background
Many people in Nepal are unemployed. They have not got work. As a result, they are forced to go for foreign employment. Foreign employment is the employment of doing physical and mental work outside the country to earn income. Due to lack of employment opportunities in the country, it has become a compulsion for Nepalis to go for foreign employment for work.
Foreign employment has become the main attraction of millions of youth in the labor market every year. Nepali manpower has been going to Malaysia, Dubai, Saudi Arabia, Qatar, Kuwait, Bahrain, South Korea, USA, Canada, Australia and Japan for foreign employment. Foreign employment is a very important sector in Nepal due to economic opportunities, employment, poverty alleviation, remittance and contribution to the national economy.
fiscal year 2081. Remittances amounting to Rs 1,723.27 billion have entered the country in 2018. At present, the Nepali economy is being sustained by remittances from foreign employment. It has played an important role in poverty alleviation and economic activities.
Nepalis have to go to foreign employment due to compulsion and not due to compulsion. On the one hand, there is a situation of being cheated by manpower companies and their agents while going to foreign employment, on the other hand, there is a situation of mental pain, torture, exploitation, risk of life such as accident, heart attack, various deadly diseases, amputation and premature death. About 5-6 of the foreign workers die every day and thousands of workers are said to be suffering from deadly diseases, amputations and accidents every year.
The government brought the Foreign Employment Act, 2064, realizing that various problems and health risks were high in the course of the work of the workers going for employment by promoting and organizing foreign employment. According to Section 26 of the Act, before sending the workers to foreign employment, the licensee has to provide insurance of at least Rs. 500,000 to each worker before sending them to foreign employment. In this way, after the provision of mandatory submission of insurance certificate while going to work abroad, the then Insurance Committee (now Nepal Insurance Authority) fixed the insurance fee and brought ‘Foreign Employment Term Life Insurance’ into practice. After that, life insurance companies started providing foreign employment term life insurance for the workers going for foreign employment.
B.S. In 2073 BS, after the government took the initiative to increase the insurance related facilities for the workers going for foreign employment, the Nepal Insurance Authority increased the facility by 100 percent and implemented foreign employment term life insurance. According to the current Foreign Employment Term Life Insurance Directive- 2080 BS, those who have gone for foreign employment due to any reason will get rs 1 million in case of death, Rs 200,000 for loss of income, Rs 100,000 for grocery expenses, Rs 100,000 for medical expenses, Rs 100,000 for transporting dead bodies and up to Rs 500,000 in case of fatal illness. In addition, the Foreign Employment Term Life Insurance Directive, 2081 has been implemented by the Nepal Insurance Authority to provide Rs 1 million for permanent full disability and rs 1 million for partial disability as prescribed in the directive.
In the beginning, foreign employment term life insurance companies used to sell the insurance business to the workers going for different foreign employment. At the same time, insurance companies started competing to earn insurance fees by issuing many insurance policies. This created an environment of unhealthy competition in foreign employment term life insurance. Extensive undertable money transactions were also started between manpower company and life insurance company. Giving commission to manpower companies and brokers up to 30-40 percent of the insurance premium, issuing some fake insurance policies by the employees of some insurers and borrowing insurance against the provisions of the Insurance Act. Such distortions led to a contraction in profits due to excessive expenditure growth in the portfolio of foreign employment term life insurance and pressure of claims. A large number of complaints and complaints were also registered in the regulatory body regarding unhealthy competition and irregularities. Keeping these issues in mind, the Insurance Authority came up with the concept of insurance bridge after discussing with all the life insurers to organize the foreign employment insurance business.
Start of the insurance bridge
The Insurance Act, 2079 bs defines the collective insurance fund (insurance bridge) established by the insurers to collectively bear the risk, deposit insurance fees in one place, arrange for reinsurance and to arrange claim payment in relation to a particular type of insurance or risk. According to the definition of the Act, foreign employment term life insurance is an insurance business of a particular nature. The then insurance committee decided to operate the foreign employment term life insurance business through the bridge from January 1, 2019 to make it transparent, dignified and systematic. For foreign employment term life insurance business, the insurance bridge started operating on the basis of the procedure of collecting insurance fees by having four company operators at a time and distributing the remaining amount of claim payment and administrative expenses from the collected amount among the life insurance companies involved in proportion to the specified market share. In this way, the business could not be organized even when the insurance companies took turns to do foreign employment term life insurance business through the insurance bridge.
