The National Insurance Commission (NIC) last week issued guidelines for implementation of the ‘No Premium, No Cover’ directive which takes effect from April 1, 2014.
The guidelines are coming on the heels of a meeting convened at the instance of the NIC with Chief Executive Officers of insurance, reinsurance and brokerage firms which required insurers to collect their premiums upfront before providing cover, a fortnight ago.
B&FT learnt that the guidelines were circulated to all heads of insurance and brokerage companies last week by NIC, pointing out that the regulator is carrying out the exercise in accordance with the powers conferred by Section 2 (a) (g) and 204 of the insurance Act 724 of 2006.
Importantly, too, the regulator stated that the guidelines are aimed at ensuring insurers are adequately resourced to enable insurers operate efficiently and improve service delivery to the public, which will in turn create confidence.
Top of the 12-paragraphed guidelines is the section that states “all insurance covers are strictly to be provided on a ‘No Premium, No Cover’ basis”.
Consequently, only covers for which the premium has been received directly by the insurer will be recognised as income in the books of the insurer.
However, any insurer who grants cover without having received premiums will be liable to a penalty of 10 times the amount of premium involved.
The guidelines also state that cover may be granted on an annual or time-on-risk basis. Irrespective of the cover granted, the premium in cash should be received by the insurer before cover is granted.
Insurance brokers are no longer allowed to receive insurance premiums directly in their names. However, any broker that receives premiums in cash on behalf of an insurer should remit same to the insurer within 24 hours.
Section six of the guidelines requires premiums paid by policyholder to a lead insurer in the case of co-insurance to be paid by the lead insurer within 24 hours.
A lead insurer that fails to pay the co-insurer premiums received on its behalf within seven days will incur a penalty 10 times the amount of premium not remitted to the co-insurer.
Other guidelines include the remittance of premiums to reinsurers while transitional arrangements have been made for insurers and brokers to make reconciliations.
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