Print Edition - 2015-04-02 | MONEY
IB takes action against United Insurance
Apr 1, 2015-
The Insurance Board (IB) has barred United Insurance Company Limited from doing fire insurance business. The regulator’s move came after it found the company collecting premium lower than the policy amount but making payment higher than actual damages caused to Satungal-based warehouse of Chaudhary Group.
The warehouse housing electronic items such mobile phones, TV sets, DVDs, washing machines, vacuum cleaners and refrigerators of brands like LG, Toshiba, Godrej, Rico and TCL, among others, was engulfed by fire on October 13, 2012.
Issuing a public notice on Wednesday, the insurance sector regulator said the
company was banned from running fire insurance business as it didn’t abide by the Insurance Act.
According to IB sources, the surveyor had valuated the damages at Rs 580 million and the company has made payment of Rs 380 million. However, an IB investigation suggested the actual damage was around Rs 350 million. “We conducted the probe after finding the survey report fishy,” said a senior IB official.
United Insurance is a Chaudhary Group-promoted company.
A source at United Insurance, however, claimed that the damages were approved by the reinsurer and that there was no point of arguing against it. An Indian reinsurer -- General Insurance -- had given reinsurance coverage on the policy, according to the official.
Two local surveyors Surya Prasad Joshi of Tisa Engineering Consultancy and Rajan Thapa of Nepal Claims Bureau were appointed to valuate damages at the warehouse. The IB source said the insurer collected fewer premiums for the policy by giving hefty discount against the policy amount. “The compensation maintained was more than the policy amount,” the source said.
Besides, Chaudhary Group also got insurance coverage for additional risks such as hooliganism and terror at the warehouse, which the IB says cannot be done after the policy is first issued. “The company also failed to submit necessary reports required,” said another IB source.
The Commission for Investigation of Abuse of Authority last year asked the IB to take necessary action against insurers after complaints were registered at the anti-graft body. However, the regulator was reluctant to initiate immediate action.
The IB source said the regulator would withdraw the ban if the company came up with satisfactory clarification.
It is not the first time an insurer has been accused of getting involved in anomalies while making payment to business entities promoted by its parent company.
Earlier, the IB had taken action against Everest Insurance for making payment to Himalayan Snax, manufacturer of Mayos noodles, before the surveyor gave its report. Khetan Group is the promoter of both the companies.
Finding that conflict of interest in business could lead to such acts, the IB banned businessmen from getting coverage for their businesses from insurance companies they have promoted.
Published: 02-04-2015 09:26