The COVID-19 Insurance Debacle

Policy inconsistency has been a prominent factor that has stunned the economic growth of Nepal for decades. Nepalese people have frequently experienced instances where policies come about and are nullified within a matter of days. One of the fundamental reasons behind the anomaly is triviality towards contract enforcement. The most recent and germane example of this is the COVID-19 insurance debacle.

All insurance companies in Nepal started issuing COVID-19 insurance on March 30. An individual was required to pay NRs. 1000 for registering in the scheme. According to the scheme, policyholders who were infected or who died due to COVID-19 would receive the entire insurance compensation amount of NRs. 100,000 from their respective insurance companies within seven days. With a substantial rise in COVID-19 cases, the policy holders started claiming for insurance since June. On June 4, the Insurance Board of Nepal (IBN) directed all non-life insurance companies to halt the issuance of COVID-19 insurance policies until further notice. On June 5, due to extreme pressure amidst widespread public criticism, IBN revoked its previous decision and allowed the companies to issue insurance policies. On September 5, IBN directed insurance companies to provide insurance claims of only those patients whose swabs were screened using the polymerase chain reaction (PCR) method at government laboratories. Out of the 1300 claims made until September 5, only 300 were settled. On September 15, IBN amended the COVID-19 insurance directive whereby PCR reports obtained from private hospitals were made valid to claim insurance. However, the new provisions incorporate limitations in claiming insurance as patients have to submit a recommendation letter from their respective local government to the insurance companies and in case of doubt about the originality of the documents the patient will not receive any claim and will have to bear all expenses on their own. Additionally, asymptomatic patients staying in home isolation and patients who are being treated in hospitals are eligible to receive only 25 percent and 75 percent of the claim amount, respectively.

Despite being a small incident when compared to other bigger fiascos that Nepal has currently been facing, it is bound to have wider implications.

The chaos highlighted in the execution of COVID-19 insurance sends a signal to entrepreneurs and investors about the underlying problem of the Nepalese economy – lack of security and predictableness whereby all parties involved do not have any kind of assurance that their contractual rights will be upheld. Predictability is a pre-requisite for economic development. It is only when policies are consistent and the regulatory regime predictable that people will engage in long term economic contracts by investing or enterprising. On the contrary, in the absence of such an environment people find no incentive to make any investment, or for that matter even make any future plans. If Nepal fails to weed out this entrenched problem, coming out of the economic morass that Nepal currently is in will likely be a far-fledged dream.

Over and above that, it has provided a convenient reason for the already frustrated Nepalese people to cast doubt on its leaders. With a government body as per its own convenience revoking and adjusting the decision made by the government itself, the people are bound to question the prevalence of rule of law in the country. With such a scale of policy inconsistency, the already smearing trust of Nepalese citizens on its bureaucrats and technocrats will indeed stiffen. Given such distrust, it is justifiable that the citizens of Nepal eagerly await to leave the country and choose to plan for their future in a foreign land.

What if Nepal will forever be caught up in this development limbo?

Ayushma Maharjan

Ayushma Maharjan pursued development finance as part of her undergraduate education. She is currently working as the Research and Communications Officer. She has been focusing on writing blogs and articles and has been researching on contemporary economic issues of Nepal. She aspires to craft conducive reforms through evidence-based policy making and redefine the policy discourse in Nepal .


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