The insurance industry has until April 30, 2026 to comply with the Insurance Act 2025 which introduces a strict cash-and-carry regime that eliminates the purchase of insurance on credit.
The new law, which came into force on May 1, 2025, fundamentally changes premium payment practices by making insurance policies valid only upon payment, introducing the principle of “no premium, no cover.”
Speaking at the Insurance Institute of Malawi Annual Lake Conference over the weekend, legal expert Patrick Mpaka said the Act addresses systemic weaknesses that exposed insurers to insolvency risk and left consumers unprotected.
For example, under the old Insurance Act 2010, insurers were allowed to offer a credit period of up to 30 calendar days for premium payments.
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This flexibility helped customer acquisition but also created risks of default, disputes and liquidity gaps as premiums were booked as receivables but not collected on time.
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The 2025 Act eliminates this practice entirely with Section 53 and 54 stipulating that providing insurance cover on credit is now an offence, with insurers caught in the practice liable to administrative penalties.
“Payment of premium is the lifeblood of insurance contracts and insurance companies. Without effective rules on premium collection, insurers are exposed to insolvency risk, consumers are left unprotected, and disputes can multiply.
“The old system led to numerous challenges including insurers failing to enforce lapses promptly, creating ‘free cover’ situations, and brokers occasionally misusing the 30- day float for liquidity purposes,” Mpaka said.
The Act also introduces strict rules for insurance intermediaries such that brokers are now prohibited from receiving cheques unless payable directly to an insurer, cannot receive payments via electronic money transfer into their own accounts, and must remit any cash received within 24 hours without deductions.
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However, section 108 of the Act states that where an insurance entity contravenes the law, the contravention shall not invalidate an insurance policy issued by the insurer, suggesting that disputes may still arise depending on specific circumstances.
Guest of Honor at the conference, Ronald Mangani, called on the insurance industry to innovate and adapt to survive global disruptions.
“The question is no longer whether the insurance industry must change. The question is, how fast can the industry innovate, how deeply can it adapt, and how effectively can it thrive whilst staying true to the promise of providing protection against adverse eventualities to customers,” Mangani said.
The conference was held under the theme “Innovate, Adapt, Thrive: Survival of Insurance in the Age of Global Disruptions” and brought together industry captains, officials from the Reserve Bank of Malawi, and international delegates
