Insurer Fees to be Outlawed

The FSB published a letter inviting comment from the industry on a practice that it intends declaring an undesirable or irregular practice.

Some insurers charge policyholders a fee in addition to the premium quoted. The Registrar views this as unreasonably prejudicing, deceiving, misleading or unfairly affecting policyholders, and defeating the objectives of regulation.

The motivation for this view is given as:

  1. The practice of charging an “insurer fee” is inconsistent with traditional business practices, and with the stipulations of both the Long- and Short-term Insurance Acts which state that premiums must include all costs incurred by an insurer.
  2. Consumer behaviour in the insurance market is price-driven. By charging an additional fee, the true price of the product is not presented to consumers.
  3. It is also prejudicial to competitors, as it does not allow prospective clients to make a fair comparison of costs.
  4. Charging an insurer fee causes premiums to be understated, which distorts a number of key indicators and regulatory requirements such as claims, expense and operating ratios. It also affects the valuation of an insurer’s assets and liabilities, and the calculation of capital adequacy requirements.
  5. Charging a separate insurer fee distorts commission and fees, such as binder fees) which are based on a percentage of premiums, as well as reinsurance premiums where these are based on the gross written premium.
  6. The charging of such fees also impedes effective supervision. Calculations for the purpose of comparison will be inconsistent where some charge such a fee and others not.

Interested parties should respond to this call for input before 30 June 2014 by email to

Please click here for a copy of the notice.


Comments are closed.