Recently I played a game ending in this position. I played white but ran out of time before being able to checkmate. To my surprise the game ended in a draw because of insufficient material instead of me losing. What kind of rule allows this to happen?

If the position is such that a player can't checkmate anymore in any conceivable series of legal moves, then he can't win on time anymore, only draw.

Thanks for clearing that one up!

I guessed that that was the rule but it's better to be safe than sorry

Why cant white mate? Only king and rook are enough to mate,and he is got the knight as well???

This is correct, if a king is acompanied only by a lone knight or lone bishop, then the best result they can hope for is a draw, regardless of time control.  However, if the player has a pawn on the board, even if it is frozen, then the possibility for promotion exists and they CAN win on time.

I would guess it was white that ran out of time . . .

I ran out of time before I could mate

See this is why I love Chess.  I never knew that either. 

 White can, but Black can't. So Black can't win on time.

 Thanks Scarblac, I was puzzling over this until I read your post. If I have got this right, White has enough material to mate, but lost on time, but because Black does not have enough material to mate the result is a draw, not a win on time for Black. I was not aware of this rule either. When I think about it a draw seems a fair result in this situation.

Just remember that if you are playing OTB you need to call it before your time runs out. Also, you can't call it if there is  a delay clock OTB

 No, you're confused with another rule. This thread is about what happens when the time runs out.

WHITE SHOULD BE ABLE TO CHECKMATE.

Again, white's flag has fallen. The question is whether black could still have checkmated. Since he doesn't have any pieces, he couldn't, and it's a draw.

You can under no circumstances win a chess game without sufficient material even by timeout except for odd cases of checkmate like this one:

@AnthonyCG: even that isn't really an exception, since there White does have sufficient material. It's just that if the Black material wasn't there, it would suddenly cease to be sufficient :-)