Nepalese regulator wants zero depreciation motor cover

The Nepal Insurance Board wants motor insurers to introduce policies with zero depreciation cover, but critics fear the high premiums would put the product beyond the reach of most Nepalese.

Under the terms of the policy, owners of insured vehicles would be able to claim back the cost of all repairs following an accident, meaning that the insurance companies would be unable to deduct anything for depreciation of the vehicle's parts.

Insurance companies are currently permitted to deduct a portion of the total claim amount depending on the types of parts replaced during repair work.

According to news website Financial Nepal, up to 50% can be deducted if the parts are made of rubber, plastic and nylon, while fibreglass is subject to a 30% deduction.

Parts made of glass can be subject to a deduction of up to 50%, depending on the age of the part. Similar deductions can be made for repair work.

Binod Aryal, executive director of the Insurance Board, told Nepalese daily Republica: "Because of these provisions, a person who has damaged a vehicle in an accident cannot get back full coverage despite paying premium amounts on time.

"To end this predicament, we are planning to instruct insurers to introduce a zero depreciation motor insurance product which offers full claim coverage on the value of parts replaced."

Aryal did acknowledge price concerns, however, saying: "It will definitely be more expensive than the regular motor insurance product available in the market, but we will try to fix the price in a way that does not create a hole in clients' pockets."