9-15 October 2015 #779

Ensuring proper insurance

This earthquake is a lesson to review how homes and businesses should be insured
Sahina Shrestha

Insurance claims for damaged property have soared in the aftermath of the April earthquake, but despite calls to settle claims there have been inordinate delays.

The Insurance Board directed the insurance companies not to delay payments for claims after customers complained that they were made to wait endlessly for no apparent reason. Even though claims are now being settled, a new problem has arisen: under-compensation.

Customers claim that insurance companies are under-valuating the damage to their buildings so they can get away with lower payments. For their part, insurance companies say that the payment is done according to the reports submitted by independent surveyors, calculating depreciation costs and also under-insurance by customers.

When Anup Baral, a Kathmandu-based businessman, bought a home, he took out a loan from a financial institution. As per the regulations, the institution insured the house. When the earthquake happened, he thought that the premium he had paid for years would cover the cost of his damaged wall. But when he went to claim the insurance he realised that his property had been underinsured and his insurance did not cover the outer walls of his house.

“At first, when they were insuring the property they said I wouldn’t have any problems in settlements. After the earthquake, I found out that the financial institution had insured only a part of the money I had borrowed from them and not the whole amount,” said Baral.

Baral had insured his office building as well, and even there the compensation he received from the insurance company was hardly enough to cover the damage. He is one of many who had insured their properties and felt cheated by the insurance companies after the earthquake.

“If the amount doesn’t even cover the repairs of the damage what is the use of the premium we pay every year?” asked Baral.

Deep Prakash Pandey, CEO of Shikhar Insurance agrees that people need to be compensated properly but says for that the consumers have to disclose the value of their property accurately and not limit the insurance to the amount they have borrowed from the bank.

“Knowing the right way of buying insurance and under-insurance are the two main problems I see now,” he said. “There has to be a change in the traditional way of doing insurance also. People have to be careful about including reinstatement cost in their policy and ensure that their property is not underinsured.”

But consumers point out that the insurance companies don’t explain what the insurance covers or what underinsurance is while insuring the properties. “How are we to know that the house insurance doesn’t cover the boundary walls? The sales executive should explain the policy in detail to us. And the Insurance Board should monitor these things,” said Baral.

Raju Raman Poudel, Director of Insurance Board says the consumers must be aware of the policies they are signing up for. He told us: “The clauses are written in the papers the consumers sign. It would pay well for the consumers to read the clauses and be aware of them.”

Read also:

Reconstruction in ruins, Om Astha Rai And Sahina Shrestha

The Kiwi way to reconstruction, Sahina Shrestha

Rebuilding ourselves

Assurance of insurance, Paavan Mathema

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