Life Insurance Policy Lapses and Surrenders on the Rise, Says Auditor General Report
Kathmandu — Life insurance policies worth over Rs 34.37 billion remain lapsed in Nepal’s insurance sector, according to the 62nd annual report of the Office of the Auditor General. Despite a slight decline in the number of lapsed policies, the total value has continued to rise, highlighting ongoing challenges in policy renewal.
As of Ashad 2081 (mid-June, 2024), a total of 1,158,299 life insurance policies were not renewed. While this figure marks a 3.88 percent decrease from the previous fiscal year, the monetary value has increased by 0.26 percent from Rs 33.95 billion in 2079/80 to Rs 34.37 billion in 2080/81.
Life insurance policies are typically structured over fixed periods such as five, ten, or fifteen years. Annual premium payments are required to maintain coverage. If policyholders fail to pay, the policy lapses, meaning the insured is no longer covered, though previously paid amounts remain with the insurer.
The report also noted a growing trend in policy surrenders. A total of 113,976 policies were surrendered in 2080/81, a 17.58 percent increase from 96,938 in the previous year. The surrender value rose from Rs 13.34 billion to Rs 14.50 billion, reflecting an 8.68 percent increase.
The Auditor General has recommended that the Nepal Insurance Authority take a closer look at the reasons behind the rising rate of policy surrenders and work towards addressing them.