the second time to recover all the cash loans provided to the life insurance agent by the end of current fiscal year. Earlier, the Board had issued a circular to recover the due loans by the end of last fiscal year. But the circular couldn’t be implemented after organized protest of the agents. The Board had left it to the life insurers to decide the deadline for recovery of such cash loans.
‘Every effort is being made to contact the agent to recover the loan’, said an employee of the loan recovery department of one of the oldest life insurers, ‘But no trace of the contact has been found, even ten years old loan is yet to be recovered.”
Some agents who are yet to repay the insurance company’s loan have even been elected as people’s representatives in the recent local body elections.
The loans were disbursed on the condition of deducting the principal and interest monthly from the commission and incentive of the insurance business received regularly from the active agent. However, insurance agents who have taken large sums of money in loans are at large or working in another life insurance company or fleeing from the insurance business and being out of touch.
The old life insurers have not been able to recover even the amount of cash loan and car loan for over a decade. Even though the insurance agent has taken a motorcycle loan, many of them are not in touch with the life insurer for years and the loan has not been recovered.
The Board had recently amended the Institutional Good Governance Directive for the second time barring the life insurers to provide loan in the mode of cash or to purchase real state. That is, there is no restriction on the purchase of laptops, electronic devices, motorcycles, four-wheelers. Earlier, there was no restriction on providing cash or real estate loans.
Provision of Blacklisting is Highly Demanded
There is a legal provision that a customer who does not repay a loan from a bank or financial institution can be blacklisted after a certain period of time. However, insurers say that there is a challenge to recover the loan as there is no provision to blacklist against the unrecovered loan given by the insurance company to its agent or employee.
The life insurance companies have disbursed the loan from the money collected in the form of insurance premium. To put such an amount at risk is to put the public’s savings at risk. Therefore, it is necessary to take it seriously and bring necessary legal provisions so that it can be blacklisted, admits an insurer.
A blacklisted person or entity is disqualified from obtaining a loan from any bank or financial institution until a certain period of repayment of the loan has been completed. Most of the insurers are of the view that if the agents who have taken loans from life insurance companies but have been reluctant to pay for a long time can be blacklisted, the loan can be recovered quickly.
Furthermore, life insurers need to form a common platform with the help of Life Insurers’ Association of Nepal to share information about defaulters of life insurers. There are many life insurance agents who have fled to another insurance company to skip from the liabilities of loan repayment. If a common platform is developed to share information about the defaulters, it would help the insurers to recover their loan with the help of eachoter.