“We did all our best to pull the dozer out immediately, but we failed,” said Kunwar, a self-made businessman, who entered into construction vehicle rental business after doing a series of odd jobs. [break]
After finally pulling it out after four days, Kunwar found that the engine of the vehicle had been damaged beyond repair.
Since he had insured the vehicle with Everest Insurance, he immediately called the insurer and asked them to send someone to evaluate the loss. After around three months, the surveyor then filed a report saying the damage was worth Rs 2.2 million, after deducting the depreciation amount.
By that time Kunwar claimed he had already spent Rs 3.2 million to repair the engine. Yet he was “pretty happy” with the news that he´d be getting back around 70 percent of the cost incurred in the repair work.
But his hopes of recouping the amount were dashed after the insurance company released an initial payment of Rs 1 million and said he´d get the remaining amount only after the reinsurance company in India, with which Everest Insurance has an agreement of sharing losses, conducts a survey and sends a final report.
He then waited for six more months. But nothing happened. Then around a month ago the insurance company sent Min Raj Regmi, an expert, to assess the situation. He put the damages at Rs 1.5 million. But after Kunwar protested, Regmi revised his earlier estimate and reported a loss of Rs 1.9 million.
“It´s been over 10 months now since the accident and I´m still not sure how much I will get in compensation and when,” said Kunwar, who wasn´t expecting such treatment after paying an annual premium of Rs 120,000 to provide cover for the vehicle.
Kunwar is probably not the first person in the country who feels cheated by an insurance company. Every day, many people, who go to these companies to settle claims, face the same treatment. This, however, should not imply insurers are frauds. But their attitude definitely makes one suspect if they harass policyholders before releasing the compensation amount.
That´s why many say the only beneficiaries of insurance in the country are the influential people, who can exert pressure on the company to release payment immediately. “While people like us without proper connections have to wait for months to get our claims settled,” Kunwar said.
Kunwar´s insurer, Everest Insurance, however, said the company´s board of directors didn´t find the report submitted by first surveyor “genuine”. If the company had found faults in the first report, shouldn´t it have hired some other surveyor earlier?
“Yes, we should have done that and we did try to do that,” Tulsi Manandhar, deputy general manager of Everest Insurance, told Republica. “But since we had to consult with the Indian reinsurance company it took time.”
As per the Insurance Regulation 1993, insurance companies should determine the loss liability using a surveyor within 15 days and release payment against claims within another 35 days. In other words, the insurance companies should compensate policyholders within 50 days of first reporting the case. But the Insurance Board (IB), the insurance sector regulator, itself acknowledges only 10 percent of the claims are settled within this timeframe.
One of the reasons for this is the delay in submission of risk assessment report by surveyors.
Without their report, insurance companies cannot begin the process of claim settlement, and these people on average take three months to prepare the report, as against 15 days set by the regulator, according to the IB.
Surya Prasad Joshi, former president of the Surveyor´s Association and the surveyor who prepared Kunwar´s report, told Republica that delays are usually caused by policyholders as they fail to submit documents like police report and estimates of loss on time.
But the Insurance Board called Joshi´s arguments “lame excuses” aimed at hoodwinking the regulator as well as policyholders.
“Many of these surveyors deal with too many cases at a time to earn as much money as possible. That´s why they take time to submit reports within 15 days as required,” Shekhar Kumar Aryal, deputy director of IB, told Republica. To put an end to this chronic problem, the IB regularly issues verbal warnings to surveyors and asks them not to let policyholders suffer because of their workload. Yet they keep on flouting the rules.
This is just a part of the problem that many policyholders, who pay premiums regularly, face. After crossing this hurdle, many of them have to brace themselves for another series of roadblocks posed by insurance companies before recovering the compensation amount.
Insurance companies say their intention is not to harass people. “But they ultimately end up doing that as Nepalis have a weird culture of delaying payments,” a surveyor, with more than 20 years of experience in the insurance sector, told Republica on condition of anonymity.
Market survey shows that most of the non-life insurance companies these days retain risk of up to Rs 500,000 themselves. In other words, if damages or losses are worth up to Rs 500,000, insurers fork out compensation amount from their own reserves. “Since policyholders who frequent insurance companies these days are vehicle owners and their claims are usually less than that amount, the companies should have no problems providing payments. But they do. And that´s the reality,” the surveyor said.
But when the compensation amount is huge, companies face problems while settling claims as they are often required to get approval from reinsurance companies.
Reinsurance companies basically sell insurance policies to insurance companies. And in case of Nepal all insurance companies heavily rely on these companies, as they do not have adequate capital buffer to pay for the damages.
Study shows that local insurance companies are spending up to 72 percent of the amount collected as premium to purchase policies from reinsurance companies based abroad, as Nepal still does not have such a firm in the country. This means of every Rs 1,000 collected as premium from clients, Rs 720 is being transferred to reinsurance companies based abroad. This basically shows local insurance companies are retaining as little risk as possible, while transferring the rest to reinsurance companies.
“Since a large chunk of risk is insured by companies abroad, these firms at times investigate matters themselves creating a pause in the claim settlement process,” the surveyor said.
Despite knowing this, none of the companies here are interested in raising their capital base by keeping aside a portion of profit to heighten the risk absorbing capacity.
“Once they earn profit they immediately distribute it as dividends. This gives a feeling they are here only to make quick bucks rather than building a strong company,” an IB official said on condition of anonymity.
Related story
Policyholders fourth in payment priority order in case insurers...
