Draft IAR - HEI Birgunj.1-BRJ V1

Himalayan Everest Insurance Limited.
Internal Audit Report

1st Quarter | FY 2080-81
November 2023
G.P. Rajbahak & Co. Himalayan Everest Insurance Ltd.
Chartered Accountants Internal Audit Report| 1st Quarter [2080-81]
BRANCH OBSERVATION
BRIRGUNJ-1 (BRJ) BRANCH
1. UNDERWRITING
The function of underwriting comprises of examination and evaluation of proposal form for the insurance, the risk evaluation, and the establishment of
premiums (subject to premium prescribed by the Nepal Insurance Authority). It also involves measuring risk exposure, risk management, and risk
assessment. For the purpose of verification of underwriting dockets, we obtained the entire list of policies issued in the first and second quarter by the
insurer. Subsequently, we selected the sample files of underwriting using stratified method of sampling. The total master file obtained was classified into
various pool (namely motor, property, agriculture and miscellaneous). From each category, sample selection has been done based on premium computed
including fresh policies issued in the period. Summary of the sample selection for Birgunj 1-BRJ has been mentioned below:
Total Sample Sample % covered
Particulars Premiu
Number of policies Premium Number of policies Premium Number of policies
m
Accidental 5 111,004.30 2 69,357.50 40 62
Marine 113 930,574.09 10 268,334.74 10 29
Miscellaneou
29 2,589,640.02 7 1,448,639.47
s 24 56
Motor 428 4,813,259.18 38 1,059,590.36 9 22
Property 145 9,572,372.99 12 4,145,904.59 9 43
Total 720 18,016,850.58 69 6,991,826.66 10 39
1.1 INDIVIDUAL POLICY-WISE OBSERVATION

a. Policy Number : EHAT/HOME/11/23/24/00918
Issued Date : 2023/09/05
Insured : SAMURAI SPA PVT. LTD.
Amount : NRs. 12,700,000.00
Observation/s:
On our review of the given policy, we noted insured has opted to take insurance against RSMDT/SRCC, War/riot. However, premium has been charged
after deduction of it while issuing the policy. This has resulted in deficit premium charged from the insured for the intended insurance as follows:
Page 1 of 20
Chartered Accountants Internal Audit Report| 1st & 2nd Quarter [2079-80]
Particulars As per Policy (NRs.) As per Declaration (NRs.)
Basic Premium 12,700.00 12,700.00
Risk Group 6,350.00 -
Agent (1,270.00) (1,270.00)
Subtotal 17,780.00 11,430.00
Ticket 20 20
Total Amount 17,800.00 11,450.00
Add: VAT@13% 2,314.00 1,488.50
Total Premium Amount 20,114.00 12,938.50
Excess Premium Charged 7,175.50
Implication & Recommendation:
Issuance of policy without considering details mentioned in proposal form has caused charging of deficit premium. Hence, it is recommended to
calculate and charge premium amount in accordance with details mentioned in proposal form.
Management Response:
b. Policy Number : BRJ/GPA/11/19/20/00008

Insured : BIRGUNJ PLASTIC SHOW ROOM
Issue Date : 12/09/2022
Amount : NRs. 1,400,000.00
Observations:
As per clause 20 of Accidental Insurance directives 2078, risk has been covered in the initial rate i.e. as per clause 17 of this directives. However,
additional risk group cost has been charged which results in excess premium of NRs.
Particulars As per proposal (NRs.) As per declaration (NRs.)
Premium 2,800.00
2,800.00
RSD -
210.00
Page 2 of 20
Total 2,800.00
3,010.00
Stamp 20.00
20.00
Total premium 2,820.00
3,030.00
Excess premium received 210.00
Issuance of policy without considering details in proposal form has caused charging of excess premium which may impact relation with customer,
dispute at the time of claim and fine from the regulatory authority. Hence, it is recommended to issue policy as per proposal form and raise the invoice
accordingly.
c. Policy Number : BRJ/GPA/11/21/22/00018

