Three days after the earthquake of April 25, the Insurance Board, the insurance sector regulator, called upon non-life insurance companies to expedite claim settlement process and extend advance payments to clients immediately after assessing the damage. Yet, the instruction seems to have fallen on deaf ears, as less than five per cent of the claims have been settled so far. This is compounding worries of those who paid premiums on time to provide cover to their properties. Rupak D Sharma of The Himalayan Times caught up with IB Chairman Fatta Bahadur KC to discuss why claim settlement process is being delayed and how can it be expedited. How many claims have non-life insurance companies received so far? A total of 16 operational non-life insurance companies have received 13,908 claims as of Sunday. At 141, Everest Insurance has received the lowest number of claims, while the highest number of claims — 2,168 — has been received by Sagarmatha Insurance. Total claim amount stands at Rs 14.03 billion. Since claims are still being filed, the liabilities of non-life insurers will definitely go up in the coming days. Earlier, some of the Insurance Board officials had predicted that losses of non-life insurers would stand at Rs 20 billion. Has any revision been made to the figure? That was not IB’s estimate. The figure was derived based on estimates of non-life insurance companies. Since claims are still being filed, we cannot make any prediction now. Also, what needs to be understood is that insurance companies may not have to settle all the claims that they receive because of deductibles. (On fire insurance, for instance, insurance companies are allowed to deduct 2.5 per cent of the loss amount or Rs one million, whichever is lower, while settling claims. In other words, if damage suffered by a property is equivalent to 2.5 per cent of the sum insured or lower, insurance companies will not be obliged to make payments.) So, many claims received by insurers may end up in the ‘no-claim’ category. But the claim settlement process has been very slow isn’t it, as less than five per cent of the claims received so far have been settled? So far, 578 claims worth Rs 180.40 million have been settled. So, it can be said that the claim settlement process has been moving ahead very slowly. As the regulatory body, we have been pushing insurance companies to expedite the claim settlement process. The IB has been telling the companies to expedite claim settlement from the beginning. But the request appears to have fallen on deaf ears? We have been pushing the companies, but they also have to follow due process. So, what exactly is causing the delay? Insurance companies say surveyors are creating delays in preparing damage assessment reports, without which claims cannot be settled. Recently, we also summoned surveyors and asked them to prepare all the reports as soon as possible. We have also asked surveyors to submit preliminary reports for the time being and work on the final one later, so that insurers can release advance payments. However, surveyors have said they are doing all they can to prepare the reports and have also submitted quite a number of those reports. Lately, we have asked surveyors to give us information on the number of reports submitted by them and time required to submit remaining reports. But isn’t this blame game between insurers and surveyors only creating problems for those whose properties have been damaged or completely destroyed? When we asked insurers why claim settlement process was moving ahead at a slow pace, they pointed a finger at surveyors. Surveyors, on the other hand, say they have started submitting preliminary reports. I hope claim settlement process will move ahead at a desired pace in the coming days as we have instructed both the parties to play their roles sincerely. It is said surveyors have been making ridiculous demands, asking clients to submit evidences to prove earthquake and aftershocks damaged or destroyed their properties. We did hear such rumours, but were not able to officially substantiate them. When we asked surveyors about it they told us they have never asked for such documents. Many clients have also not been able to furnish documents as they are lying inside the property which has become uninhabitable, isn’t it? That should not create much problem in getting advance payment, as clients should only submit documents that are available with them. If the clients can explain this properly, surveyors won’t make a fuss out of it. Three days after the earthquake of April 25, the IB came up with a directive instructing insurers to release advance payment immediately after evaluating the loss. At that time, the regulator could have also told surveyors not to ask for documents that were not available. Wouldn’t that have eased the claim settlement process? We issued that directive to ensure people, whose insured properties were damaged or destroyed, do not face unnecessary hassles from insurance companies. It was actually a measure to provide relief. But at the same time, it is also the duty of insurance companies to serve their clients well. So, companies should be equally responsible to their clients. Besides, the sole purpose