July 7: Insurance Board has instructed insurance companies not to sell insurance policies on credit. The regulatory body recently issued such directive as the trend of selling insurance policies on credit has been increase.

The board issued the directive in the name of the CEOs of non-life and life insurance companies. Chairman of the Insurance Board Surya Prasad Silwal confirmed that he has instructed the insurance companies not to sell insurance policies on credit. CEOs of the insurance companies have been asked to be more cautious in this regard.

"It was found that both life and non-life insurance companies were selling insurance policies on credit, which is against the Insurance Act," he said, adding, "We had issued an internal circular two months earlier not to sell insurance policies on credit. Since such practice did not stop, we have issued instructions to the CEOs of the companies to be cautious in this regard."

At the end of the fiscal year, during the period between mid-June to mid-July, companies tend to sell insurance policies on credit to meet the annual target. So, the insurance board has issued another directive to prevent such practice, said Silwal.

According to the Insurance Act, no company should agree to accept the risk of the assured people until the company receives the premium amount. The individual is considered to be insured only after receiving the premium. However, various inspections and monitoring activities show that companies are selling insurance policies on credit.

The board  claims that the insurance companies have carried out such activities though it is prohibited by the Act. The board has received complaints in this regard as well after which the board took further steps to prevent such practice. 

The Insurance Board has directed the CEOs of the companies to be more responsible regarding this issues. From now on, companies are instructed to issue policies only after receiving premium amount and clearance of cheques. If they are found to have issued policies on credit, they will be penalized accordingly.