Insured : GYANDA ACADEMY PVT. LTD.
Issue Date : 01/05/2023
Amount : NRs. 42,100,000.00
Observations:
As per clause 20 of Accidental Insurance directives 2078, risk has been covered in the initial rate i.e., as per clause 17 of this directive. However,
additional risk group cost has been charged which results in excess premium of NRs. 6,240.00
Particulars As per proposal (NRs.) As per declaration (NRs.)
Premium 72,800.00
72,800.00
Less: Direct Discount 3,640.00
3,640.00
Sub Total 69,160.00
69,160.00
RSMDT -
6,240.00
Total 69,160.00
75,400.00
Page 3 of 20
Stamp 20.00
20.00
Total premium 69,180.00
75,420.00
Excess premium received 6,240.00
accordingly.
d. Policy Number : BRJ/MAR/11/22/23/00612

Insured : MAGNUS PHARMA PVT. LTD.
Issue Date : 01/08/2023
Amount : NRs. 4,316,042.50
Observations:
On our review of given underwriting policy, we noted that the insurer has stamped the sticker of NRs. 20.00 in tax invoice instead of NRs. 10.00.
Issuance of policy with attaching NRs. 20.00 as stamp duty on tax invoice cause loss to insurer. Hence, it is recommended to raise the invoice
accordingly.
e. Policy Number : BRJ/MAR/11/22/23/00588
Page 4 of 20
Insured : NATURAL INGREDIENTS PVT. LTD.
Issue Date : 10/16/2022
Amount : NRs. 2,658,858.34
Observations:
As per the clause 18 and annexure – 6 of Marine Tariff Insurance directives 2065, Drum of Liquid glucose item shall be categorized in Liquid cargo and
chemicals in fluid form- Non-Hazardous (in tanker or drums). However, on our review, we noted an instance where such item has been categorized in
plastic items resulting in deficit premium of NRs.
Applicability As per proposal As per declaration
Particulars
* (NRs.) (NRs.)
Basic premium rate 0.25 0.40
Inland transit discount y
0.05
Balance 0.20 0.32
Additional
Road transit-SRCC y
0.02
Applicable Premium Rate 0.22 0.34
Premium amount: 5,849.49 9,040.12
Direct Business discount y
584.95
Premium 5,264.54 8,136.11
Stamp 20.00 20.00
Total 5,284.54 8,156.11
VAT 686.99 1,060.29
Premium amount 5,971.53 9,216.40
Deficit premium
3,244.87
received

Issuance of policy without considering details in the proposal form has made loss of revenue for the insurance company and may also cause dispute at
the time of claim. Hence, it is recommended to issue policy as per proposal form and raise the invoice accordingly.
Page 5 of 20
f. Policy Number : BRJ/MAR/11/22/23/00645

Issue Date : 02/08/2023
Amount : NRs. 4,553,028.47
Observations:
On our review of given underwriting policy, we noted that the insured has not proposed for Road transit-SRCC costs in the questionnaire form.
However, such clause has been added resulting excess premium of NRs. 926.09
Particulars
* (NRs.) (NRs.)
Inland transit discount y 0.05
Balance 0.2 0.2
Additional
Road transit-SRCC y 0.02
Premium amount: 10,016.66 9,106.06
1,001.6
7
Premium 9,015.00 8,195.45
Stamp 20.00 20.00
Total 9,035.00 8,215.45
VAT 1,174.55 1,068.01
Premium amount 10,209.55 9,283.46
Excess Premium Received 926.09
accordingly.
Page 6 of 20
g. Policy Number : BRJ/MAR/11/22/23/00612

