The Insurance Board acted on the basis of a report published in Republica on Friday, disclosing that Momento Universal, a corporate agent of National Life, was using the illegal scheme. It was recruiting untrained human resources to sell life insurance policies, promising yields of up to Rs 60,000 per month to every individual enrolled in the scheme. [break]
“We summoned the company management on Sunday to clarify the matter,” said Shekhar Kumar Aryal, acting director at the Insurance Board.
Republica had recently learnt that Momento was recruiting ordinary individuals to sell the policies of National Life -- the country´s third largest life insurance company in terms of revenue collection. Regulations allow only authorized agents who have received a license from the Insurance Board to sell insurance policies.
Under the scheme launched by Momento, each client first had to purchase a policy from National Life and sell at least two more policies to as many clients. Each of these two then had to recruit two other people to create a pyramid. The attraction of the scheme was that the person at the peak of the pyramid earned a commission whenever someone below sold a policy.
"This way a person can earn up to Rs 60,000 per month," Keshab Raj Sharma, an official with Momento, had said when Republica asked posing as a client. He had also informed that over 1,300 people have so far been enrolled in the scheme.
Aryal had earlier expressed surprise over how the company was able to give away such huge sums, and said the practice was “unsustainable".
The payment of huge amounts, meanwhile, has shed light on unhealthy competition in the insurance industry, and the flouting of regulations limiting commission distribution at 25 percent of the amount generated from premium in the first and second years, and five percent thereafter.
In defense of National Life, its CEO Bharat Basnet told Republica on Friday: “The agent had acted on his own and I was completely unaware how he was conducting business.”
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