KATHMANDU: The government is facing a show-cause order from the Supreme Court (SC) for its inability to promptly handle COVID-19 insurance claims. This action is in response to an appeal that the Nepal Insurers' Association (NIA) filed, alleging that the payments were not handled properly by the government.

The SC's Justice Abdul Aziz Musalman, sitting in a solitary bench, mandated on Monday that the government submit a written justification for the hold-ups in resolving these claims. The government now has the chance to address the issues voiced and give this matter top priority, thanks to the court's decision.

The government's incapacity to resolve payments for COVID-19 insurance claims served as the impetus for the petition. Launched in April 2020, the COVID-19 insurance program operated until mid-July 2021. Non-life insurance companies sold 1,758,343 policies during this time, bringing in Rs 1.5 billion in premium income.

Despite selling a large number of policies and collecting large sums of premiums, insurers only paid out Rs 4.78 billion in claims, leaving the government with an additional Rs 11 billion in debt. Any payments beyond Rs 3.5 billion would fall under the purview of the government, as the insurance plan was intended to cover a wide range of liabilities.

Under the COVID Insurance Directive, liabilities were distributed among insurance companies, reinsurance companies, catastrophe funds, and the Nepal Insurance Authority (formerly the Insurance Board). The government’s role was to cover any excess beyond Rs 3.5 billion.

Over the past three years, the Ministry of Finance (MoF) has been hesitant to resolve these claims, frequently blaming a shortage of funding. To make matters worse, the MoF has been accused by the NIA of delaying the payments.

A big step toward resolving the delays and putting pressure on the government to pay its share of COVID-19 insurance claims costs is the SC's show cause order.

As a result of the court's ruling, parties impacted by the situation must take immediate steps to guarantee they obtain the insurance benefits to which they are legally entitled. A tight watch will be kept on the government's response to make sure the SC's directive is followed.