Kathmandu. Insurance companies have been transferring a certain share of the risk to the reinsurance company as well, not limiting the risk they have promised to bear. This increases the risk bearing capacity of the insurer and helps in stabilizing the financial position of the insurer as the reinsurer bears the financial burden in case of any large compensation.
In normal circumstances, the insurer itself has to pay the claim for the retention that the insurer bears per risk. Only the remaining amount of the claim is reimbursed through the reinsurer. However, in the event of a disaster, the insurer makes a provision to reimburse all the damages through the reinsurer, except for a retention. Under this arrangement, the insurer transfers the catastrophic risk to another reinsurer in addition to the risk transferred through treaty reinsurance. The insurer transfers all or a certain portion of the risk assumed by him under the catastrophe risk to that reinsurer.
The Insurance Act, 2079 has a provision that the insurer should bear the risk of the liability to be held and reinsurance in such a way as to cover the risk of the remaining liability. In addition, Directive 19 and 20 of the Insurer’s Reinsurance Directive 2081 (Fourth Amendment) provides that the insurer should provide catastrophic reinsurance and adequate reinsurance.
How is a claim managed during a disaster?
Deaths due to such calamities are taken under the ‘catastrophe claim’ or additional accident benefit in the language of life insurance. If the deceased has taken the accidental death benefit in their life insurance policy, then this type of sudden natural flood or landslide is considered as an accident. In this, the insured is entitled to claim payment up to double the sum insured or an additional amount as mentioned in the insurance policy, even for more than the ordinary death claim.
Even if there is only ordinary life insurance with no accident benefit, the family gets the basic sum insured and the bonus earned.
How do insurers get a reinsurance claim?
Insurance companies follow certain criteria while settling claims for natural calamities or disasters. Although there is no limit of a certain kilometer area or geography for a disaster claim, a corridor or watershed area directly affected by floods and landslides from the point of origin of the incident (Langtang area) or watershed area (e.g. areas that have been effectively washed away and reached 170 to 240 kilometers downstream from India) can be considered as affected areas. Insurance companies carry out the claim process by placing the entire coastal area affected by this flood under the emergency zone.
If the floods sweep away and destroy the documents, the recommendation letter of the missing or deceased issued by the local authority or the police is made the main basis. The biggest complication is that hundreds of bodies are not identified and double the number of people are still missing.
In case of a disaster, life insurance companies use these procedures for claim payment
In the case of a missing person: According to the Civil Code, if a person is in a natural calamity, flood or accident and has not been found for a long time, then the insurance claim has to be paid after completing the procedures prescribed by the law (usually after being declared dead by the court or after being declared dead by the government). However, in the case of such a major national disaster, the insurance companies make the process somewhat easier on the basis of the official confirmation and emergency guidelines of the government and the concerned authorities.
Claims of unidentified bodies: If the body of the deceased is found, if the identity is not revealed, the help of DNA test, dental examination or fingerprints is taken. Family members have to get a genetic DNA match to make a claim. Only after the identity is revealed and the death registration certificate is issued, the insurance company transfers the claim amount to the desired person.
Simplified Procedure: In such a crisis, the Insurance Authority of Nepal and life insurance companies can set up emergency claims departments to make the paperwork process as quick and simple as possible. In order to avoid further mental distress to the victim’s family, it is practiced to take advance claims or early settlement policies on the basis of preliminary documents.
With the release of updated government data, insurance companies are expected to provide relief to the affected families through special counters to facilitate claims.
