The insurance sector regulator took action against the company based on a report published in Republica in February exposing the illegal act.[break]
"As per the newspaper report, other evidences and interviews with promoters, the board of directors of the Insurance Board concluded that Momento Universal was engaged in a business that goes against the country´s insurance laws," a high-ranking IB official told Republica on condition of anonymity. "The board has, thus, decided not to renew the operating license of the company."
Another IB official told Republica that if the regulator does not renew the license of a corporate agent for six months it can never be renewed again in future. "So the decision (not to renew license) implies the Board has decided to confiscate the license of the firm and it can never work as a corporate agent for insurance companies in the future," the official said. He, however, explained: "The ruling does not bar the company´s promoters from opening another such firm or working as individual insurance agents."
Momento Universal, a firm located in Koteshwar, is promoted by Keshav Raj Sharma of Dhading, Tara Nath Neupane of Kathmandu, Manoj Kumar Pandit Chhetri of Lalitpur, Hari Prasad Thalang of Taplejung and Hom Kumar Khadka of Jhapa.
An investigation conducted by Republica in the end of January found that these people were directly or indirectly involved in recruiting ordinary people to sell policies of National Life -- the country´s third largest life insurance company in terms of revenue collection. This practice goes against the rules set by the regulator, as only authorized agents who have received a license from the Insurance Board are allowed to perform the duty.
"This is because insurance is a technical subject and agents need to have a good understanding of the subject before selling policies to the people," the IB official said.
Under the scheme launched by the firm, every client had to first purchase a policy of National Life Insurance and sell at least two policies of the company to two individuals. Each of these two then had to recruit two more people. As more people joined in, a pyramid was created. And the attraction of the scheme was that the person on the upper rungs of the pyramid earned a commission whenever someone below sold insurance policies.
"This way a person can earn up to Rs 60,000 per month," Keshab Raj Sharma, an official of Momento, had said when Republica posed as a client. On top of the cash incentive, there were other freebies as well, including mobile set, digital camera, laptop, bike, Rs 500,000 worth of insurance policy and even a car, which every member enrolled in the scheme was entitled to depending on the new recruits they brought.
At the time when the scam was unearthed, many IB officials had expressed surprise over how the insurance company and the corporate agent were able to extend such a huge amount and offers.
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