of introducing the directive was to ensure claim settlement process does not hit a roadblock just because of lack of some documents. Insurers and surveyors should have understood that. Has the IB been monitoring whether the process of releasing advance payments is smooth? Yes, we have been conducting monitoring works. We have asked insurers to give us daily updates on the number of claims that have been settled. But it is also the responsibility of insurance companies to act sincerely at this hour — albeit this statement shouldn’t mean insurance companies have failed to do their jobs properly. So what is your assessment of the non-life insurance sector? Will the companies be able to withstand the losses? Insurance companies here retain only a small portion of risk with them and transfer most of the risk to reinsurers. So, I think they will be able to withstand the losses. Insurance companies have bought different reinsurance packages here. You must have looked into those arrangements as well, isn’t it? Yes, different companies have different reinsurance arrangements. We have also gone through treaties signed between domestic insurance companies and reinsurance companies. And it appears they have adequate reinsurance coverage. So, as of now, everything appears fine to us. So, you are confident that none of the insurance companies will go bust? Different companies here have different risk retention abilities. Companies with greater risk retention ability have parked more funds in their reserves. And those with lesser risk retention ability have spent more on reinsurance. However, the regulatory body cannot disclose individual company’s reinsurance arrangement, as it is highly confidential. But data available till date suggest non-life insurance companies will be able to tide over the rough weather. As insurers start settling claims, reserves of many companies will probably exhaust. This will deteriorate the financial health of many companies. Don’t you think this is the right time to introduce long-overdue reforms in the insurance sector? Yes, reform in the insurance sector is long overdue. And it is now time to start thinking about ways to better secure the future of the insurance sector. But the Insurance Board alone cannot do anything in this regard. Insurance companies, including their promoters, board members and senior management staff, should also think along this line. This is because the reform measures will ultimately benefit insurance companies. Even after all these years of conducting business, many insurance companies do not seem to be operating professionally. Why is it so? This is very unfortunate. And this is because there is no vision. Many companies do not have short-term or long-term strategic plans. Because of lack of such plans, they have not been able to set goals on ways to enhance performance and consolidate market position. Had they charted those plans, they probably would have been able to mobilise financial and human resources accordingly, expand coverage area and explore ways to reap maximum benefit from information technology. So, the existing status quo will take insurance companies nowhere. Do you mean to say insurance companies here are operating on ad-hoc basis? No, I didn’t say that. What I meant to say was that insurance companies should be proactive. They should have formulated growth strategies aimed at ensuring prosperity. Business-as-usual won’t take them anywhere. The IB did try to introduce reforms by introducing a directive on corporate governance a few years ago. But it wasn’t properly implemented. Doesn’t this reflect weakness on the part of the IB as well? It’s always my wish that all directives and regulations issued by IB are promptly followed. But to ensure proper implementation of all directives and regulations, IB should also have that level of capacity. In other words, each and every part of regulatory body should function well. Then only can we achieve all the goals. So, what needs to be done to enhance the capacity of IB? The IB should be given greater autonomy. We should be allowed to take decisions on our own and hire adequate number of human resources. In other words, capacity enhancement of the regulatory body is a must to improve the performance of the insurance sector. Do you mean to say unnecessary intervention from the Ministry of Finance is affecting IB’s works? No, I didn’t say that. What I wanted to say was that a weak regulatory body cannot put insurance sector in order. So, we need better working environment so that better results can be generated. And the role of the regulatory body is crucial in an open market like ours. Only a strong regulatory body can protect interest of policyholders. Lastly, the latest disaster has also opened a window of opportunity for the insurance sector as many are now aware of the importance of insurance. What is your take on the issue? Yes, the disaster has laid ample opportunities for both life and non-life insurance sectors to grow in a rapid manner. But to cash in on this opportunity, insurance firms must behave well with customers and expedite the claim settlement process. This would only make people believe that insurance firms are here to serve them.