Insurance is the risk transfer mechanism between the insured and insurance company.
An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.
Some of the main reasons why insurance is important are:
Insurance regulation refers to the government's supervision of the insurance market in order to ensure fairness and professionalism among those working in the insurance industry, to keep the market from collapsing, and to provide parental guidelines to insurers and insured. Under the Insurance Act of 1992, the Beema Samiti (Insurance Board) is an autonomous body established to develop, systemize, regularize, and regulate the insurance business in Nepal.
One of the methods of risk management that insurance companies primarily use is the insurance pool. Under this concept, insurance companies combine together to form a pool that can protect them from catastrophic risks such as floods, earthquakes, RSTMDST(Riot, Strike, Malicious damage, Sabotage, Terrorism) and so on.
The insured should review the "Policy Schedule" to confirm the insured's name, policy period, insured property, person, or liability, risks covered, premium, and special exclusions, as well as the "Policy" to review the terms, conditions, exclusions, warranties, and limitations, along with other information. The insurance policy holder should also verify how the premium is calculated.
The policy document or policy paper is a crucial legal document that is related to the insurance contract. Therefore, to maintain the policy, serious safety is needed. However, if a copy is lost for whatever reason, a duplicate copy must be requested right away. However, some official procedures must be performed and some fees must be paid.
The insured must first notify the insurers as soon as possible, but no later than the time limit specified in the policy. He should also cooperate with the surveyor(s) appointed by the insurance company to inspect and assess the loss. He must also submit a claim form and all substantiating documents as specified by the nature of each incident.
A policy is a document that demonstrates the insurer's promise to compensate for losses caused by the operation of the insured perils. It is essential for the insured to read all of the terms and conditions of the Insurance Policy to determine whether they correspond to what the insured requires or whether he is adequately protected.
Anyone wishing to insure must complete the proposal form for each type of insurance. All other questions about the subject of insurance and risks to be covered must be answered as needed. The insurers then set the premiums and terms of the insurance. When the insured pays the premium, the insurance becomes effective.
According to the insurance Act, an insurance policy is not valid without payment of the premium. As a result, after paying the premium against the risk, the policy can be effected. The insurance company's liability doesn't start until the proposal has been accepted by the business and the payment has been paid.
There are two types of Claim:
For Maturity Claim, you need to submit the following necessary documents at the company’s nearest branch office:
In case of death of insured, you need to submit the written application along with the following necessary documents:
Once the policy has been issued, the Sum Assured and Policy Term cannot be changed. However, after meeting certain criteria, additional policy can be acquired.
When purchasing a policy, the paying mode can be chosen. After a predetermined amount of time, the pay Mode can be changed.
The task of underwriting involves assessing the object of insurance, whether it be a person, piece of property, occupation, company, or other entity, and deciding whether to insure it or not. Each applicant must be subjected to company criteria, and based on these standards, the underwriter must determine whether the application is an acceptable risk. The insurance transaction process is built on underwriting.
The process of evaluating whether or not an insured is an acceptable risk, and if so, at what rate the insured would be accepted, is known as underwriting. Not all applicants will be accepted by insurers. An insurer owes it to its current policyholders to ensure that it will be able to meet all of the contractual commitments of its existing policies. If an insurance company issues policies to applicants who represent uninsurable risks or who demand premiums that are greater than the insurer's ability to charge can pay, the insurer's ability to meet its contractual obligations is jeopardized. On the other hand, a for-profit insurer wants to make money and to increase its number of policyholders. No insurer wants to turn down applicants who are not qualified. All of these factors must be considered during the underwriting process. The states in which an insurer does business also regulate it. The states anticipate that the insurer will set reasonable, non-discriminatory standards for accepting insured. Another important factor in the underwriting process is regulation; most risks are tariff governed.
Once the proposal is accepted or the Insurance Company issues the Policy, the Insured (Proposer) must pay the Total Premium promptly.
As per the Insurance Regulation, 1993 A.D, Non-Life Insurance companies can do following businesses: Fire Insurance, Motor Insurance, Marine Insurance, Engineering and Contractor’s Risk Insurance, Aviation Insurance, Miscellaneous Insurance As per the Insurance Regulation, 1993 A.D, Life Insurance companies can do following businesses: Whole Life Insurance, Endowment Life Insurance, Term Life Insurance.
As per Insurance Act of Nepal, “Life Insurance Business” means the business relating to a contract regarding to the life of any person under which he/she or his/her heir in the event of his/her death, will be paid a particular amount in case a specified amount is paid in installment on the basis of his/her age.
Life insurance is a contract in which the insured commits to continuing premium payments for a predetermined amount of time in exchange for the company guaranteeing financial compensation in the event of the insured's death, disability, disease, or maturity value.
