Corona Insurance claims to be cleared by mid-July, IB assures all for the payment

Kathmandu, Feb. 5

Insured of Corona Insurance scheme are likely to get their claims reimbursed by mid-July this year – end of current Fiscal Year 2021/22 – approximately a year after the validity of the term-insurance expired.

The Ministry of Finance (MoF) is currently mulling over two alternatives for the payment suggested by the Insurance Board (IB). “Discussions are underway to resolve the issue of Corona Insurance. Since we need to manage a large sum of money to clear all the claims, other options are also being studied,” said Ritesh Kumar Shakya, Spokesperson of the MoF.

According to him, the ministry will make budgetary adjustment to manage resources for the Corona Insurance payment after the end of the second quarter of this fiscal, i.e. March 14.

The government makes budget transfers only after the second quarter of the running fiscal year.

According to the statistics provided by the Nepal Insurers Association (NIA), non-life insurance companies have issued about 1.758 million policies under Corona Insurance while 958,198 policies were issued under the government insurance grant.

By 31 December 2021, approximately 161,549 claims were made which need Rs. 15.32 billion to meet the demand. About Rs. 3.5 billion was paid from the insurance pool created with the contribution from 19 non-life insurance companies. The companies had collected just Rs. 1.95 billion by selling the policies, and they are yet to get Rs. 211.2 million from the government for the grant offered to the Corona Insurance.

“We have paid about Rs. 5 billion for Corona Insurance making additional Rs. 1.5 billion payment. We had made the payment with a hope that the government would provide financial support,” said Chunky Chhetry, President of NIA. The MoF had directed the companies to make the payment pledging for the reimbursement of the paid amount.

As per the Corona Insurance Rules, if the claims on the Corona Insurance exceed Rs. 3 billion, the government will bear the cost. Insurance companies have the liability of up to Rs. 1 billion. If the claims exceed Rs. 1 billion, Nepal Re should cover up to Rs. 2 billion, insurance pool up to Rs. 2.5 billion and IB up to Rs. 3 billion.

Chhetry said that the insurance companies have made enough contribution, more than what they could manage.

 

Two alternatives

Earlier in October 2021, the IB had suggested two methods for the payment. The first alternative recommends clearing the insurance claims of the government employees from the Rastriya Beema Sansthan within the period specified by the government. Sansthan is a state-owned insurance company.

Rest of the claims should be considered 100 per cent and half of it should be borne by the government. The remaining half will divided to IB, Nepal Reinsurance Company and non-life insurance companies – with 10 per cent each by the former two and 30 per cent by the latter. The 30 per cent contribution from the non-life insurance companies should be paid in a proportionate manner by all institutions.

The second alternative suggests 55 per cent contribution from the government in making the payment of claims amounting about Rs. 11.44 billion. Likewise, Nepal Re should contribute 12 per cent, insurance companies 25 per cent and IB 8 per cent.

However, Chhetry said that it would be challenging for the insurance companies to make additional contribution.

 

Loss of credibility

Insurers said that the delay in clearing the claims of the Corona Insurance had eroded credibility on the part of insurance companies while it is now a pure liability of the government.

Inability to make the payment against the insurance claims has sent a negative message to people about the insurance industry itself. Likewise, staff and agents of the insurance companies are receiving threats. “Our staff and agents outside the valley are receiving threats to clear the claims immediately,” a CEO of a non-life insurance company said.

Chhetry said that the damage was not only on the part of the companies, it was the trust issue in the government as well. “Leadership at the MoF has been changed thrice but the problem is not resolved. Clearing the remaining claims is not a big deal for the government. It's about ‘earning goodwill’ as well,” he said.

 

‘Insured will get their money’

While the IB and insurance companies are waiting for a positive step from the Finance Ministry, Executive Director of the board, Raju Raman Adhikari, assured that the insured would get their claims cleared even though it would take a while.

“All insured persons will get their insurance money. The process for it would be initiated after the ministry makes decision about the modality of contribution,” he said.

However, all stakeholders are looking up to the government for the resolution of the problem. MoF Spokesperson, Shakya said that the ministry would make a decision on the issue at the earliest. 

Published in The Rising Nepal daily on 6 February 2022.