Kampala, Uganda | THE INDEPENDENT | Ugandans and businesses should be given a grace period of up 90-days in which to pay their insurance before they are rendered uncovered, the industry regulator Insurance Regulatory Authority has advised.
In a letter to all insurance companies, IRA advises that a “grace period for policy lapse of life, policies be extended by an additional 90 days while that for medical insurance and non-life policies be extended by an additional 60 days.”
A policy becomes lapse when the holder (individual or business) misses payment deadline. However, insurers are legally bound to give a grace period to policyholders before the policy falls into a lapse, where they can’t receive insurance benefits.
This means that when one’s insurance is running out and they have not paid, they will still be considered covered in the grace period as they look for the money.
The measure is intended to help people and businesses that have been impacted by the coronavirus crisis to get back to their footing so as to pay their insurance. IRA says it expects increased defaults in premium payments during this period.
Kago Wamuyu, an official at Bartlett, an insurance brokerage firm explained that policy holders will have to inform their insurers about their willingness to continue with the cover. Then even if they have not paid, they will still be covered for the months in the grace period.
Also, because the regulator expects a financial hit on some insurers, IRA ordered insurance companies not to pay bonuses or dividends so as to stay with enough capital to absorb the losses.
The letter said that the authority in the exercise of its power directs that save for deposit administration plans and for-profit policies, no insurer of Health Maintenance Organisation (HMO) shall issue bonuses or engage in any distribution including payment of dividends to shareholders and other persons.
These measures have implications on the amount of money the regulator receives and what will go to the Uganda Revenue Authority as tax.
Every policy given out has a Value Added Tax component. A grace period means URA will not demand insurers to pay that money.
With businesses shut and with many unsure when to get back to business, insurance might be taken as not a priority with a lot of businesses cutting it.