The Insurance Board (IB) has moved to conduct regular onsite inspections of insurance companies, targeting to streamline the working processes of insurers more effectively.
Previously, the regulator only carried out an onsite inspection after receiving complaints. It scrutinised the insurers based on the financial reports that they are required to submit to the regulator on a quarterly basis, reports The Kathmandu Post.
IB officiating executive director Raju Raman Paudel said said, “We have targeted to cross check each insurer at least once a year through spot based observation.”
There are a total of 38 insurance companies in operation in the country—20 non-life insurers and 18 life insurers.
Among these, two are state-owned while three are foreign companies. In the fiscal year 2017-18, the non-life insurers collected premiums totalling NPR22.13bn ($194m), a growth of 16%. Similarly, the premium collection by the life insurers amounted to NPR19.44bn, a growth of 52%.
The surge in the volume of insurance business has also highlighted the pressing need for the IB to carry out field inspections.
The inspection teams will cross-check the inner workings of insurance companies within the framework of existing laws. They will also review the time taken for claim settlements by insurers, the documentation process for claim settlements, timely allocation of surveyors and the insurers' reporting, underwriting and reinsurance provisions.
In a number of past cases, the IB had taken action against insurers for failing to observe the rules. Four months ago, the regulator halted United Insurance from offering fire insurance after the insurer was found illegally insuring promoters’ property and compensating more than the lost amount.
Earlier, the board took over management of Everest Insurance after the insurer was found to have been involved in a number of anomalies.
Apart from these, other issues include insurers distributing dividends among promoters and shareholders without obtaining the relevant approval, paying out claims without having proper documents, delay in claim settlement and surveyors’ false reports on insurance coverage are among the underlying problems in the domestic insurance business.
In addition, most of the insurers are reluctant to offer microinsurance cover despite the government making it mandatory for both life and non-life insurers to do so. According to the regulations, at least 5% of an insurer’s total business has to comprise microinsurance.