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Premium collection by intermediaries – Compliance deadline extended

The FSCA has extended the period of compliance for collection of premiums by intermediaries, specifically the requirement for a separate bank account to only contain premiums, from 28 September 2019 until 1 February 2020.

Paull Lawrence from Moonstone Compliance points out that this is largely due to the retail market where insurance is ancillary to the commercial contract and the FSCA wishes to interrogate business models so that clients are protected as well as not having to pay additional costs for multiple collections.

In their communications the FSCA makes it clear that any request for an exemption from the requirements of Reg 8.2(2) and Reg 4.2(3) must be made by the Insurer and not the independent intermediary:

Long-term Insurance Act Regulations

8.2 Requirements relating to receiving premiums

  1. An independent intermediary who receives premiums must account for such premiums properly and promptly and open and maintain one or more separate bank account into which premiums are to be received.
  2. A separate bank account referred to in subregulation (1) may only contain monies collected from policyholders and may not contain any monies or funds of the independent intermediary.
  3. All premiums received by an independent intermediary –
    (a) through electronic means must be received into a bank account referred to in subregulation (1); or
    (b)in cash must be deposited into a bank account referred to in subregulation (1) within 1 business day after a premium is received.
  4. An independent intermediary must within a period of 15 days after the end of every month, pay to the insurer concerned the total amount of the premiums received during that month.
  5. Despite subregulation (4), an independent intermediary may, subject to the insurer’s authorisation, prior to paying the total amount of the premiums received to the insurer reduce that amount by the value of –
    (a) any refund of premiums due and payable by the insurer to any policyholder or prospective policyholder represented by such independent intermediary in respect of the policies that are subject to the authorisation granted by the insurer;
    (b)any consideration payable to that independent intermediary by the insurer for rendering services as intermediary in respect of the policies concerned.
  6. If more than one independent intermediary is authorised by an insurer to receive or hold premiums in relation to the same policy, the period between the receipt thereof from the insured or any person on his or her behalf and payment to the insurer shall not exceed the period contemplated in subregulation (4).

Short-term Insurance Act Regulations

4.2 Requirements relating to receiving premiums

  1. The payment of a premium to an independent intermediary authorised under section 45 to receive a premium is deemed to be a payment to the insurer under the policy concerned.
  2. An independent intermediary who receives premiums must account for such premiums properly and promptly and open and maintain one or more separate bank account into which premiums are to be received.
  3. A separate bank account referred to in subregulation (2) may only contain monies collected from policyholders and may not contain any monies or funds of the independent intermediary.
  4. All premiums received by an independent intermediary –
    (a)through electronic means must be received into a bank account referred to in subregulation (2); or
    (b)in cash must be deposited into a bank account referred to in subregulation (2) within 1 business day after a premium is received.
  5. When an independent intermediary receives a premium in cash, that independent intermediary must as soon as reasonably practicable after receiving the premium give to the payer a written receipt for the premium received containing the name, address and telephone number of the recipient, the policy number and the name of the insurer on whose behalf the premium is received.
  6. An independent intermediary must within a period of 15 days after the end of every month, pay to the insurer concerned the total amount of the premiums received during that month.
  7. Despite subregulation (6), an independent intermediary may, subject to the insurer’s authorisation, prior to paying the total amount of the premiums received to the insurer reduce that amount by the value of –
    (a)any refund of premiums due and payable by the insurer to any policyholder or prospective policyholder represented by such independent intermediary in respect of the policies that are subject to the authorisation granted by the insurer;
    (b)any consideration payable to that independent intermediary by the insurer for rendering services as intermediary in respect of the policies concerned.
  8. If more than one independent intermediary is authorised by an insurer to receive premiums in relation to the same policy, the period between the receipt thereof from the insured or any person on his or her behalf and payment to the insurer shall not exceed the period contemplated in subregulation (6).

Click here to download FSCA Communication 7 of 2019 (Insurance)

Click here to download FSRA Compliance Extension Notice 1 of 2019

Click here to download FSRA Compliance Extension Notice 2 of 2019

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