FROM Sept 1, changes to the premium payment framework to minimise claim disputes between insurers and customers that arise out of a delay or non-payment in premiums for all general insurance policies, including motor and travel plans, will take effect.
The General Insurance Association of Singapore (GIA) on Wednesday said the revised framework sets out that premiums must be paid to the insurer or intermediaries on or before the inception date or the renewal of the coverage.
This means that if the total premium is not paid to the insurer or the intermediary by then, there will not be any cover and benefits will not be payable by the insurer.
In renewing existing motor policies, the framework states that the insurer has 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, GIA said.
The framework also recommends that insurers review special non-payment incidents on a case-by-case basis and within a reasonable time to ensure a fair outcome.
Said Derek Teo, GIA chief executive: "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."
The premium payment framework 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, a workgroup comprising representatives from GIA, Singapore Insurance Brokers' Association (SIBA) and the Monetary Authority of Singapore (MAS) was formed to review the framework as new insurance business and distribution models evolved.
The parties had sought to address 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.