By ROSEMARY ONUOHA
As an insurance consumer, has your broker, agent or insurer denied you access to your insurance product or service lately? If yes, such practitioner is only adhering to the ‘no premium no cover mandate of the National Insurance Commission, (NAICOM).
NAICOM issued a circular last year, stating that from January 1, 2013, any underwriting firm that provides insurance cover without collecting the premium would be liable to a penalty of N500, 000 or lose its license.
It also noted that all insurance covers shall only be provided on a strict ‘no premium no cover’ basis and that only cover for which payment has been received, directly by the insurer or indirectly through a duly licensed insurance broker, shall be recognised as income in the books of the insurer.
This mandate became necessary due to the reoccurring high rate of outstanding premium in the books of underwriters. As a result, NAICOM decided to enforce section 50 (1) of the Insurance Act 2003 which states that, “The receipt of insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance.”
NAICOM said that any insurer who grants cover without having premium in advance or premium receipt notification from the relevant insurance broker shall be liable to a penalty of N500, 000 in respect of each cover so granted, and in addition, may be a ground for suspension of the licence of the insurer.
It said irrespective of the period of insurance, insurers shall ensure that at any point, they have received directly or indirectly, through the insurance broker, the full premium in advance for cover being granted. NAICOM noted that all brokers should within 48 hours of receiving premiums on behalf of any insurer; notify the insurer in writing in each case of the receipt of such premium, adding that all such notification shall be accompanied by the broker’s credit notes, acknowledging indebtedness to the insurer.
NAICOM also mandated that upon the receipt of such credit notes, the insurer shall issue cover and forward the policy documents along with the related debt notes to the broker. Any broker who fails to notify the insurer of any premium received on his behalf shall be liable to a penalty that is not less than N250,000 in each case of failure to notify.
NAICOM also mandated insurers to notify it, not later than 30 days from the end of every quarter, of all premiums acknowledged as having been received by brokers or lead insurers, but not remitted to them, adding that any insurer, who fails to render such return, shall be liable to a penalty of N5000 for each day of default.
So far, insurance practitioners have been adhering to the ‘no premium, no cover’ mandate. It is expected that insurance consumers adhere to it as well if they want the best of insurance.