Background
So far, 76 youths have lost their lives and hundreds have been injured during the Genji movement. The state has to bear the financial burden of billions of rupees due to the loss of public and private property during the agitation.
During the protests, demonstrators vandalized, vandalized and looted public, commercial and private property. There have been incidents of looting, vandalism and even arson in the industries, establishments, offices and private residences of some entrepreneurs and entrepreneurs. The exact extent of the damage is yet to be ascertained. However, the state will have to pay the price for the impact on the economy in the long run. Thousands of people have been unemployed due to arson and looting in the private sector. The private sector created about 86 percent of the jobs in the country.
Similarly, the contribution of the private sector to revenue is about 80 percent and to the overall economy is 81 percent. This shows how important the contribution of the private sector is for the country.
The recent incidents have made it difficult for people to run their families on the one hand, while on the other hand, education, health and economic security have become the main issues for the bright future of children. On the one hand, the government is compelled to depend on internal and external loans to meet general expenses due to the shortfall in revenue, while on the other hand, the lack of resources will also affect the development works. The increasing economic burden is likely to have a severe impact on the overall economy.
The Genji demonstration has affected the domestic and external investment environment in the country on the one hand and has raised questions on Nepal’s image in the international arena on the other.
The revenue generated by the private sector from the operation of industries and businesses is the main source of the government’s economy. There have been frequent destructive attacks on the physical infrastructure of industrialists and businessmen. However, the state has not been able to provide proper security to the industries and businesses. As a result, investors have lost confidence and morale. Due to these reasons, there is no possibility of creating an immediate investment environment in the country.
Vs. The earthquake of 2072 also damaged many buildings, houses, industries and vehicles. Structures, vehicles and equipment worth billions of rupees have been damaged in Singha Durbar, Parliament building, Supreme Court building, police office, provincial offices, structures, vehicles and equipments during the ongoing agitation. Since most of the private property is insured, it is certain that the government itself will bear the financial liability of the damages as the government buildings and property are not insured. In this way, the non-life insurance companies and foreign reinsurance companies, including two domestic reinsurance companies, will have to compensate the damage caused to the physical infrastructure of the private sector in the country.
In the current situation, the pressure of insurance claims will put a burden on the capital and reserve fund of the insurance company. However, the private sector is likely to expedite the reconstruction by getting compensation from the insurance company. However, since government buildings and vehicles are not insured, the state treasury will have a single burden for reconstruction. In the current situation where government state finances are not so strong, reconstruction may take longer.
Vs. The massive earthquake in 2072 BS and the subsequent coronavirus pandemic and the devastating floods and landslides that occurred every year have caused huge loss of life and property. Similarly, the damage caused by the devastating activities during the recent Genji agitation has caused a major economic crisis for the state. Therefore, it is necessary to insure government property, vehicles and property in the coming days. If the government had understood the importance of insurance on time and insured the physical infrastructures, the government would not have had to raise funds for the reconstruction in the current difficult situation and appeal for help.
Case analysis
}
The insurance sector plays an important role in providing financial protection against the risks that may arise on human life, business, property and liability. Nepal Insurance Authority (NEA) is the regulatory body of the insurance sector to develop the insurance system and insurance business by making it systematic, regulated, competitive and credible and to protect the rights and interests of the insured through effective regulation of the insurance business. As an insurance advisor to the Government of Nepal, the Authority has been recommending the government to provide insurance for the government-owned buildings and property as well as immovable property of citizens against natural disasters and other risks. Likewise, the regulatory body has been submitting proposals for inclusion in the government’s policy and program and annual budget by incorporating the suggestions received from the insurance sector. However, the government has not paid much attention to this. As a result, the government itself has to bear the financial burden of billions of rupees due to loss and damage to government buildings and property due to various reasons, including natural disasters and non-natural disasters.
Although the Nepal Insurance Authority (NEA) has reached the state and local levels to raise insurance education and public awareness for the development and expansion of the insurance sector, the scope and reach of the insurance sector has not yet expanded as expected. Some state governments have started works for accident insurance, home insurance and agricultural and livestock insurance. Though the local level has assured to link insurance with the services it provides, it has not materialized due to lack of resources.