There are numerous life insurance policies available on the market today. However, the two principal types of life insurance are:
a) Participating Products(Par)
It is a product that pays policyholders a bonus depending on the company's profits or death benefit in addition to the Sum Assured at maturity. Whole life, endowment, money back, child endowment plans, etc. are examples of this sort of product.
b) Non Participating Products(Non- Par)
Only the policyholders' risks are covered by these products during the insurance period.
Life is unpredictable, and risks are inevitable. We cannot completely eliminate danger, but we can greatly reduce it with life insurance. Life insurance gives you peace of mind since you know that in the tragic event of your passing, your dependents will be able to maintain their financial security.
Life insurance enables you to enjoy a comfortable retirement by protecting your finances in old age. Additionally, life insurance offers tax advantages.
In essence, life insurance offers financial protection (death benefits) to remaining dependents in the event that the insured passes away. In the event of the policyholder's passing, the policy will pay for any resulting income loss, funeral expenses, and other necessary expenses for the family. These days, life insurance policies also include securities components that aid in the policyholders' future financial independence.
The foundation of the life insurance market is founded on life tables, which are also known as mortality tables or actuarial tables. They display the likelihood that a person of a given age would pass away before their next birthday. With the help of such tables, conclusions may be drawn about the likelihood of surviving that year of age and the remaining life expectancy for individuals of various ages
Riders are offered by insurance companies to policyholders to allow policyholders to customize their policies as per their need. Riders are additional benefits under an existing insurance policy that provide additional coverage. There are many riders. Some common ones are:
Accidental Death Benefit Rider
Waiver of Premium Rider
Disability Income Rider
Critical Illness Rider
The words "insurance" and "assurance" can occasionally be used interchangeably; life insurance is the more common term. While insurance is coverage for a potential catastrophe, assurance refers to the provision of coverage for an event that will definitely occur.
As per Insurance Act of Nepal, Non-Life Insurance Business” means other Insurance Business other than the Life Insurance Business.
Personal accident insurance provides coverage in the event that a person suffers physical harm due to an accident caused by external, violent, and visible factors, which results in death or disablement.
A mishap could involve things like:
• Air, rail, or road accidents.
• Injury caused from any collision or fall.
• An injury brought on by a gas cylinder explosion.
• Dog, frost, and snake bites.
• Poisoning, drowning, burn injuries, etc.
These are merely examples and not a complete list of all accidents.
According to the insurance companies' underwriting standards, the personal accident policy covers accidental death, loss of limbs, permanent total and partial disablement.
Sum insured is based on various factors namely :
a) income from gainful employment,
b) type of occupation,
c) age as on date of proposal,
d) period of insurance
e) Conditions prevailing at the place from where the proposal is made etc.
f) As regards the non-earning spouse of the insured the sum insured in respect of such spouse shall not exceed 50% of the eligibility of the insured, subject to a limit of Rs.One
Lakh under benefits available under Table III of the policy.
g) Dependant children can be offered a sum insured not exceeding Rs.50000/- to cover
death and disablement only. NO TEMPORARY DISABLEMENT COVER SHALL BE
a) When an insured person sustains accidental injuries that result in limb loss and a medical specialist certifies that the injury is of a permanent total or permanent partial nature, only the insured is considered permanently totally/partially disabled.
b) Temporary total disablement occurs when a person is unable to perform the duties he was performing prior to the accident, which must be certified by a medical professional.
In the event of a fatal accident involving the insured person, compensation is paid to the assignee on the basis of his full and final discharge. If the assignment is not made under the Personal Accident Policy, the insurance company will require an SUCESSION CERTIFICATE from the Court in order to settle the claim compensation, which is a time-consuming, lengthy, and inconvenient procedure.
Motor insurance is a one-of-a-kind insurance policy designed to protect vehicle owners from financial losses caused by vehicle damage or theft. A motor insurance policy can be purchased whether you own a private car, a commercial vehicle, or a two-wheeler.
There are two types of insurance in Nepal:
(a) Third-party or liability-only insurance
(b) Comprehensive cover.
Comprehensive Motor Insurance or a Package Policy covers damage/loss to your vehicle as well as third-party damage/loss caused by your vehicle. Furthermore, it protects against damage caused by fire, riots, lightning, natural disasters, or malicious acts.
Third-party Motor Insurance or Liability only compensates the insured if he is legally responsible for third-party property damage or bodily injury.
The profit an insurer makes while managing an insurance company is a bonus. It is paid in the event of the policyholder's death or policy maturity, whichever occurs first.
In order to motivate policyholders to maintain good health and limit claims, the insurer may provide a discount known as a "No Claim Bonus" at the time of policy renewal. The insurer provides the NCB bonus if the policyholder had no claims during the previous policy year. The policyholder also has the choice to accrue the NCB for a few years, which simply results in a reduction in the policy's premium.
Claim Intimation is the procedure by which a policyholder intimates or informs their specific insurance provider about the claim.
