Clearer rules on insurance premium payments kick in on Thursday

AIG's travel insurance booth at Natas on Aug 14, 2016.
AIG's travel insurance booth at Natas on Aug 14, 2016.PHOTO: TIFFANY GOH FOR THE STRAITS TIMES

SINGAPORE - Clearer rules that will minimise claim disputes between insurers and customers arising from a delay or non-payment of premiums will take effect on Sept 1.

These new rules will apply to all general insurance policies, including motor and travel plans, General Insurance Association of Singapore (GIA) said in a media release on Wednesday (Aug 31).

They state that premiums must be paid to the insurer or intermediaries on or before the start date or the renewal date of the coverage. If the total premium is not paid to the insurer or the intermediary by then, there will not be any cover or benefits payable by the insurer.

In the event of special cases of non-payment, insurers are urged to review them on a case-by-case basis and within a reasonable time to ensure a fair outcome.

The new rules have been introduced as revisions to the Premium Payment Framework (PPF) that govern the industry.

Said GIA chief executive Derek Teo: "The key point in the revision of the premium framework is about introducing certainty to all the parties involved. It makes it clearer to the general public when their coverage starts and ends. Likewise, it provides greater clarity to the general insurers in the industry. At its core, it removes any source of disputes that could potentially arise." 

 He added: "This is about increasing transparency between all parties involved in a general insurance contract."

GIA listed four other areas to note in the revised PPF:

- In renewing existing motor policies, insurers have to inform policyholders that they need to renew their policies at least 30 business days before the expiry date. If the policyholder fails to pay the premium before inception, the benefits will not be payable.

- For those buying personalised policies such as travel insurance through online channels and AXS machines, the cover is effective only when payment is successful. In the event there is insufficient funds and the payment does not go through, insurers will not be obliged to provide coverage.

- For commercial policyholders including businesses and government organisations, the revised framework allows insurers to require them to pay within 60 days from the policy inception date. These policyholders also have to ensure that proper documents on their procurement procedure are set in place.

- On an industry level, the framework now states that an insurer underwriting a new policy should not start providing cover without written confirmation from the previous insurer. This latest move is aimed at raising practice standards specifically relating to cases involving non-disclosure and payment by policyholders.

The PPF was first introduced in May 2005 to improve efficiency in the collection of premiums for all classes of general insurance policies. It also aimed to minimise the possibility of claim disputes between insurers and customers arising from delay or non-payment in premium payment.

In 2014, GIA began working with Singapore Insurance Brokers' Association (SIBA) and the Monetary Authority of Singapore (MAS) to review the framework as new insurance business and distribution models evolved.

The workgroup looked into three areas: new, renewal policies as well as endorsements; overdue premiums; and re-marketing by general insurers after cancellation due to breach of premium payment warranty.