24 Nov 2021

There is no law which allows the Ministry of Finance and Economic Development to reinstate insurance policies that lapsed during the State of Emergency, says Minister Peggy Serame.

She told Parliament that there was no need to review the law as the insurance contracts by nature specified the terms of the policy including reinstatement of the policy where the policyholder had cleared outstanding arrears.

Ms Serame said there were 850 short-term insurance lapses out of 86 000 policies whilst for long-term insurance there were 50 022 lapses and 32 990 surrenders out of 384 636 long-term policies, which were taken since the advent of COVID-19 from April 2020.

She noted that the short-term lapses accounted ‘for just less than one per cent.’

The minister explained that an insurance contract was an agreement wherein the insured paid a fee in exchange for insurance of an insurable risk. She added that there were basically two types of insurable risks, one being the ones which were insured in the short-term and that they included policies such as for fire, motor vehicles, property and personal liability.

She noted that the other was for risks insured for the long-term which included funeral policies, credit life, life policies and annuities.

Ms Serame also clarified that lapse referred to a failure by the policyholder to meet the premium obligations whilst surrender referred to a voluntary termination of the policy by the insured.

“A client is allowed to surrender the policy and receive a surrender value, which is the paid up sum, less administration and termination costs as contained in the policy document,” said Ms Serame.

The minister noted that the client’s entitlement or benefits when a personal insurance package lapsed when a client had invested in the policy over a substantial period differed from one insurance policy or contract to the other. She said it was important that Batswana always ensured that they understood the insurance contracts they entered into and that they addressed the risks to be insured.

She noted that a mortgage policy would only pay out following retrenchment if retrenchment was one of the risks insured.

The minister also noted that the insurance industry was regulated through the Insurance Industry Act together with the Insurance Industry Regulations, Prudential and Administrative Rules and

Regulatory Instruments such as circulars and directives issued by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA).

“There is no law or regulation in place that empowers insurance companies to take all or a larger part of policy accruals when an insurance policy/package lapses due to failure of payment of monthly premiums,” said Ms Serame.

She added that the payout was as pre-determined in the parameters contained in the insurance contract.

The law, she said, protected the insured and that any non-compliance by insurance companies should be reported to the Non-Bank Financial Institutions Regulatory Authority in accordance with the NBFIRA mandate of ensuring fairness.

The minister, however, said she was aware that the industry in collaboration with NBFIRA awarded the insured some concessions during the COVID-19 era such as premium holidays.

One of the leading insurance companies offered six months premium holiday for about 3 500 clients, she noted.  

“The advice, is therefore, that, when the insured has difficulty in paying premiums, they should immediately engage with the insurers with a view to determine the way forward such as to suspend payment of premiums for a specified period, that is premium holidays or to surrender the policy,” said the minister.

The minister was answering a question from Bobonong MP, Mr Taolo Lucas who had asked whether her ministry would reinstate insurance policies that lapsed during the State of Emergency and to review the law such that clients were able to receive a substantial percentage of the money they put into the policy when it lapsed.

Mr Lucas had also wanted to know the number and type of personal insurance policies that lapsed due to failure of payment of monthly premiums since the advent of COVID-19; the client’s entitlement and or benefit when a personal insurance package lapsed especially when a client had invested in the policy over a substantial period.

The MP further wanted to know the law that empowered insurance companies to take all or a larger part of policy accruals when an insurance policy lapsed due to failure of payment of monthly premiums. ENDS