Issue Date : 01/08/2023
Amount : NRs. 4,316,042.50
Observations:
Particulars
* (NRs.) (NRs.)
Balance 0.2 0.2
Additional
Premium amount: 9,495.29 8,632.09
Direct Business discount y 949.53
Premium 8,545.76 7,768.88
Stamp 20.00 20.00
Total 8,565.76 7,788.88
VAT 1,113.55 1,012.55

accordingly.
Page 7 of 20
h. Policy Number : BRJ/MAR/11/22/23/00569

Insured : HIMALAYAN BANK LTD. A/C S.P.M PRINTER P. LTD
Issue Date : 08/07/2022
Amount : NRs. 783,652.39
Observations:
Particulars
* (NRs.) (NRs.)
Balance 0.24 0.24
Additional
Premium amount: 2,037.50 1,880.77
Direct Business discount y 203.75
Premium 1,833.75 1,692.69
Stamp 20.00 20.00
Total 1,853.75 1,712.69
VAT 240.99 222.65

accordingly.
Page 8 of 20
i. Policy Number : BRJ/MAR/11/22/23/00576

Insured : GOOD LIFE MEDICO & CLINIC PVT. LTD.
Issue Date : 09/12/2022
Amount : NRs. 512,287.82
Observations:
Applicability As per proposal
Particulars As per declaration (NRs.)
* (NRs.)
Balance 0.56 0.56
Additional
Premium amount: 2,971.27 2,868.81

297.1
3
Premium 2,674.14 2,581.93
Stamp 20.00 20.00
Total 2,694.14 2,601.93
VAT 350.24 338.25

accordingly.
Page 9 of 20
j. Policy Number : BRJ/CV/11/20/21/00923

Insured : QUEST PHARMACEUTICALS PVT. LTD.
Issue Date : 09/27/2022
Amount : NRs. 4,100,000.00
Observations:
On our review of given underwriting policy, we noted that the insurer has charged premium for 46 seats instead of 45 seats. Also, it has given discount
for private purpose use although it is used for renting purpose as per blue book and has charged premium for towing charge instead of not proposing for
it. Eventually, it results in deficit of premium of NRs. 5,939.56
As per proposal As per declaration
Particulars
(NRs.) (NRs.)
Basic Premium 51,250.00 51,250.00
Discount as per seat capacity 2,500.00 2,500.00
Sub Total 48,750.00 48,750.00
Voluntary Discount 9,750.00 9,750.00
Sub Total 39,000.00 39,000.00
No Claim Discount 9,750.00 9,750.00
Sub Total 29,250.00 29,250.00
Discount If used for Private Use 7,312.50 -
Sub Total 21,937.50 29,250.00
Direct insurance without agent 2,193.75 2,925.00
Charges for removing the accidental
500.00 -
vehicle
Sub Total 20,243.75 26,325.00
Third Party liability 10,000.00 10,000.00
Sub Total 7,500.00 7,500.00
Drivers Insurance 700.00 700.00
Other Staff (Except Driver)(Per Person) 700.00 700.00
Passenger insurance (per person) 30,800.00 30,100.00
Sub Total 32,200.00 31,500.00
Risk Group Additional
Riots 4,100.00 4,100.00
Page 10 of 20
Terrorism 4,100.00 4,100.00
Driver 125.00 125.00
Other Staff 125.00 125.00
Passenger 5,500.00 5,375.00
Sub Total 13,950.00 13,825.00
Total 73,893.75 79,150.00
Stamp 20.00 20.00
Sub Total 73,913.75 79,170.00
VAT 9,608.79 10,292.10
Premium Amount 83,522.54 89,462.10
Deficit premium received 5,939.56
Issuance of policy without considering details in the proposal form has made loss of revenue for the insurance company and may also cause dispute at
the time of claim. Hence, it is recommended to issue policy as per proposal form and raise the invoice accordingly.
k. Policy Number : BRJ/CV/11/19/20/00518

