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Reserve Bank of Malawi sets new standard for insurance premiums

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The Reserve Bank of Malawi (RBM) has said insurance premiums should be paid to insurance companies and not brokers as one way of strengthening capacity to handle risks.

In a statement issued on Friday, RBM Governor, Charles Chuka, who is also Registrar of financial institutions, said the main objective of the directive is to ensure that insurance premiums are received by insurers so that insurance companies build appropriate reserves and are able to process and settle claims in a timely manner.

“To this effect, the directive requires the insuring public to make all premium cheque payments payable in the name of the insuring company and not insurance brokers or insurance agents.

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“The said cheques and any such cash payments shall then be channelled to the insuring company through the policyholders’ insurance broker,” Chuka said.

He added that under paragraph 7(1) of the Directive, policyholders may, upon negotiation in advance with insurance companies or through intermediaries, obtain insurance on monthly, quarterly, semi-annual or annual payment basis.

Chuka, however, said payment under such arrangements must be made within 30 days of agreed terms of payment or issuance of cover.

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“ Where premium is not paid within 30 days, the policy will be cancelled and no claims will be processed by insurance companies.

“The insuring public is further advised that insurance companies are prohibited to accept or underwrite any insurance risk that has been cancelled by another insurance company due to non-payment of premiums,” Chuka said.

He appealed to the insuring public to develop a culture of prompt settlement of their insurance premiums to avoid cancellation of policies.

Reacting to the news, an industry player said the directive is not new as brokers stopped handling premiums over a year ago.

He noted that previously, insurance brokers and agents could receive the premiums and invest them in quick money making avenues before remitting them to the insurance companies.

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