Nepal Insurance Authority Forms Study Team to Investigate Rising Insurance Policy Surrenders

Kathmandu – The Nepal Insurance Authority has initiated a study to investigate the growing trend of insurance policy surrenders in the country. In response to the increasing rate of policy abandonment, the Authority has formed a study team comprising representatives from the Nepal Life Insurers’ Association, Authority officials, and industry experts.

The Authority has taken a keen interest in understanding the root causes behind this trend as the billions of rupees worth of insurance policies being surrendered annually. According to stakeholders, the rise in policy surrenders has been linked to legal provisions that allow policyholders to surrender their insurance. However, experts argue that surrendering a policy results in financial losses for both the insured and the insurance company.

Insurance expert Bhojraj Sharma emphasized that policyholders should carefully assess their financial situation before purchasing a policy to avoid surrendering it later. He noted that the issue is not unique to Nepal, as insurance policy surrenders are a global phenomenon. However, inadequate communication by insurance agents about policy terms and benefits has been identified as a key factor contributing to the increasing rate of surrenders.

According to data from the Nepal Insurance Authority, more than NPR 13 billion worth of insurance policies were surrendered last year. In just the first six months of the current financial year, surrendered policies have already exceeded NPR 7 billion, signaling a concerning upward trend. To address the issue, the Authority has also introduced a new provision in its life insurance policy guidelines, prohibiting policyholders from surrendering their insurance within the first three years.