KATHMANDU, Sept 2: The Insurance Board, which has lately stepped up action against insurers violating norms set for the sector, has set its sights on the state-owned Rastriya Beema Sansthan.
The insurance sector regulator is contemplating action against the insurance company for running the business illegally without renewing its operating license in time.
The government-owned insurance company has failed to renew its license for few years now due to its failure to audit financial reports of the last several years. The state-owned company has also failed to establish life and non-life businesses as separate entities.
Calling these gross violations of rules, the Board had recently given a 15-day time to the company to clarify why it failed to comply with the regulator´s instructions. After the company could not furnish satisfactory explanation, the Insurance Board has now sought clarification on why the regulator should not take action against it.
“The notice issued last week has asked the company to submit answers within seven days . If not, the regulator can take severe action against it,” a high-ranking official of the Insurance Board told Republica on condition of anonymity.
According to Board officials, these actions may include temporary suspension of business activities to seizure of operating license.
Despite being a listed company, Beema Sansthan has not completed audits of its financial reports since fiscal year 2003/04 due to frequent change in top level staff and frequent protests by employees. This goes directly against the provision in the Insurance Act that specifically says insurance companies must have their balance sheets audited by an authorized chartered accountant within 10 months of completion of every fiscal year.
“Since its balance sheets are not updated it has become almost impossible for us to trace its investment and how premium amount collected from the public is being utilized,” the Insurance Board official said.
Acknowledging the mistake, Beema Sansthan Acting General Manager Omkar Nidhi Tiwari, during a gathering to mark the 45th anniversary of the company in February, had announced to complete these tasks “soon”.
At that time Tiwari had also promised to hold annual general meetings of 2003/04 to 2005/06 in mid-April and of another four years till 2009/10 by mid-April next year. But the company has failed to keep its promise.
In another instance, the insurer has also not separated its life and non-life businesses. This violates a law introduced more than a decade ago, which makes it mandatory for insurance companies operating both life and non-life businesses to create independent units to conduct their activities.
Following introduction of the law, National Life and General Insurance Company, for instance, which was conducting both life and non-life businesses, has already established National Life Insurance Company to conduct life insurance business and set up a subsidiary company called NLG Insurance to operate non-life insurance business.
Yet Beema Sansthan has been taking advantage of its status as government-owned company and continuing to run the business violating the rules set forth by the regulator.
“We cannot continue to tolerate this attitude of the company, which has set a bad example in the insurance sector,” the Insurance Board source said.