Insured : GYANDA ACADEMY PVT. LTD.
Issue Date : 01/30/2023
Amount : NRs. 2,600,000.00
Observations:
On our review of given underwriting policy, we noted that the insured has not proposed for towing facilities. However, such charge has been included
and also, premium has been charged for 38 seats instead of 37 seats which results in excess premium of NRs. 1,497.25
As per proposal
Particulars As per declaration (NRs.)
(NRs.)
Basic Premium 32,500.00 32,500.00
Discount as per seat capacity 2,500.00 2,500.00
Sub Total 30,000.00 30,000.00
Voluntary Discount 6,000.00 6,000.00
Sub Total 24,000.00 24,000.00
Page 11 of 20
Sub Total 16,800.00 16,800.00
Discount If used for Private Use 4,200.00 4,200.00
Sub Total 12,600.00 12,600.00
Direct insurance without agent 1,260.00 1,260.00
Charges for removing the accidental vehicle 500.00 -
Sub Total 11,840.00 11,340.00
Third Party liability 10,000.00 10,000.00
Sub Total 7,000.00 7,000.00
Drivers Insurance 700.00 700.00
Other Staff (Except Driver)(Per Person) 700.00 700.00
Passenger insurance (per person) 25,200.00 24,500.00
Sub Total 26,600.00 25,900.00
Risk Group Addition
Riots 2,600.00 2,600.00
Terrorism 2,600.00 2,600.00
Driver 125.00 125.00
Other Staff 125.00 125.00
Passenger 4,500.00 4,375.00
Sub Total 9,950.00 9,825.00
Total 55,390.00 54,065.00
Stamp 20.00 20.00
Sub Total 55,410.00 54,085.00
VAT 7,203.30 7,031.05
Premium Amount 62,613.30 61,116.05
Excess premium received 1,497.25

accordingly.
Page 12 of 20
l. Policy Number : BRJ/MCY/11/20/21/01219

Insured : LAXMI UPRETI
Issue Date : 2022/12/22
Amount : NRs. 210,000.50
Observations:
As per Motor Insurance Tariff Directive, 2073, Clause 7.5(1), "The new owner shall fill up the new proposal form in case of the transfer of ownership of
the vehicle." However, in regards to this policy, the ownership has been transferred from MAX AUTO PVT. LTD. to Laxmi Upreti during the policy
period but the new proposal form has not been filled by the new owner yet.
Proposal form is the basis for issuance of policy and the information so provided in proposal form is used in premium calculation. It is mandatory for the
owner to fill up the proposal form and provide required information. New owner shall also fill up new proposal form. It might otherwise create risk of
dispute at the time of claim as policy terms of the insured vehicle has not been acknowledged by the new owner yet. Hence, it is recommended to duly
fill up the new proposal form by the new owner.
m. Policy Number : BRJ/MCY/11/21/22/01587

Insured : AJAY KUMAR GUPTA
Issue Date : 2022/10/12
Amount : NRs. 0.00 (Third party)
Observations:
As per Motor Insurance Tariff Directive, 2073, Clause 7.5(1), "The new owner shall fill up the new proposal form in case of the transfer of ownership of
the vehicle." However, in regards to this policy, the ownership has been transferred from d & d motors pvt. ltd. to ajaya kumar gupta during the policy
period but the new proposal form has not been filled by the new owner yet.
Proposal form is the basis for issuance of policy and the information so provided in proposal form is used in premium calculation. It is mandatory for the
owner to fill up the proposal form and provide required information. New owner shall also fill up new proposal form. It might otherwise create risk of
Page 13 of 20
dispute at the time of claim as policy terms of the insured vehicle has not been acknowledged by the new owner yet. Hence, it is recommended to duly
fill up the new proposal form by the new owner.
n. Policy Number : BRJ/MCY/11/22/23/01662

Insured : SHARASWATI KUMARI RAJPUTIN
Issue Date : 1/24/2023
Amount : NRs. 650,000.00
Observations:
On our review, we noted policy for the vehicle has been issued based on delivery challan. Tax invoice and bluebook copy has not been obtained before
the policy issuance which enables to ascertain the sum insured and reliability of existence of insured vehicles.
Tax invoice and blue book are the fundamental documents ensuring the ownership & legality of a vehicle. Also, it provides various details required for
calculation of premium like cubic capacity, seat capacity, ton capacity, etc. of the vehicle along with owner identification. Further, such details enable to
ascertain the vehicles in case of claim lodged for the loss. Hence, it is recommended to obtain required documents before policy issuance.
o. Policy Number : BRJ/MCY/11/22/23/01643

