The General Insurance Association of Singapore (GIA) has introduced new rules on the payment of premiums in a bid to reduce claim disputes between customers and insurers. The rules require premiums to be paid to insurers or intermediaries on or before the inception date or renewal of the policy. If full payment is not made by this date, there will be no cover.
These changes to the Premium Payment Framework (PPF) – which was first introduced in May 2005 – are designed to improve efficiency in the collection of premiums. Both general insurers and the public purchasing personalised insurance products will need to take note of these changes.
The new rules took effect on 1 September 2016 and apply to all general insurance policies, including motor and travel plans.
The GIA worked together with the Singapore Insurance Brokers’ Association (SIBA) to address three areas of concern: renewal policies; overdue premiums, and re-marketing by insurers after cancellation of coverage due to breach of premium payment warranty.
Key changes to the PPF include:
- For existing motor policies, if the customer fails to pay the policy premium by the inception date, no benefits will be payable by the insurer.
- Where a customer purchases a personalised policy, such as travel insurance, through online channels, cover is effective once the payment has been processed. Insurers will not be obliged to provide coverage where the payment cannot be processed due to insufficient funds. However, insurers will honour the payment and provide coverage if the unsuccessful payment is due to an operating system failure.
- For commercial policyholders, insurers may set the requirement for payment of the first instalment up to 60 days after the policy inception date. Insurers are free to set the schedule for when the remaining instalments are to be paid during the policy period. Commercial customers must ensure that proper documents relating to their procurement procedure are in place.
- The PPF now states that an insurer should not start providing cover under a new policy until it has received written confirmation from the previous insurer. This regulation is particularly aimed at tackling issues relating to non-disclosure by customers.According to Derek Teo, the GIA chief executive, the overarching aim of the revision to the premium framework is to introduce certainty to all parties involved and to provide clarity on when policies start and end.
- Whilst these changes to the PPF are more onerous than before, the PPF states that insurers should consider policies on a case-by-case basis where the customer has failed to pay by the inception or renewal date.