Insurance Board directed non-life insurance companies to charge a premium of at least 2.75 per cent, when insuring the business of banks.
The insurance market regulator had fixed the minimum rate and amended the Banker’s Indemnity Policy to shield insurance companies as many insurers had been charging less than one percent, informed director at the board Shreeman Karki.
Currently, a number of insurers have been charging low minimum premium due to cut-throat competition in the market exposing themselves more to risk.
The new directive will bar insurers from changing the insurance amount for the duration of the insurance policy. The board has created the provision after banks were seen to be increasing the insurance amount when risks were higher.
“Banks used to raise the insurance amount during festivals like Dashain when cash transactions were greater,” Karki said, adding that the insurance companies were forced to cover a higher risk.
According to the amended Banker’s Indemnity Policy, insurance will cover losses to bank property like ATM counters, mobile counters and branchless banking counters. Likewise, losses to collateral stored at the bank due to any reason like fire or theft or robbery by bank staff or outsiders will be covered by insurance. The coverage will also extend to damage, theft or looting of cash or collateral during transportation.
In recent years, there has been increased cases of looting of cash in transit.
Likewise, insurance will cover losses caused to banks by fake documents including counterfeit cheques, drafts and other commercial papers, apart from covering losses to collateral held by banks. “If the damage has been caused by bank staff, the insurance will compensate equal to the insured amount or the cost of the damage,” the policy read, adding that insurance will however, not cover losses caused by the board members or partners of banks.
Likewise, no compensation will be paid for losses arising from stolen passwords or improper use of the software or any other computer-related application.
According to the new regulation, insurance will not cover losses caused by natural calamities like earthquake, volcanic eruption, flood, typhoon and other climatic reasons. Likewise, the policy will not include losses due to war, foreign intervention, civil war or other types of army operations.