The Insurance Board on Friday suspended the engineering portfolio of the non-life insurance company and fined it Rs 10,000 after finding it guilty of five counts of willful disobedience ranging from selling policies without collecting payment to delaying claim settlement process.[break]
With the suspension, the company cannot sell or renew engineering insurance policies that, among others, provide cover to construction projects. “The company can, however, conduct other businesses,” a reliable source of the Insurance Board told Republica.
With the latest ruling on NLG Insurance, the number of insurance companies that faced the action of the Board in 2012 has reached seven. Prior to this, the Board had taken action against Asian Life Insurance, Lumbini Insurance, Shikhar Insurance, NB Insurance, Everest Insurance and state-owned Rastriya Beema Sansthan.
“We were forced to take action against NLG as it was found conducting too much of businesses with its own promoters without maintaining transparency,” the source said.
Prior to the introduction of the latest directive that bars insurers from bagging businesses from its own promoters, the regulator allowed insurance companies to generate business from their own investors, but only after informing the Insurance Board about such transactions. “However, in many cases the insurance company failed to do that (inform about business generated from promoters),” the source said.
The Board also found that the insurance company had sold policies to its promoters without collecting premium amount, but had later settled claims emanating from such transactions. This also went against the law as insurance companies are not allowed to conduct business in which payments are not involved.
“During the inspection, held a year ago, we also found the company had issued a number of short-term insurance policies without collecting payment and had later cancelled them after they generated no claims,” the source said. “Worst was the company´s practice of delaying claim settlement process, which caused trouble to policyholders who could not wield influence to get the compensation amount.”
The Board has given NLG Insurance 35 days to amend its mistakes. “We will then conduct an on-site inspection of the company and decide on whether to let it conduct normal business,” the source said.
Officials of the insurance company, however, declined to comment on the issue.
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