Rise in cost but with huge benefits Premium down for private vehicles
REPUBLICA
KATHMANDU, Sept 1: Mandatory insurance of vehicles has increased vehicle operation cost for the owners, but Insurance Board (IB) has clarified that actual rise in cost is less than the extent by which the third party insurance premium was hiked.
In case of private vehicles, the cost has, in fact, gone down compared to the past. "The premium has gone down mainly because we have tried to rationalize the rate so as to support all to come under compulsory insurance rule," said Shekhar Kumar Aryal, senior IB official.
For instance, the board has raised the cost of third party premium by Rs 500 to Rs 700 in case of a bike. But actual additional financial burden for customers will not be Rs 500 because the board has provisioned the companies to pledge 10 percent direct business discount on the basic premium that stands at 1.5 percent of the value.
"So the actual rise in cost will vary greatly with the value of a bike. The expensive the bike, higher will be the discount. Hence, net impact will be very nominal”," said Aryal, adding that the net rise in cost will be a few hundred rupees.
For this additional cost, the customer will not only get third party insurance coverage of Rs 500,000, but will also get personal accident benefit of Rs 100,000 for rider as well as pillion rider, something which was not heard of so far.
"And that benefit has been incorporated in the system without additional charges," said Aryal. Also, under the new system, the owner will receive medical cost of Rs 5,000, which was Rs 2,000 so far, he added.
In case of private vehicles, the new directive has slashed the rate for basic premium itself. On top of that, the customers will get 10 percent direct business discount. For instance, in case of cars of more than 1,600cc, insurance companies will now calculate basic insurance premium at the rate of 1.7 percent for the first Rs 2 million and 2 percent for the remaining amount whereas it was flat 1.85 percent for the first Rs 2 million and 2.25 percent for the remaining amount in the past.
"If your car of more than 1600 CC is valued at Rs 2 million, this change will directly reduce basic premium cost by an average of Rs 2,800 compared to the past," said the official.
Against this rise, the vehicle owners will enjoy third party insurance of half a million rupees and also the insurance coverage for the driver and four passengers.
Apart from these changes, IB has also reduced the premium rate for riot, strike and malicious damage to 0.15 percent of the insured sum from 0.25 percent of the past (down by 40 percent) and also lowered premium rate for the insurance of drivers and passengers in case of public transportation. The cost of insurance, however, has gone up in case of passenger vehicles and goods carriers.
"Since mandatory insurance and half a million rupees worth of third party insurance benefit is a new beginning in Nepal, we have tried to put down fewer burdens on the customers," stated Aryal.
With the new rule that compels all vehicles plying on the road to buy insurance policy, the government estimates vehicle insurance market to more than double to Rs 3 billion over the next one year. IB has estimated it to generate additional revenue of about Rs 390 million to the government.
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Rise In Cost But With Huge Benefits Premium Down For Private Vehicles
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