Insurance Premium Refund under Financial Services Act 2013

The Financial Services Act 2013 (FSA) took effect on the 1 July 2013 repealing the Insurance Act 1996 with some exceptions | section 147(4) & (5), section 150, section 151 and section 144.

“….such (policy premium) refund shall under no circumstances be paid or credited to any insurance agent.”

Noticeably there is a difference with the manner the REFUND OF PREMIUM is being worded in this FSA when compare to the “now old” Insurance Act 1996. We put the two versions together to outline that difference:

COMPARING THE TWO ACTS ON MATTERS CONCERNING PREMIUM REFUND

FINANCIAL SERVICES ACT 2013 ( Schedule 8 Section 128 – Provisions relating to policies, paragraph 12, page 243)

INSURANCE ACT 1996 (Part XII, Section 141 Assumption of risk, subsection 4)

12.   A licensed general insurer shall pay directly to a policy owner any refund of premium in relation to a policy which may become due to the policy owner for any reason including the cancellation of the policy or alteration in its terms and conditions and such refund shall under no circumstances be paid or credited to any insurance agent. (4) A licensed general insurer shall pay directly to the policy owner a refund of premium in relation to a policy of such description as may be prescribed under subsection (1) which may become due to the policy owner for any reason.Penalty | Five hundred thousand ringgit. Default penalty.

No doubt about this, in the FSA the refund provision was worded in a manner that policy premium refund is to be paid directly to the policy owner and never under any circumstances be paid or credited to the agent’s account.

We have also underlined the phrase, “….pay directly to a policy owner….” and if read together with the other phrase, “….such refund shall under no circumstances be paid or credited to any insurance agent.”, there is no doubt the FSA has intended to provide no flexibility at all for any possible interpretation…. including allowing the policy owner to sign a declaration to assign the policy refund to the agent…. with intention to strengthen policy owner protection.

Then, can the policy owner assigns his or her refund proceeds to another person other than the agent? There are possibilities but such would leave the insurer on a strict proof to that effect….

What do you think? Do leave a comment below.

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3 comments for “Insurance Premium Refund under Financial Services Act 2013

  1. Anonymous
    July 10, 2013 at 14:21

    Ok, what would be the penalty; last time RM500k woh! Now seems no penalty, izzit?

    • Anonymous
      August 25, 2013 at 00:13

      think is at the fancy of the bank negara. they now have better control over the insurers, matter of whether they want to whip the stick or not!

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