Even at the insurance bridge, there were complaints of the insurer not keeping the accounts transparently, not paying the amount to other insurers on time, problems in payment of claims and lack of transparency in administrative expenses. As a result, financial statements of life insurers were not submitted to the Insurance Authority on time and the annual general meeting was also delayed.
In order to solve the problems seen in the insurance bridge, the Insurance Authority has assigned the responsibility of bridge manager to Nepal Reinsurance Company with the consent of all the insurers to make foreign employment term life insurance more systematic and provide service to the customers in an easy and effective manner. As a result, transparency was maintained in the accounts of foreign employment term life insurance. Nepal Reinsurance Company fiscal year 2077. 78 and 2078. The insurance bridge of foreign employment term life insurance was operated till 79. After that, Nepal Reinsurance Company could not operate the insurance bridge due to various reasons. Then the financial year 2079. 80 and 2080. In 1981, life insurance companies started foreign employment insurance business. This time too, the number of cashback and commissions given to digital service providers and manpower companies has increased. After this, with the re-consent of life insurers, the need was felt to make the reinsurance company a bridge manager and provide foreign employment term life insurance.
The Insurance Act, 2079 has empowered the Insurance Authority to develop the insurance business by making it systematic, regular, competitive and trustworthy. Section 65 of the Act provides that the AUTHORITY can establish or provide a collective insurance fund (insurance bridge) to the insurer to bear the liability of a particular risk group under the insurance business, section 166 of the Act provides that the AUTHORITY can issue any order, direction, guidance to the insurer, insured, insurance intermediary or other insurance service provider in order to achieve the objectives pursuant to this Act. In the past, manpower companies have been facing various problems such as giving commission and gifts to manpower companies while insuring workers going for foreign employment, manpower companies taking insurance fees from workers but not paying insurance to insurance companies for a long time, increasing management expenses, lack of effective risk assessment and middlemen and brokers dominating during claim payment. It felt the need to put an end to all these unhealthy competitions and provide quality and reliable insurance services to the workers who have gone for foreign employment and effectively regulate the insurance business.
In exercise of the powers of Section 65 and Section 166 of the Insurance Act, 2079, the Nepal Insurance Authority (NEA) has issued directives related to the establishment and operation of the Foreign Employment Term Life Insurance Collective Insurance Fund (Insurance Bridge), 2081 BS. This directive has appointed the fund manager reinsurance company to manage the collective insurance fund.
Functions, duties and rights of a fund manager
- Operating the insurance fee received for the policy issued by the member insurer in a separate bank account,
- Confirming that insurance charges have been received,
- Operating, distributing and managing collective insurance funds,
- Making necessary adjustments (interest income, claim payment) from the insurance fee received from the member insurer and distributing it monthly as prescribed,
- Keeping accounts of insurance fee income, interest income, and claim payments transparently,
- Sending monthly income statement related to foreign employment term life insurance to member insurers,
- Foreign employment term life insurance collective insurance to maintain the accounts of the collective insurance fund separately,
- Actuarial evaluation and audit.
As per the directive issued by the NRA, the reinsurance company has to operate the insurance bridge, so two reinsurers nepal reinsurance company and Himalayan Reinsurance company based in the country have to operate the insurance bridge. Of these two, Nepal Reinsurance Company has already operated the insurance bridge, so Himalayan Re Insurance has been given the responsibility of operating the Foreign Employment Term Life Collective Insurance Fund (Insurance Bridge) by mutual consent.
