KATHMANDU, Nov 5: The Insurance Board´s plan to raise insurance coverage for every passenger travelling on public vehicle to Rs 500,000 has hit a roadblock as transport entrepreneurs have voiced strong objection saying the measure would only add to their financial burden.
Currently, every passenger travelling on a public vehicle is automatically are entitled to an insurance cover of up to Rs 100,000 and a life insurance of Rs 100,000. This means family members of a passenger who dies immediately after the accident can claim up to Rs 100,000 in compensation, while a person who dies while undergoing treatment can demand up to Rs 100,000 for medical expenses and an additional Rs 100,000 in case of death.
Transport entrepreneurs are currently paying an annual premium of Rs 150 per seat to insurance companies. But once the insurance coverage is raised to Rs 500,000, annual premium amount for each seat in a public vehicle can go up to Rs 750, meaning a 40-seater bus which was paying a premium of Rs 6,000 per year will have to pay up to Rs 30,000 in annual premium. “Such a raise will definitely affect our profits,” said Dol Nath Khanal, general secretary of National Federation of Nepalese Transport Entrepreneurs.
Although the board has said that it would negotiate with the insurance companies to fix the annual premium at Rs 500, transport entrepreneurs are in no mood to accept the proposal. “We do not want the board to raise the premium or the coverage amount for now as we are not in a position to afford it,” said Khanal.
“We are holding another round of talks after the Tihar festival (in mid-Nov). Hopefully, we can strike a deal that will benefit the public,” a high-ranking board official told Republica on condition of anonymity.
However, the board has made it clear that it cannot guarantee anything as of now.
The board has been trying to revise the insurance coverage for passengers for the last several months following rising incidents of fake third-party claims.
The third-party insurance, introduced by the board in September 2009, provides coverage of up to Rs 500,000 in case the insured vehicle causes damage to properties and human lives outside the vehicle. But over the years, more and more family members have started using fake evidences to alter passenger accident cases into third-party accidents to extract up to Rs 500,000 in compensation.
Because of this 93 percent of the premium collected through sales of public vehicle insurance policies was expended on providing compensation as third party insurance coverage, a report of the Insurance Board shows.
“If 15 percent of the premium amount extended to agents, reinsurance cost and administrative costs are factored in, insurance companies seem to be making net loss from public vehicle insurance business,” a board official had earlier told Republica.
Non-life insurance companies earned a total premium of Rs 1.68 billion through sales of public passenger vehicle insurance product in the 28-month period since the provision was introduced in September 2009, while Rs 1.57 billion was spent on settling claims.