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Insurance regulator looks at premium financing proposal

June 20, 2022

Insurance regulator looks at premium financing proposal
The insurance regulator is examining a proposal that may allow customers, both retail and corporate, to take loans for buying insurance and spread premium payments over a longer duration. Known as premium financing in insurance jargon, at present the structure is not available in the nation.

A senior executive aware of the developments said the move is aimed at increasing insurance penetration, and retention, reducing the protection gap, and also creating new avenues of consumer and corporate financing.

“It is being looked at. Necessary amendments will be required in the Insurance Act, for which the government also needs to be on board,” he added.

Under premium financing, a broker or insurer will offer the retail customer an option to spread the cost of insurance over a period of instalments rather than to pay a single premium in one lump sum before the policy commences.

“The finance provider will pay the loan amount to the insurer to enable them to issue the insurance. Repayments are then collected directly from retail customers by monthly instalments through direct debit payments,” said another executive, adding this will assist in renewal retention as the policyholder is not faced with the challenge of paying a full-year premium in a single payment.

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