Kathmandu: The life insurance industry has witnessed a surge in claim payment during last fiscal year 2078-79. According to the unaudited financial statements of fourth quarter of the insurance companies, the claim payment has increased by 45 percent within a year. Experts opine that such surge has been arose amid increasing number of policy surrender.
During last FY 2078-79, life insurance companies have paid Rs. 50.55 billion against claim and surrender. It was Rs. 34.93 billion during previous FY 2077-78. Surrender ratio is increasing in old companies as well as in new companies. The outstanding claim is Rs. 4.86 billion.
In addition to the surrender, the policies of old life insurers have started matured, so the maturity claim payment too has increased. The old companies are at the stage of completing the first cycle of life insurance business. Thus, when the first cycle is completed, the claim payment ratio increases. On the other hand, some new life insurance companies had sold policies with large sum assured and insurance premium to show that they had huge amount of premium income in the market in the early years. Those forcefully sold policies too are being surrendered by the policyholders now.
In the last financial year, Nepal Life has paid the highest amount of claims of Rs. 14.16 billion. During this period, Nepal Life has earned Rs. 34.98 billion net insurance premium. Thus, the share of claim payment ratio to insurance premium is 40 percent. Nepal Life’s net claim payment during this period of the previous year was Rs. 8.78 billion only. Which has surged by 61 percent in the last FY.
LIC Nepal is the second highest claim payer. Claim payments of the company has increased by 23 percent to Rs. 9.6 billion. National Life is the third highest claim payer. The claim payment of National Life has increased by 46 percent to Rs. 5.79 billion during last FY.
In terms of percentage, the claim of Prabhu Life has increased by 467 percent to Rs. 434.1 million. The company had paid a total of Rs. 76.4 million against claim in the previous FY. In terms of percentage, Mahalakshmi Life has the lowest increase of only 5.26 percent in claim payment. The company has paid only Rs. 189.5 million during this period.
It is good for insurance companies to pay claims, but due to unhealthy competition, the practice of poor underwriting is increasing which incurs loss in short or long term.