The FSCA published FSRA Exemption Notice 5 of 2019 on 19 December 2019, which came into effect on 1 January 2020. This Notice exempts certain microinsurers who offer credit life microinsurance policies from certain requirements of Rule 2A.10.1 of the Long-term Insurance Policyholder Protection Rules.
This Rule prohibits a microinsurance policy benefit payable as a sum of money, from being paid directly to a service provider. However, the Exemption Notice allows microinsurers that offer credit life insurance policies, to pay out the sum insured to the credit provider as long as certain conditions are met. Briefly, these conditions are as follows:
- A policyholder must be informed in writing before entering into the policy that the policy will not pay out to the policyholder but to the credit provider, and this information must be prominently provided.
- The microinsurer may not advertise, market or sell a credit life microinsurance policy as part of any policy with complex or bundled features which are likely to be difficult to understand; and
- The microinsurer is only entitled to pay the credit provider the outstanding balance of debt owing. Any remaining amount of the sum insured must be paid to the policyholder or nominated beneficiary.