Insured individuals surrendered their insurance policies worth Rs 1.21 billion during one month of mid-May and mid-June this year.
The records with the Nepal Insurance Authority (NIA) show that a total of 98,136 insurance policies worth Rs 11.91 billion were given up as of the first 11 months of the current fiscal year. According to the NIA, 45,023 persons surrendered life insurance policies worth Rs 5.37 billion just in the past five months.
An official at the NIA said the ongoing economic slowdown could have surged the cases of surrendering of insurance policies. “The cases could have increased recently as many individuals are needed to clear tax liabilities in the arriving end of the fiscal year.”
The NIA has maintained the rule barring the buyers of life insurance policies from surrendering before settling the premium payments for three years. Likewise, insurers cannot issue general life-insurance policies for less than five years of maturity.
Nepal Life Insurance Company had the largest cases of its policy withdrawal. The policies worth Rs 2.71 billion were canceled in the first 11 months this FY. Similarly, policies worth Rs 1.01 billion of Rastriya Beema Company, Rs 870 million of National Life Insurance, Rs 730 million of Asian Life Insurance and Rs 650 million of Surya Jyoti Life Insurance were canceled during the review period.
Provided insured individuals give up their insurance policies, they get back only 40-60 percent of the premium amounts that they paid to insurers. Similarly, they also lose the bonus amounts that are offered by the insurance companies.
A study carried out by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) in 2022 pointed out the economic slowdown and soaring prices of consumer goods as among the main factors that push the insured to cancel their insurance policy.
Despite an increase in cases of policy surrenders, Nepali insurance companies increased their premium collection by six percent in the first 11 months. According to the NIA, the premium collection increased to Rs 170.32 billion from Rs 160.74 billion in the review period.
Life insurers earned 7.40 percent more in premium collection, a rise to Rs 133.75 billion from Rs 124.54 billion. On the other hand, premium collection of non-life insurers increased 1.02 percent, an increase to Rs 36.56 billion from Rs 36.19 billion.
