INSURANCE AND ITS BUSINESS IN Nepal

People live in society. Society is full of risks and uncertainty. Insurance is a device providing financial compensation to those who suffer from misfortune. In orther words, insurance is the best means for security to human life and property from various risks. It is a kind of investment, from which one gets return only when certain loss occurred from predetermined incidents This study aims mainly to analyze the performance of Insurance business in Nepal The data used in this study is mainly quantitative and analysis has bee carried out by using simple percentage and correlation coefficient. The study reveals that there are altogether 27 insurance companies out of which 8 companies provide life insurance while 17 companies provide non-life insurance and 2 insurance companies offer both life and non-life services. They have branch offices in valley and outside of valley. The growth of insurance policies for both life and non-life insurance companies has been increasing and significant during the study period. Similarly, the progressive trend of premium collection reached to 48 % for non-life and 37.06%  for life insurance in FY 2066/67 and contributed 1.70% in GDP of the economy. Moreover, the investment of insurance companies has been positive but fluctuation over the period under study. However, the correlation coefficient between total premium collection and total investment is positive with r = 0.97 and significant as its PE is only 0.0163. These facts reveal that the performance of insurance business in Nepal is satisfactory.

TYPES OF FIRE POLICIES

The following are some of the more common types of fire policies:

1. Specific Policy : A specific policy is one where the insurer undertakes to make good the loss up to the amount specified in the policy, irrespective of the value of the property. For example, if a property worth Rs. 2,00,000 is insured for Rs. 1,00,000  but the actural loss is only Rs. 1,50,000 he can only recover the actual loss if it is equal to or less than the value of the policy, but if his loss is more than the sum insured, he can recover only the amoount of policy.
2. Valued Policy : A valued policy is usually taken where it is not easy to determine the value of the property. For example, works of art, pictures, sculptures etc., whose value cannot be determined easily. In the case of total loss in the valued policy the insurer undertakes to pay the value of the property as mentioned in the policy, or the declared value, irrespective of its actual or market value. Such policies are however, not very common in fire insurance.
3. Average Policy : A fire policy containing an average clause is called an Average Policy. Under this policy the insured is penalised for under-insurance of the property. In other words, the insured is considered to be a self insurer to the extent of under insurance. For Example : Where the property worth of Rs. 80,000 is insured for Rs. 60,000 and the loss caused by fire is Rs. 40,000 then the amount of claim to be paid by the insurer will be Rs. 30,000. It must be remembered that average clause applies only where there is under insurance and partial loss. If the loss is total, the insure amount will be paid. For instance, if in the above example, the entire property is lost, then the claim that will be admitted is Rs. 60,000.
4. Floating Policy : A floating policy covers loss on goods which are lying in different places. For example ,  a dealer may take out only one floating policy, instead of separate specific policies for all his goods, some of which may be in warehouse, others in railway stations, shop counters etc. This policy is useful when the insured is in a position to declare only the total value at risk and not separate values in separate risks.
5. Replacement Policy : Replacement policy is otherwise termed as Re-instatement policy. This policy is issued in respect of building, plant and machinery, furniture and fixtures and fittings etc. Under this policy the insurer undertakes to pay the cost of replacing the property instead of paying compensation to the insured for the property destroyed. In short, the damaged property is replaced by a new property.
6. Declaration Policy : Declaration Policy may be granted only in respect of stock of inventories (stock of raw material, stock of work in progress and stock of finished goods) of the insured. Generally levels of stock which are subject to frequent fluctuations in value or in volume, present a special problem for insurance. In such a case the businessman takes a policy for a maximum expected amount and the premium is paid. Every month the insured must declare in writing the stock covered under the policy to the insurance company. At the end the premium is adjusted accordingly.
7. Comprehensive Policy : This policy undertakes full protection not only against the risk of the fire but combining with the risk against burglary, riot, civil commotion, theft, damage for pest, lightning. The policy is also termed as all Insurance policy. Here the comprehensive does not mean that every type of risk is covered. Such policies are not common in our country.
8. Consequential Loss Policy : Under this policy the insurer agrees to indemnify the insured for the loss of profits which he suffers due to dislocation of his business as a result of fire. This type of policy is also called as "Loss of profit policy". Thus this policy covers :
1. loss of goods or property damaged
2. loss of net profits
3. outstanding expenses (interest on debenture, salaries rent on building etc.)
4. prepaid expenses etc.
9. Adjustable Policy : This policy is nothing but an ordinary policy on the stock of the businessman with liberty to the insured to vary at his option. The premium is adjustable pro-rata according to the variation of the stock. The adjustable policy is granted to remove the disadvantage of declaration on policy. This is issued for a definite term on the existing stock. The premium is calculated in the ordinary manner and is paid in full at the inception of the policy. Whenever, there is variation in the stock, the insured informs the insurer. As soon as the information of variation is received, the policy is suitably endorsed and the premium is adjusted on a pro-rata basis. The policy amount will, thus, be changeable from time to time.