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BREAKING: How ‘No Premium, No Cover’ Directive Will Affect You in 2013

A new era dawns in the Nigerian Insurance industry on January 1, 2013 as the full implementation of the ‘No Premium, No Cover’ rule as stated in Section 50 (1) of the 2003 Insurance Act commences.

Have you been taking up insurance services and paying at a later date? Do you obtain insurance documents (such as motor insurance certificates, cover note or marine certificate etc) without paying for the service in advance? Do you pay part premium and spread the balance over a period of time? The National Insurance Commission (NAICOM) directive tagged Circular on Insurance Premium Collection and Remittance which comes into full operation on January 1st 2013 has changed the game. Hence, you need to know how this affects you and your business. therefore summarizes some of the implications of  the “No Premium No Cover” directives in three parts:

  • Insurance Consumers

  • Insurance Brokers and
  • Insurance companies

Insurance Consumers (Insureds/Policyholders)

  1. Premium MUST be paid  IN ADVANCE before Insurance cover can be granted

  2. Any Agreement to pay INSTALLMENTAL PREMIUM is ILLEGAL, NULL and VOID as the law does not recognise such agreement. The law contemplates full payment before parties can be bound by the contract.

  3. Any document (marine certificate, cover note, GIT certificate, motor insurance certificate, Group Life Certificate etc) issued by an insurance company without premium paid in advance is illegal, null and void.

  4. Time-on-Risk Cover can be arranged but it must be by prior agreement. This could be monthly, quarterly or half yearly.

  5. Any part-payment of the premium made will be refunded should there be a claim. This is different from the practice in the past where insurance companies could admit a claim and request for full premium before relasing their claim settlement offer

  6. You could pay premium to your broker. This must be done in advance as Brokers are to notify insurance companies of the receipt of premium in writing within 48hrs of receipt before cover commences. Receipt of premium by licensed insurance broker is deemed to be receipt of same by the insurance company.

  7. Backdating of cover is Illegal, Null and Void. That is, where an insurance company issues documents but payment is made at a later date as happens in most government accounts.

  8. You may have to arrange credit facility to pay off your insurance premium in advance should you have cash flow challenges This is in contrast to previous arrangement where your insurance company could allow you time to pay later.

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