Policyholders fourth group to be paidPolicyholders are the fourth group of creditors to be paid in case an insurance company goes into liquidation as per the Insurance Bill currently being discussed in Parliament. Insurance Board (IB) officials said the provision could discourage people from buying insurance policies.
Policyholders are the fourth group of creditors to be paid in case an insurance company goes into liquidation as per the Insurance Bill currently being discussed in Parliament. Insurance Board (IB) officials said the provision could discourage people from buying insurance policies.
The government tabled the Insurance Bill in Parliament a few weeks ago. As per the order of priority, expenses incurred in the process of liquidation and resolution of the insurance company are first to be paid; government taxes, fees or charges are second; the proposed Nepal Insurance Authority that will supersede the IB is third, and insurance policyholders are fourth.
IB Officiating Executive Director Raju Raman Paudel said the provision could further affect the insurance business at a time when it is going through a slow phase. As per the IB’s estimate, access to life and non-life insurance coverage in the country currently stands at 12 percent of the population.
Insurance companies collect premiums from the general public, so they should be placed at the top of the list of creditors, said the IB officials. As per the Nepal Rastra Bank Act 2002, depositors come immediately after expenses incurred in the process of resolution in the order of priority in case a bank or financial institution goes into
Following preliminary discussion in Parliament, the parliamentary committee for review is currently studying the bill. Speaking at a press meet held at the Ministry of Finance Ministry last week, Finance Minister Yuba Raj Khatiwada hinted that the ministry was thinking of revising the order of priority.
The proposed bill to amend and integrate the Insurance Act has envisioned replacing the existing regulatory board by an Insurance Authority. IB officials said the formation of the authority could affect the autonomous existence of the regulator. “As the proposed authority will be accountable largely to the Finance Ministry, this could affect its decision making,” an IB source said.
The bill proposes to fine insurers up to Rs50,000 for delays in appointing surveyors. Insurance companies will be required to form a separate insurance pool for high-risk policies.