Insured : KRISHNA NANDAN YADAV
Issue Date : 2022/11/18
Amount : NRs. 395,900.00
Observations:
On our review, we noted policy for the vehicle has been issued based on delivery challan. Tax invoice and bluebook copy has not been obtained before
the policy issuance which enables to ascertain the sum insured and reliability of existence of insured vehicles.
Page 14 of 20
Tax invoice and blue book are the fundamental documents ensuring the ownership & legality of a vehicle. Also, it provides various details required for
calculation of premium like cubic capacity, seat capacity, ton capacity, etc. of the vehicle along with owner identification. Further, such details enable to
ascertain the vehicles in case of claim lodged for the loss. Hence, it is recommended to obtain required documents before policy issuance.
2. ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM DIRECTIVE, 2075

Observation/s:
As per Anti-Money Laundering Directive, 2075, Clause 4(7), “Documents and details to be collected and verified while carrying out the customer
identification should be in accordance with the Annexure 1". Similarly, as per Clause 7(2), "Insurer should classify risk into high, medium and low
category by evaluating the risks associated and may make further classification if required". However, on our review, we noted the branch does not have
practice of maintaining KYC Form of the insured.
It is recommended to duly comply with regulatory requirements of Anti-Money Laundering Directive, 2075 and related acts and regulations to avoid
fines and penalties for non-compliance.
2.1 NON-COMPLIANCE WITH NEPAL BIMA PRADHIKARAN CIRCULARS

Observations
As per Nepal Beema Pradhikaran Circular 14 (AML CFT Circular) dt.2079.08.06 (Ref: Ne. Bee. Pra.119(079/80) Cha. Na. 2304, “While mentioning
beneficiary/nominees in the policy, it should be ascertained whether such person is/is not eminent politically exposed person (PEP).” On our review, we
noted such direction of Nepal Beema Pradhikaran has not been complied.
Page 15 of 20
Non-compliance of Beema Pradhikaran circulars. It is recommended to duly comply with related circulars to avoid fines and penalties for non-
compliance.
Page 16 of 20

Draft IAR - HEI Birgunj.1-BRJ V1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Draft IAR - HEI Birgunj.1-BRJ V1

Uploaded by

Copyright:

Available Formats

Himalayan Everest Insurance Limited.

Internal Audit Report

1.1 INDIVIDUAL POLICY-WISE OBSERVATION

b. Policy Number : BRJ/GPA/11/19/20/00008

c. Policy Number : BRJ/GPA/11/21/22/00018

d. Policy Number : BRJ/MAR/11/22/23/00612

e. Policy Number : BRJ/MAR/11/22/23/00588

Implication & Recommendation:

f. Policy Number : BRJ/MAR/11/22/23/00645

g. Policy Number : BRJ/MAR/11/22/23/00612

Implication & Recommendation:

h. Policy Number : BRJ/MAR/11/22/23/00569

Implication & Recommendation:

i. Policy Number : BRJ/MAR/11/22/23/00576

Premium amount: 2,971.27 2,868.81

Implication & Recommendation:

j. Policy Number : BRJ/CV/11/20/21/00923

k. Policy Number : BRJ/CV/11/19/20/00518

Implication & Recommendation:

l. Policy Number : BRJ/MCY/11/20/21/01219

m. Policy Number : BRJ/MCY/11/21/22/01587

n. Policy Number : BRJ/MCY/11/22/23/01662

o. Policy Number : BRJ/MCY/11/22/23/01643

2. ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM DIRECTIVE, 2075

2.1 NON-COMPLIANCE WITH NEPAL BIMA PRADHIKARAN CIRCULARS

You might also like