CASE NO: NBFIT – 005/2023

APPLICANT 5 V. NBFIRA

CASE NO: NBFIT – 005/2023

Sector - Insurance

1. Issue

1.1. An Intermediary Agreement concluded between the Insurer and the Insurance Broker authorising the Insurance Broker to collect premiums on behalf of the Insurer;

1.2. The Policyholder having paid premiums to the Insurance Broker and the Insurance Broker failing to remit the premiums to the Insurer;

1.3. The Policyholder’s insured vehicle sustaining damage in an accident and the Insurer repudiating the claim on the basis that the Policyholder breached the policy by failing to timeously pay premiums;

1.4. Policyholder having paid premiums to the Insurance Broker, whether payment of premiums to Insurance Broker constitutes payment of premiums to the Insurer even where such premiums are not remitted to the Insurer.

2. Summary of Facts

2.1. In the matter between Applicant 5 v. NBFIRA case number NBFIT-005/2023, the Applicant, an insurer, lodged a review application against the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) after NBFIRA directed the Applicant to settle the Policyholder’s claim which it had repudiated.

2.2. The Policyholder had undertaken a motor vehicle insurance policy with the Applicant and paid premiums to the Insurance Broker, however, the Insurance Broker failed to remit the premiums to the Insurer. 

2.3. The Policyholder’s insured motor vehicle was involved in an accident and consequently, the Policyholder lodged a claim which the Insurer repudiated on the basis that the Policyholder had breached the insurance policy by failing to timeously pay the premiums.

2.4. The Policyholder lodged a complaint with the Authority and the Authority ruled in favour of the Policyholder and directed the Applicant to honour the Policyholder’s claim.

3. Issues for Determination by the Tribunal:

3.1. Whether the Insurance Broker was authorised to collect premiums on behalf of the Insured; and

3.2. Whether an Insurer can be held liable in instances where premiums are paid to an Insurance Broker and the Insurance Broker fails to remit such premiums to the Insurer.

4. Relevant Provisions of the Law

4.1. Insurance Industry Act [CAP 46:01]

Section 82

(1) An insurance broker shall not receive, hold or in any other manner deal with premiums payable under a policy entered into or to be entered into with an insurer, other than a reinsurance policy, and the insurer shall not permit the insurance broker to receive, hold, or in any other manner deal with the premiums

(a) unless authorised to do so through a written agreement with that insurer; and

(b) otherwise, than in accordance with such manner as may be prescribed.

(2) An insurance broker shall remit the premiums collected on behalf of an insurer to the insurer according to such requirements as may be prescribed.

(3) In so far as it affects a policyholder or prospective policyholder, all premiums paid to an insurance broker shall be deemed to have been paid to the insurer, subject to section 55(2).

(4) An insurance broker who contravenes a provision of this section is liable to a fine not exceeding P20 000 as may be imposed by the Regulatory Authority.

4.2   Intermediary Agreement

Clause 5

5.1.1.7 Complete shall collect and sue for premiums and deposit them into Hollard’s account whereafter Complete shall remit to Hollard details of all such premiums in terms of this agreement;

5.1.3 If Complete holds out to any person that cover is in force notwithstanding that payment of premiums has not been received by Hollard by the due date, and Hollard unwittingly accepts the risk or is stopped from denying liability, Complete shall indemnify Hollard in respect of any claim which may be made against Hollard in regard to such Policy;

Clause 6

6.2.1 … when Complete collects premium on behalf of Hollard then Complete shall pay premiums received, less commission into the Hollard account.

5.0 Tribunal Judgment

The Tribunal dismissed the application for the following reasons:

5.1. The Insurance Broker was authorised in terms of the Intermediary Agreement to collect premiums on behalf of the Insurer, therefore there was nothing barring the Insurance Broker from collecting premiums on the Insurer’s behalf.

5.2. Since premiums were paid by the Policyholder to the Insurance Broker, the law in terms of section 82 (3) of the Insurance Industry Act deemed such premiums as having been paid to the Insurer and thus imposed a duty on the Insurer to honour the claim even though the premiums were not remitted to the Insurer by the Insurance Broker.

5.3. The Insurer was entitled to pursue the Insurance Broker under the Intermediary Agreement and seek indemnification of any claims made by the Insurer to the Policyholder, in instances where the Insurance Broker held out to a Policyholder that the cover remained effective even though premiums were not received by the Insurer on the due date and the Insurer is obliged to pay a claim or unwittingly pays out a claim.

Full Judgement Here