COVID-19: EXEMPTIONS FOR INSURERS PROVIDING PREMIUM RELIEF

By Christine Rodrigues,Kirsten Serrurier Monday, April 20, 2020
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On 15 April 2020, the Financial Sector Conduct Authority (FSCA) published FSCA INS Notice 6 of 2020 and FSCA INS Notice 7 of 2020. These provide exemptions for short-term insurers and long-term insurers who provide premium relief, from certain provisions of the Regulations under the Short-term Insurance Act, 1998 (STIA Regulations) and the Long-term Insurance Act, 1998 (LTIA Regulations).

FSCA INS Notice 6 of 2020 - Exemption of certain short-term insurers and independent intermediaries

Certain short-term insurers and independent intermediaries are exempted from Regulation 5.2 (time and payment of commission) of the STIA Regulations in respect of policies that are subject to premium relief. Regulation 5.2 stipulates that commission shall not be paid or accepted before the date on which the premium in respect of which it is payable has been paid to the insurer.

The exemption aims to facilitate the delivery of premium relief to policyholders, at the discretion of the insurer, without affecting the expected income of intermediaries. The exemption is subject to the following conditions:

  • the premium relief is granted in relation to an existing policy of which the policyholder is in good standing with the insurer;
  • any commission paid in respect of a policy that is subject to premium relief does not exceed the maximum allowable commission prescribed in Regulation 5.3(1).

FSCA INS Notice 7 of 2020 - Exemption of long-term insurers

Certain long-term insurers are exempted from Regulations 3.5 (adjustment and refund of commission) and 3.17 (adjustment and refund of commission) of the LTIA Regulations in respect of policies that are subject to premium relief.

The exemption aims to facilitate the delivery of premium relief to policyholders by insurers, but at the same time, exempts the insurer from having to immediately adjust commission due to intermediaries but where the insurer has received a reduced premium. The exemption is subject to the following conditions:

  • the premium relief is granted in relation to an existing policy of which the policyholder is in good standing with the insurer; and
  • if the premium relief remains unpaid for a period of 12 months, the exemption automatically expires, and as a result of the unpaid premium, any commission that was paid in respect of such a policy must be adjusted (recalculated) by the relevant insurer and refunded by the relevant independent intermediary to the relevant insurer.

Certain long-term insurers are exempt from Regulation 4.2(1) (limitation on policies) of the LTIA Regulations insofar as it relates to premiums being repaid to that long-term insurer to compensate for the premium relief so granted, which premium repayments constitute excess premium and consequently triggers an extended restriction period. The exemption is subject to the following conditions:

  • the premium relief is granted in relation to an existing policy of which the policyholder is in good standing with the insurer;
  • the insurer does not impose additional causal event charges because of the premium relief granted; and the insurer
  • clearly discloses any implications of the premium relief to the policyholder, including any impact on the investment value (where relevant) prior to granting the premium relief.

FSCA INS Notice 6 of 2020 is available here and FSCA INS Notice 7 of 2020 is available here. Both Notices should be read together with FSCA Communication 19 of 2020, available here.