The sum that you are accountable for in the case of a covered loss is known as a deductible. In the majority of covered loss situations, you are in charge of all costs up to your deductible level, and your insurance would cover for any further costs up to your coverage limit.
Paid up value is the reduced amount of sum assured paid by the insurer in case of the discontinuation of the payment of premium after paying the full premium for the first two years.
Termination of a policy if the policyholder does not pay the premium within the grace period.
A policy that was terminated and is no longer in effect as a result of unpaid premiums.
The equitable transfer of a loss risk from one entity to another in exchange for payment is generally is referred to as Insurance. An insurer, also known as an insurance carrier, is a company that sells insurance; an insured, also known as a policyholder, is a person or entity that purchases an insurance policy. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the case of a financial (personal) loss. Reinsurance, on the other hand, is insurance that an insurance company (referred to as the "ceding company," "cedant," or "cedent" under the agreement) purchases from one or more other insurance companies (referred to as the "reinsurer") directly or through a broker as a risk management strategy. A reinsurance agreement between the ceding company and the reinsurer specifies the terms under which the reinsurer will pay a share of the claims incurred by the ceding company. The ceding firm, which issues insurance policies to its own policyholders, pays the reinsurer a "reinsurance premium".
Due to their huge loss potential and high degree of unpredictability, catastrophic risks are typically not self-insured. Normally, the re-insurance underwrites catastrophic risks. Any risk where the maximum loss is so significant that no one could afford to pay the market premium needed to provide coverage would not be commercially insurable. As an illustration, earthquakes cannot be completely insured since they have the potential to do more damage than any one insurance company or the entire insurance market is willing to risk in terms of assets.
There are two types of insurance companies in Nepal.
There are 19 Life insurance and 19 non-life insurance companies in nepal.
|Name of Life Insurance companies||Name of Non-life Insurance companies|
|MetLife (American Life Insurance Company Limited)||Ajod Insurance Limited|
|Asian Life Insurance Company Limited||General Insurance Company Nepal Limited|
|Citizen Life Insurance Company Limited||IME General Insurance Limited|
|Gurans Life Insurance Company Limited||Himalayan Everest Insurance Limited|
|I.M.E. Life Insurance Company Limited||Lumbini General Insurance Company Limited|
|Jyoti Life Insurance Company Limited||National Insurance Company Limited|
|Life Insurance Corporation (Nepal) Limited||Neco Insurance Limited|
|Mahalaxmi Life Insurance Limited||Nepal Insurance Company Limited|
|National Life Insurance Company Limited||NLG Insurance Limited|
|Nepal Life Insurance Company Limited||The Oriental Insurance Company Limited|
|Prabhu Life Insurance Limited||Prabhu Insurance Company Limited|
|Prime Life Insurance Company Limited||Premier Insurance Company (Nepal) Limited|
|Rastriya Beema Sansthan||Prudential Insurance Company Limited|
|Reliable Nepal Life Insurance Company||Rastriya Beema Company Limited|
|Reliance Life Insurance Limited||Sagarmatha Insurance Company Limited|
|Sanima Life Insurance Limited||Sanima General Insurance Company Limited|
|Sun Nepal Life Insurance Company Limited||Shikhar Insurance Company Limited|
|Surya Life Insurance Company Limited||Siddhartha Insurance Limited|
|Union Life Insurance Company Limited||United Insurance Company (Nepal) Limited|
Premium means the Insurance Premium to be collected by the Insurer from the insured in consideration of the Insurance Business.
Reinsurance is re-insuring the portion of the risk which is excess of the risk to be hold by the Insurer.
Reinsurance is a process whereby reinsurer takes on all or part of the risk covered under a policy issued by an insurance company in consideration of a premium payment. In other words, it is a form of an insurance cover for insurance companies.
A company which insures an insurance company is known as reinsurer. Reinsurance companies are reinsurers.
Retrocession is re-insuring the portion of the risk which is excess of the risk to be hold by the reinsurer.
Insured takes the policy from insurance market through insurers, then insurers goes to reinsurance market to get reinsurance from reinsurers. Reinsurers with the help of reinsurer intermediary goes to the market with retrocession with the retrocessionaire.
There are two types of treaty.
A proportional reinsurance agreement, also known as “Pro Rata” reinsurance, obligates the reinsurer to share a percentage of the losses. The reinsurer receives a prorated share of the insurer’s premiums.
Non-proportional reinsurance, or excess of loss basis, is based on loss retention. The ceding insurer agrees to accept all losses up a predetermined level. The reinsurer agrees to reimburse the ceding insurer for losses above the predetermined level and up to the reimbursement limit provided for in contact.
Ministry of Finance.
3rd floor, LS Building, Thapathali, Kathmandu, Nepal
Nepal Re provides the services for facultatve and treaty reinsurance for fire, property, engineering, aviation, marine, agriculture, miscellaneous and motor portfolios along with different kind of pools such as covid, RSDMDST etc.
2077/03/15 (29th june 2020).