Surge in Insurance Policy Surrenders Amid Economic Slowdown

KATHMANDU: Insured individuals in Nepal surrendered insurance policies worth Rs 1.21 billion between mid-May and mid-June this year, highlighting the impact of the ongoing economic slowdown on policyholders.

According to records from the Nepal Insurance Authority (NIA), a total of 98,136 insurance policies worth Rs 11.91 billion were given up in the first 11 months of the current fiscal year. In the past five months alone, 45,023 individuals surrendered life insurance policies worth Rs 5.37 billion.

An NIA official attributed the surge in policy surrenders to the economic downturn and the need for individuals to clear tax liabilities as the fiscal year draws to a close. “The cases could have increased recently as many individuals are needed to clear tax liabilities in the arriving end of the fiscal year,” the official said.

The NIA enforces rules preventing policyholders from surrendering life insurance policies before settling premium payments for three years. Additionally, insurers cannot issue general life-insurance policies with less than five years of maturity.

Among the insurance companies, Nepal Life Insurance Company saw the highest number of policy withdrawals, with policies worth Rs 2.71 billion canceled in the first 11 months of this fiscal year. Other significant cancellations included Rs 1.01 billion from Rastriya Beema Company, Rs 870 million from National Life Insurance, Rs 730 million from Asian Life Insurance, and Rs 650 million from Surya Jyoti Life Insurance.

When individuals surrender their insurance policies, they typically receive only 40-60 percent of the premium amounts they paid, and they lose any bonuses offered by the insurance companies.

A study by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) in 2022 identified the economic slowdown and rising consumer goods prices as major factors prompting policyholders to cancel their insurance policies.

Despite the increase in policy surrenders, Nepali insurance companies reported a six percent rise in premium collections in the first 11 months of this fiscal year. Premium collections increased to Rs 170.32 billion from Rs 160.74 billion during the review period.

Life insurers saw a 7.40 percent increase in premium collections, reaching Rs 133.75 billion from Rs 124.54 billion. Meanwhile, non-life insurers experienced a 1.02 percent rise, with collections increasing to Rs 36.56 billion from Rs 36.19 billion.

Fiscal Nepal |
Monday July 8, 2024, 10:37:37 AM |

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