How has the insurance industry been coping with the demands post disaster?
Naturally we all have been very busy. Claims have been made every single day. Though six weeks on and the flow has decreased. There are about 25-30 claims coming in on average these days and of course 95% of those are about lands and buildings. We are probably at the end of it though. We have had 14,000 intimations so far, and we are expecting it to reach up to 15,000. But that is only a rough estimate. There is no way for us to know for sure.
Was the Nepali insurance industry prepared to handle such a situation?
Indeed we all have to prepare ourselves for worst case scenarios. That's the philosophy of our industry and it would be rather foolish if we didn't abide by it ourselves. Even though we couldn't have predicted such a catastrophe hitting our country, we all knew an earthquake was long overdue in Nepal. Besides for other such events as well insurance companies buy themselves a reinsurance cover. Many had one for an earthquake as well. Usually we estimate the loss that could have occurred in a quake and different companies, according to their capacity, get themselves covered. The amount of reinsurance does vary from one company to another but that bit is confidential. Still the answer is yes, we were prepared.
How long do you think it will take for insurance companies to settle all the mess that has been left behind by the earthquake?
In my opinion, insurance companies will settle close to 90% of all the claims within six months. We are raising our performance bar here. Six months for this scale of catastrophe is not a long time at all. The remaining 10% will probably consist of big structures. Estimating its losses and repairing it will take some time, thus they might not be handled within the six-month period, but we are putting in our best effort. Our reinsurance companies too have been very keen to help. They have sent us advance money, just in case our cash flow gets strained for some reason. They too are with us in thinking that insurance companies can provide relief to the public by honoring their promises. Due to this gesture of goodwill on their behalf, we are in a position to pay our clients and I think majority of the claims will be sorted out within the six-month time frame.
So all those who were doubting insurance companies' competence, following the quake, had got it wrong?
I'd say so. Our industry is small and there are many times when our voice is not heard. Some people from different quarters take advantage of that and spread rumors. Nepal insurance industry is very capable of addressing these claims and 90% of them, like I mentioned, should be settled within six months. Even at the moment, out of 14,000+ claims, more than 1000 have already been dealt with and those claims that will take longer time to assess have not been forgotten either. We are dealing with them by visiting sites and giving advances. In fact, if there is a problem, I'd say it is the lack of skilled manpower. In many cases, people have got their money but they can't get help building their houses or cleaning the debris.
What about instances where companies' estimates have proven to be lower and as a result they are struggling to cover their client's losses?
As President of Nepal Insurance Association, I know that none of our members are in need of being rescued. They don't have such problems yet. Though, sometimes it's very easy to state that insurance companies need to purchase 100% reinsurance. In reality, it's a tricky task. Insurance companies have to protect their balance sheets and they are also accountable to their shareholders. In this regard, I believe an insurance company should have a very capable management. I believe I'm not in a position to lecture my colleagues on the ways they run their business. Nevertheless, at the end of the day, we are all risk managers. We ask people to transfer their risks to us and it should be our priority to make sure we are capable of protecting ourselves from all these contingencies as well.
What about the clients, are there any challenges that they are facing at the moment?
What we are finding out is that many were under insured. There those who bought insurance just to fulfill their loan requirements or to meet bank requirements. With this decision, they now have to share a portion of the risk. They will not get their losses fully and properly reimbursed by insurance companies. In that context, they will sadly have difficulty rebuilding their houses or restarting their businesses. I guess this is one of the most common challenges for clients. My request is that they get 100% insurance for the future.
Is there anything clients can do to help speed up their insurance payment processes?
My only request is that the clients submit their papers as soon as possible, because without estimates and bills insurance companies won't be in a position to settle their claims. Immediately after the earthquake, the insurance companies had a series of meetings with our regulators and as many now know we have simplified the process. Nepal Insurer's Association has made a committee and devised a system so that we don't have to send surveyors to assess the loss. Company employees – somebody who has some expertise on the matter – can go to the site, assess the loss, fill up documents and we shall get to it as soon as possible.
Following this big earthquake, insurance industry in our country is bound to change. What are your thoughts on it?
Before the quake everybody in the insurance industry was working desperately to create awareness about the importance of getting yourself insured through their own channels. As unfortunate as the natural disaster was, the quake has highlighted all of this for us. Nepalis now clearly see what we had been trying to tell them all along. Many watched their life savings turn to rumble but the ones who were insured don't have to worry about it. We can deal with that problem for them. These risks are transferrable for a small amount of premium. Thus from here onwards I expect more citizens of our country to get insured. Even outside Kathmandu, this culture should take off. We have to learn our lessons from this wretched experience. It's the only silver lining.
So the insurance industry is bound to flourish?
I don't want to associate business and profits with this tragedy. That would be wrong. However, insurance companies do have a chance here. We had never experienced such calamity so for the first time in our career, we have an opportunity to connect with our customers. If we stretch ourselves, visit as many sites as possible, and settle the clients' claims swiftly, our popularity and goodwill is bound to increase.
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