“Thank god, today (Monday) was a public holiday. Only four people called up to take stock of the situation,” Aryal, who is also the president of the agents´ association of the insurance company, told Republica. But when the office reopens on Tuesday, he is quite certain that his phone will ring more often than other days, and people who bought policies from him will pose tough questions and probably threaten to take action against him. [break]
“I´m ready to face the music as it´s my responsibility to answer them, although I wasn´t involved in creating this mess,” said Aryal, who collects an average premium of Rs 10,000 from each of his clients every year. Other agents are probably feeling as uncomfortable as Aryal although Republica could not contact them.
This is all because of the mistakes committed by the insurance company, which on Sunday was asked to suspend all its business activities. Asian Life Insurance is facing the wrath of the Insurance Board after the insurance sector regulator found that the company had violated directives on dividend distribution.
The IB order prevents the company from selling new policies. The insurance company will have to take the board´s permission before settling claims though it is allowed to collect premium on policies sold in the past.
The regulator has said it was forced to take action after the company recently gave away cash dividends estimated at Rs 105 million to its promoters and some shareholders despite a moratorium issued against distribution of dividend.
Earlier in September, the Insurance Board had issued a directive asking all life insurance companies to halt distribution of dividend until they raise paid-up capital to Rs 500 million from the existing Rs 250 million. Since the insurance company has a capital of Rs 360 million, it was also barred from distributing profit among shareholders. Yet the company, which is collecting cash from the public, went against the regulator´s instructions and distributed cash dividend to its promoters.
Bijaya Kumar Sarawagi, the company´s chairman, meanwhile, has defended the company´s decision, citing it had not used the money from annual profits it generated but from premium collected through sales of foreign employment policies, which had expired.
Some life insurance companies, like Asian Life, sell these policies to people who go abroad for employment purpose. “Since these policies mature after a maximum of three years, we assumed there was no harm in disbursing money collected through sales of policies, which have already expired, thereby freeing us from the liability,” Sarawagi said.
When asked, if this wasn´t violation of the regulator´s instruction, Sarawagi said: “The management (of the company) probably knows better on this issue.”
Republica tried to contact Ramesh Kumar Bhattarai, one of the company´s promoters, who resigned from the post of managing director some days ago as the matter was going out of control, but he didn´t take the calls. In a text message, he said: “I´m in an urgent meeting about the present critical matter. I will call you later.” But instead of giving a call, his cell phone went dead soon after. Even Kamal Raj Gautam, general manager, could not be contacted despite several attempts.
The Insurance Board has clearly said that the company has violated the regulation and the only way to rectify the mistake is to put the money that was distributed among promoters and some public shareholders back in the vault.
“We had asked the company to retain the earnings so that it could strengthen its capital buffer as the company dealing with tens of billions of rupees in public money only has a capital base of Rs 360 million,” Shekhar Kumar Aryal, acting director of the Insurance Board, told Republica.
“If the company is unable to retrieve the cash, the board of directors will be responsible for raising the fund,” Aryal added. The company has until Sunday to do this. If it does not comply, the Insurance Board can even terminate its operating license.
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