Benefits of operating foreign employment term life insurance through insurance bridge
- Foreign employment by life insurers will be transparent and effective,
- Providing quality and reliable insurance services to workers going for foreign employment,
- Foreign employment term life insurance business to be organized and regular,
- Unhealthy competition between insurers will be stopped,
- Withholding of fake policies,
- Insurance claim payments are fast and reliable,
- to help prevent issuance of borrowed policy,
- Effective risk assessment of insurance policies of workers going to foreign employment,
- Foreign exchange coming out through reinsurance will remain in the country,
- Reduction in insurer management costs,
- Workers going to work abroad will be arranged through the insurance bridge,
- Preventing fraud by middlemen and brokers,
- There will be transparency in the accounts of foreign employment term life insurance.
Conclusion
Nepal Insurance Authority (INSURANCE) is the sole autonomous regulatory body to regulate the insurance business. Section 5 (d) of the Insurance Act, 2079 bs empowers the AUTHORITY to issue necessary bye-laws, guidelines, guidance and orders for the insurance business under the functions, duties and powers of the Authority. In addition, Section 65 of the Act provides that the AUTHORITY may establish or arrange a collective insurance fund (insurance bridge) to bear the liability of a particular risk group under the insurance business. According to Section 166 of the Act, the AUTHORITY can issue any order, direction, guidance to the insurer, insured, insurance intermediary or other insurance service provider in order to achieve the objectives pursuant to this Act.
The insurance business operates on the basis of good international practices and practices. India, Sri Lanka, Pakistan, Japan, France, Germany, The United Kingdom, Russia, South Korea and many other countries have also been operating insurance business by forming insurance bridges. In the global insurance market, some countries operate insurance businesses by forming insurance bridges to bear the risk of insurance by adopting air insurance bridges, hydropower insurance bridges, motor third party liability bridges, health insurance bridges, nuclear bridges, and disaster bridges. In Nepal, the insurance business was operated by forming an insurance bridge under the supervision of the regulator. Therefore, the Collective Insurance Fund (Insurance Bridge) formed by the AUTHORITY is justified to make the foreign employment term life insurance issued by the life insurance companies transparent, systematic and effective by controlling the unhealthy competition in foreign employment insurance and managing the risk during employment for Nepali workers going for foreign employment.
It has also been heard that the government will run the work of managing the risk of workers going for foreign employment on its own without giving it to the insurance company. The health insurance operated by the government itself has not been able to operate effectively. Also, the amount for corona insurance claim payment under the government’s obligation as per the Corona Insurance Standards, 2077 BS has not been received so far. In such a situation, it is not appropriate for the government to bear the risk of workers going for foreign employment from 8 to 9 lakh annually.
Insurance companies in the fiscal year 2081. A total of 840,073 foreign employment term life insurance policies have been issued to the citizens going for foreign employment during the 1982 period and rs 3.56 billion has been collected as insurance premium and Rs 1.95 billion has been paid to the claim insured. Since a person going for foreign employment goes for at least 3-4 years, he has to pay a lump sum insurance fee to the insurer at the same time. If the claim is made for 3-4 years from the insurance collected in this way, the insurance company has an obligation to pay the claim. As per the directives issued by the Insurance Authority regarding the preparation of financial statements, the insurance company should make provision for the insurance premium for the remaining period. Apart from this, there are management expenses in addition to the claims of the insurer. In this way, the insurance premium for foreign employment term life insurance helps the insurance company to balance the cash flow rather than the profit.
Insurers are also paying taxes to the state by doing foreign employment term life insurance business. The state has to play the role of a regulator. Therefore, according to the spirit of the Insurance Act, 2079 and the Foreign Employment Act, 2064, it is advisable for the foreign employment term life insurance member life insurers to do foreign employment. In this way, through the collective insurance fund (insurance bridge), the member life insurance companies provide financial compensation to the workers going abroad through insurance against future risks, so the state does not have to bear financial responsibility for this. Therefore, the legal provision made by the Insurance Authority to end the distortions of the past and appoint the reinsurance company as the fund manager through the foreign employment term life insurance business insurance bridge is positive and welcome.
Karna is a former director of Nepal Insurance Authority. )
