Insurers owe Rs 2.57b in unsettled claim to clients
RUPAK D SHARMA
KATHMANDU, May 26: Non-life insurance companies - that insure cars to cargos - owe at least Rs 2.57 billion in unsettled claim amount to over 19,000 clients, which is more than 50 percent of the premium collected by these companies in the current financial year.
The third-quarter unaudited financial reports of 14 private non-life insurance companies published through mid-May show these companies have yet to settle 19,296 claims - up 25.6 percent from nine-month period of last fiscal year - worth Rs 2.57 billion.
The data compiled by Republica, however, do not contain statistics of Beema Sansthan, a state-owned insurer which has not audited its reports for the last few years. Statistics of Oriental Insurance and National Insurance are also not included as these are not publicly listed companies and are not obliged to make quarterly reports public.
Insurance Board, the insurance sector regulator, during a recent survey, found that most of claims waiting to be settled incorporated motor-vehicle claims.
Although statistics on the overdue amount are not available, the Board said “even small payments of less than Rs 20,000 were kept pending for years”.
“What was even more disturbing was the practice of pestering clients time and again to submit various documents under the pretext of investigation,” an official of the Board told Republica on condition of anonymity. “This shows dominance of unprofessional management at insurance companies.”
Statistics of the first nine months of the current fiscal year shows that the worst offender, in terms of providing compensation on time, is Everest Insurance, with 3,531 unsettled claims to its name - up more than 100 percent from nine-month period of the last fiscal year. To settle all these claims, the company needs to fork out at least Rs 464.17 million.
Next in line is Himalayan General Insurance with 1,940 undue claims worth Rs 255.46 million, while Sagarmatha Insurance, the third biggest offender, is yet to settle 1,872 claims worth Rs 268.51 million.
As per the Insurance Regulation 1993, all claims should be settled within 50 days of first reporting of the case. Within this timeframe, the insurance company should hire a surveyor to determine the loss liability and release the payment as well.
But the insurance sector regulator itself acknowledges only 10 percent of the claims are settled within this timeframe.
One of the reasons for this, according to the Board, is centralization of power, as most of the branch offices of insurance companies do not have the authority to take decisions. Second is the delay made by surveyors in submission of risk assessment report.
Insurance companies cannot initiate the process of providing compensation in absence of these reports. “And since the people, who prepare these reports, on average take three months to complete the work, the entire process of settling claims gets delayed,” the Insurance Board official said.
But the Board officials themselves agree this should not be used as an excuse. “They (the surveyors) are actually taking advantage of indifferent attitude of companies that never create pressure on them to conduct their research on time. And companies should punish those not serious about work by not hiring them in future,” the official said.
This, however, does not mean only companies are at fault.
Lately, the practice of filing fake claims - especially on third party insurance which provides coverage of up to Rs 500,000 to people killed or injured in road accidents - is growing.
“Yet such (fake) claims do not absorb a big chunk of unsettled claims,” the official said.