Kathmandu. The topic of ‘Insured Protection Fund’, which is mentioned with priority in the first and second five-year strategic plan of the Nepal Insurance Authority, has become like a lock kept inside the box.
The regulator discusses, interacts, meetings or corresponds with the insurer once or twice a year to avoid allegations of inaction. And then it is stored back inside the Ark.
The authority had set a target to establish the fund by 2019 (six years ago). At that time, there was zero progress. The work of establishing the fund was not taken forward citing the reasons that the Insurance Act was under consideration and it was necessary to include this issue in the Insurance Regulations.
Although the second strategic plan released in 2020 included the issue of establishing an Insured Interest Protection Fund as the number one strategic pillar, the NRA has also passed the deadline set by it. In this strategic plan, NEA had set a target to establish the fund within 2024.
The NRA had formed a study committee in 2080 BS under the convenorship of the then executive director Raju Raman Poudel to prepare the draft of the fund’s operation. After that, the matter was pending for 13 months.
Issuing a letter on January 2, 2025, the authority had directed all life insurers to provide details of the claim fund and the amount deposited in the fund that has not been claimed for 10 years. After that, the NRA held an interactive meeting on this issue once again but did not proceed with the work of establishing the fund. It is not yet certain when the fund will be established.
What is an Insured Protection Fund?
This fund is a fund established for the purpose of protecting the insured. In this fund, the amount to be paid to the insured who has not been claimed by the insurance company for a long time is collected. The amount of such funds is used for the literacy of the insured.
In case the insured or heir comes to make a claim, there is a provision to pay from the amount transferred to the protection fund. For this, if the insurer makes a claim on behalf of the insured with necessary documentary evidence, the insured party directly receives the claim payment.
What is the legal provision?
Clause 150 of the Insurance Act, 2079 has a provision to have an Insured Interest Protection Fund under the Insurance Authority. As per Section 123, the amount allocated by the NRA, the amount received from the life insurer and the amount deposited in the unclaimed fund as per Section 123 should be deposited in the fund if the payment is not made due to the situation of payment under the life insurance policy.
Similarly, Section (3) states that the Insured Interest Protection Fund and other provisions related thereto shall be as prescribed.
According to Sub-rule (2) of Rule 86 of the Insurance Rules, 2081, if the amount deposited in the unclaimed fund of the insured is not transferred to the insured or heir even after 10 years, it should be deposited in the Insured Interest Protection Fund. Similarly, sub-section 3 states that if the transfer could not be made to the insured or his/her successor for 10 years, it should be done as per the directive of the Authority.
Clause 103 of the regulation has a provision regarding the Insured Interest Protection Fund. According to Section 150 of the Insurance Act, for the operation of the fund, an account should be opened in a commercial bank licensed of class ‘A’.
Areas where the fund amount can be used{
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According to the Insurance Regulations, the amount collected in the protection fund can be spent in 3 areas.
- In case the insurer is unable to pay the liability to the insured from the property of the insured in the event of liquidation or insolvency, the amount as determined by the Authority shall be paid,
- If the insured is identified in the deposit made in the fund pursuant to clause (c) of sub-section (2) of Section 150 of the Act, or if a claim is made with identification from a person who can receive payment pursuant to Section 127 on the death of the insured, to pay such claim,
- To incur expenses for the works as determined by the Insured Interest Authority in the event of a catastrophe and other crises occurring in any part or region of the country.
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The Insurance Authority of Nepal (IBA) is the main body to implement both the Insurance Act and Regulations. The NRA has not been able to establish the fund even after three and a half years of the promulgation of the Act and 15 months since the implementation of the regulation.