The National Insurance Policy-2080 BS has stated that the insurance sector should be developed as an important pillar of the economy, providing financial security against the risks that may occur on human life, business, property and liability by expanding the insurance service and reducing the expenditure burden on the state by insuring the historical heritage, government property and public liability. Similarly, the policy has made clear provisions to include disaster management, social security, health services, infrastructure development and government and public property in insurance respectively.
Likewise, although the insurance policy has provisions for mobilizing the investable amount of the insurance business by concentrating on the national infrastructure development and productive sectors, expanding the insurance service to productive sector and collaborating with the provincial, local level and private sector for the development and expansion of insurance business, the government does not seem to have paid much attention to this.
There are many incidents of natural disasters in Nepal every year. The state has suffered loss of billions of rupees due to physical, human and economic losses caused by the disaster. In the 2015 earthquake alone, about 11,000 people died and thousands were injured. The earthquake had caused damage worth billions of rupees. At that time, only a few properties of the private sector were insured, and the insurance companies paid about Rs 18 billion. However, due to the lack of public property insurance, the state treasury had to bear the sole burden of reconstruction.
At the same time, millions of people died from the corona virus, which spread like a global pandemic. The Insurance Board (now Nepal Insurance Authority) had issued Corona Insurance Standard, 2077 in conjunction with the Ministry of Finance, Government of Nepal. As per the standard, the Government of Nepal would provide 50 percent subsidy on the insurance premium and 100 percent subsidy to the civil servants.
Under the claim payment allocation, the government of Nepal would bear the claims above Rs 3.5 billion. However, although the insurance companies, reinsurance companies and regulatory bodies have paid the claim amount under their liabilities, the government has not paid the entire liability amount of the corona insurance yet. Three years ago, Rs 1 billion of the remaining claims were paid, but it was not enough.
Currently, the government has the responsibility to pay claims above Rs 10 billion. Despite repeated efforts by the regulatory body to pay the liability, the claim has not been paid as the government has not made provision in the budget. If the remaining insurance claims could not be paid, it would have been easier to make the public aware of the importance of insurance on the one hand and on the other hand, it would have increased the trust of the people in insurance.
Nepal is at high risk of climate change. Due to its geographical complexity, diversity and fragile topography, even a small change in climate change in Nepal can have a major impact and damage. Every year, floods, landslides and droughts have affected the agricultural sector, roads, bridges and hydropower projects. The state has to reconstruct damaged infrastructure and rebuild it billions of rupees every year due to the lack of insurance for government infrastructure. In addition, the general public has not given much importance to insurance as the government has not insured government property and the credibility of insurance has not increased.
On the other hand, the insurance companies have not shown enthusiasm for agricultural insurance as they have not been able to get the subsidy amount on time even though the government has provided subsidy for agricultural insurance.
The regulatory body Nepal Insurance Authority (NEA) has been pushing the government for the development and expansion of the insurance system since the past years. In this context, to provide compulsory insurance with approval for the construction of public physical infrastructures through non-life insurance for disaster risk management, to provide financial security to the low-income group and marginalized communities through micro-insurance, to provide microinsurance through the local level, to increase the limit of income tax exemption for life insurance, to provide subsidy on the insurance premium of microinsurance to those living in rural areas and to those living in low income areas, to provide VAT waiver on micro-insurance by providing subsidy on the insurance premium, The committee has also suggested the government to formulate and implement a concrete policy for linking the risk of climate change with the insurance service, to make arrangements to pay the subsidy amount of agriculture and livestock insurance from the province and local level and to increase the coverage of third party insurance under the motor vehicle insurance. However, the government has not paid enough attention to this.
The recent huge damage to the assets of the public and private sectors has affected the insurance sector under the country’s financial system and the importance and necessity of insurance has increased even more.
Conclusion
In the current difficult situation created by the events of the Jenji movement, it is necessary to rebuild the country’s economy in the right direction. The government should remove the current fear and panic in the private sector and encourage the private sector to invest. At the same time, the government should take necessary steps in the coming days by learning from the huge loss of government property and private sector during the agitation. Although the recent decision of the Government of Nepal to initiate the process of insuring the government physical infrastructures and providing comprehensive non-life insurance of the government vehicles is positive, it has been silent regarding the evaluation method, cost determination, determination of the sum insured and the guarantee of the source amount. However, since insurance is an important backbone of the financial system, the government needs to understand the importance and necessity of insurance and implement policy provisions related to insurance in the coming days.
(The author is a former director of Nepal Insurance Authority) )
