Ramesh Kumar in Himal Khabarpatrika, 5-11 August
In April, the Patan High Court found Chaudhary Group guilty of making a bogus insurance claim, and ordered the authorities to recover the Rs240 million paid to the conglomerate.
A warehouse of CG Electronics had burnt down in 2012, and the company sought Rs 580 million from the insurance company, which was approved by inspectors deployed on the ground to verify the claim.
However, an investigation by the Insurance Board, Nepal’s insurance regulatory authority, revealed that CG Electronics had exaggerated the damages, and the actual amount of loss was just Rs340 million. The court ordered the country’s largest business group to return the inflated amount.
United Insurance, which easily paid the inflated amount to CG Electronics is partially owned by Chaudhary Group. The insurer and the insured were both under the same business umbrella.
This case highlights how vulnerable Nepal’s insurance market is, and why there is an urgent need for stronger regulations. But a bill introduced in the Federal Parliament by Finance Minister Yuba Raj Khatiwada aims to weaken the insurance regulatory body instead of further empowering it.
There are 20 life insurance and 18 non-life insurance companies in Nepal. But the Board lacks infrastructure, human resources and legal instruments to regulate all of them. The regulatory body swings into action only if it receives a complaint against a particular company. It cannot proactively regulate the market, and this has enabled fraudulent companies to make bogus claims, risking the public’s investment.
However, the new bill curtails the power and autonomy of the Insurance Board. If it is passed, the Board’s structure will be determined by the Finance Ministry. Says insurance expert Damodar Basaula, “The bill essentially aims to regulate the regulatory body, which will eventually hurt the insurance market.”
The bill, if passed, will also allow insurance companies to hire Executive Officers without an experience in insurance market. And if insurance companies go bankrupt, the insured will get their money back only after the government and the regulatory body recover all the dues.
The regulatory body has also failed to help the insured to claim their insurance money. People have to bear more hassles in claiming non-life insurance.
The total amount claimed by the insured but not paid out has already exceeded Rs8 billion, eroding the public trust in insurance.
Basaula says: “The regulatory body is weak, but the new bill will further weaken it.”