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Perspective of Motor Insurance

Nepal is a mountainous country situated in the southern lap of mighty Himalayas. Total area of the country is 54,000 Sq. mile of which 83% is covered by mountain including high Himalayas and few valleys only 17% of the total land is plain area.

Transportation is therefore very difficult in vast mountainous part of the country and even in plain area there is no complex road net work. Kathmandu, the capital of the country is connected with Tribhuvan Highway (208 Km), Prithibi Highway and Sunali Highway (350 Km) both leading to India border and Kodari Highway (117 Km) leading to Chinese border to north. Apart from these, there are long east west high way connecting eastern part of Nepal to western part of Nepal and also there are few internal highways connecting mountainous area with the plain ones. In spite of these highways, travelling by road is very tedious as one has to drive ups and down, climbing and descending in the range up to 6000 ft and passing through narrow and steep roads with many turnings. Really journey through road is an adventure in the mountainous area. Moreover, many roads are not all weather, many a time obstructed by landslide in the summer.

Due to topographical condition and economic factor, motor vehicle was lately introduced in this country. However with the pace of development motorable roads are increasing rapidly with the mobilization of local factors as well as foreign aids. Consequently number of motor vehicles playing in the roads are also increasing considerably especially in the valleys and plain area. In the year 1975 the total number of vehicles playing in the country was 11,000 whereas it increased to around 20,000 in year 1980 and after 2001 it has increased so rapidly that within Kathmandu valley only about 1,16,700 are playing and in country about 2,05,800 vehicles are playing in the road.
The accident records reveal that the highest number of persons killed in accident are pedestrians and the killers are heavy vehicles, Truck and Busses. Because of lack of road safety education accidents are occurred in most of the part of country. In Kathmandu every day about 20 vehicles involved in accident (As per the Traffic Police Office record).

Insurance is a new concept in Nepal. Only before 3 decades ago Rastriya Beema Sansthan was established to create the needs of Insurance of the country. Before its advent there were branch offices of Indian Insurance Companies in Nepal, which transacted General Insurance, including Motor Insurance. But now there are 14 Insurance companies functioning non life Insurance business in Nepal, mostly private companies. As the number of vehicles was not much many vehicle owners were also not aware of Insurance, Motor Insurance premium in these days was very insignificant. But after the Rastriya Beema Sansthan was established people and even the government offices became conscious about Insurance and consequently the number of vehicles Insured also increased considerably. But now, after the establishment of many private companies, the volume of motor premium has been increased significantly. One of the main reason of increasing premium in motor Insurance is because the Government of Nepal make compulsory Insurance for the vehicles which are used for hire or reward For the transaction of Motor Insurance we have our own Motor Tariff which came in effect from 1984. Before that, we were following Indian Tariff Calcutta region for rating and formulation of policy wordings and endorsement.

Out of total vehicles are insured most of the vehicles belongs to government offices, Government owned corporation, industries and business firms, Transport Companies, Agencies and foreign diplomats. Many of the vehicles owned by private individuals are still not insured. The main reason for this is that Motor Insurance is not compulsory in Nepal. In absence of compulsory Motor vehicle Insurance Act in Nepal, it is only due to the increasing Insurance consciousness of the people that demand for Motor Insurance is increasing in the country. The other reason is that the vehicles are not manufactured in Nepal and therefore all the vehicles plying in this country are imported from foreign country and custom duty for such vehicles are very high and consequently the value of this vehicles are very high and insurance premium too and all the vehicles owner can not afford.
In the view of the fact that the amount of compensation in respect of Third Party is very nominal. Many injury cases even death cases are settled out of court with the mutual agreement between the Driver/owner if the vehicle and the third party.

However, with the initiative of Beema Samitee, the government is considering formulating the Motor Vehicle Act. After the Motor Vehicle Act is introduced it is hoped that proper record of accident will be kept by concerned office which will help to Beema Samitee for proper rating system and also it will help to fix the liability for the death and bodily injury to the Third Party and also it helps to make Motor Insurance (for some specific risk) compulsory in Nepal.

Underwriting means the acceptance or rejection of risk and this includes the determination of underwriting Policies, knowing that contract to insure determining the premium to be charged, determining the companies retention and many others.

Underwriting requires a high degree of technical skill. As a matter of procedure, and underwriter should draw up, set of underwriting regulation for his own guideline as well as those who are under his supervision. The underwriting regulation must be adhered faithfully If the underwriter becomes unduly liberal in applying underwriting regulation, adequate rates, terms and conditions then it may lead to substantial underwriting losses.

When a proposal is offered to an Insurance Company, someone on behalf of Insurance Company must asses the risk and decide whether it is acceptable or not if it is acceptable, he must decide the rate of premium to be charged and the terms and condition to be imposed This process of assessing the risk, determining premium rate, imposition of terms and condition on an Insurance contract is known as ” Underwriting”.

The Agents and Development officers are under the supervision of Marketing Department. The underwriting Department may not have control over them. To insure that they solicit good risk, they must be apprised of the Company’s underwriting regulation through the Marketing Department.

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