Kathmandu. The real-time ‘earmark’ system implemented by the Insurance Authority of Nepal (IA) to strictly enforce regulatory discipline in the insurance sector of Nepal has been seen as a significant improvement in the deposit management of insurance companies.
Transparency, speed and security have been qualitatively changed with the introduction of the system of freezing deposits kept by insurance companies in banks and financial institutions through online system.
“Earmark” means a certain amount of money that an insurance company has to keep as per the regulatory requirements and securely withheld it for a specific purpose. Under this, the regulator identifies and freezes the deposits kept by the insurance company in the bank through an online system. Which the company cannot operate voluntarily.
Its main objectives are to secure the funds required for claim payment, ensure financial stability of the insurance company and protect the interest of the insured.
The insurance business is based on trust. If the company fails to pay the claim immediately, it will hurt the trust. The earmark system will be needed to ensure claims payment, strengthen regulatory discipline, reduce the financial risk of the company, and protect the interests of the insured.
How do you benefit the insured?
The earmark system directly protects the insured. In the event of a claim, the company has the necessary amount of money. The risk of delayed claim payment due to the company’s financial crisis decreases. Confidence in the insurance sector increases and the insurance market becomes stable and reliable in the long run. It conveys the message that insurance is safe not only on paper but also in practice. It has also made coordination between regulators and banks more effective.
How secure is the online system ?
It is based on a secure server and authentication process. Digital tracking of transactions is possible and effective in preventing mismanagement or unauthorized outlets. This has strengthened financial discipline and pushed the insurance sector towards modern technology.
The ‘Earmark’ system is a new chapter of financial discipline and protection of the insured in the insurance sector. This digital system implemented by the Nepal Insurance Authority seems to be faster, transparent and safer than the old manual process.
This has created an environment of confidence to the insured by making the insurance company responsible. In the long term, such reform is expected to help make Nepal’s insurance sector more reliable, stable and modern.
