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Commissioner for Insurance Fola Daniel |
Chuks Udo Okonta
The National Insurance Commission (NAICOM)
today Tuesday released the guidelines that will help effectively monitor how insurance operators should henceforth
treat rebates, commissions, return and refund premiums.
A circular signed by Deputy Commissioner
(Technical) NAICOM Mohammed Kari, referenced NAICOM/CFIO/DCTICOM-CIR/2014/007 and entitled circular on
commissions, rebates and returned premiums issued to all Insurance Institutions in Nigeria, the
commission said "),
in the exercise of its statutory powers conferred on it by the enabling laws, the circular was issued to provide guidance on Rebates, Commissions, Return and Refund premiums in order to effectively
monitor same.
The Circular reads: “The National Insurance Commission (hereinafter
referred to as "Commission"), in the exercise of its statutory powers conferred on it by the enabling laws, hereby issue this Circular for compliance by all insurance institutions in Nigeria.
“The Circular is issued
to provide guidance on Rebates, Commissions, Return and Refund premiums in order to effectively
monitor same.
“ Rebates
and Brokerage Commissions: It shall be illegal for any Insurance Institutions to solicit, offer or allow commissions and/or rebates in the transaction of Insurance
Businesses except as provided by the extant Insurance Laws
and guidelines. For the avoidance of doubts, Over-Riding Commission, Business Acquisition fees and other similar fees not
provided for by the Nigerian Insurance Laws shall not be solicited,
deducted, offered or paid in respect
of any insurance transaction in Nigeria.
“An Insurer, who grants or receives a rebate, offer, demand, pay or receive commission contrary to Section 53(1)-(3) of the Insurance Act 2003 may, in addition to the penalty prescribed by Sections 53(4) and 76 of the Insurance Act, 2003, shall be liable to other penalties as prescribed.
“Each Insurer shall
submit a quarterly return on the rebates, brokerage commission and other
fees paid out or payable on all its production during the preceding quarter to the Commission, not later than 14 days from the end of the quarter. The return shall be in
accordance with format prescribed in form ICR2.3a.
“In addition to the provision of Section
41(1) of the Insurance Act, 2003, a Broker shall submit to the Commission a
copy of his dedicated Client account, duly stamped and signed by the bank and a quarterly
return of the brokerage commission received, receivable or deducted at source, taxes paid and rebates received during the
preceding quarter on all businesses not later than 14 days from the end of the quarter.
On return or refund
premium, NAICOM said: “For
the avoidance of doubt and in line with Article 3(9) of the Anti-Money
Laundering and Countering the Financing of Terrorism (AML/CFT) Regulation 2013,
no Insurer, broker or its agents shall
charge or receive premiums in excess of the actual premium on an insurance policy
that may result in refunding the excess amount paid or with the intent of returning
the excess in any form, by cash or otherwise to the insured, its agents or any party thereafter.
“An Insurance Institution shall keep and maintain a register of return or refund premiums in hard copy, where transactions are to be entered on the day they are made. The register shall be presented in such a manner to include:- i) The date of transaction; ii) Policy number; iii) Name of client; iv) Name of insurer/broker/agent; v) Gross premium received with date; vi) Commission paid with date; vii) Net premium; viii)Excess premium returned/refunded; and ix) Reasons for the return or refund premium.
“Similarly, a register of policies cancelled or reversed after the receipt of premium or credit note from the broker must be kept and maintained by an Insurer. A Broker shall also maintain a register of cancelled businesses where the premium had earlier been received, notwithstanding whether it has been remitted to the insurer or not.
“All payments for returned premium which
must be approved by the CEO of the Insurance company shall be made in the name
of the original insured or proposer. An Insurance Institution shall submit to the Commission a
monthly soft copy of the report of Returned or Refunded Premiums and
cancelled/reversed businesses in 3.2 and 3.3 above by the 3rd working day of
the succeeding month in the format provided herewith and a Quarterly.
“Report in hard copy not later than 14 days
from the end of each quarter. The hard copy above must be signed by the Chief
Compliance Officer and Head of Internal Audit of the Insurer and the Managing
Director/CEO in the case of Brokers.
“Where there was no incidence of returned
premium in any month, the Institution shall file a "Nil Return" in accordance with Section 3.5 above.
“Any unexplained payment or where the
explanation, in the opinion of the Commission, is not satisfactory, such
payment shall be deemed suspicious and
subject to appropriate treatment under extant laws.”
The commission said any insurance institution
that fails or omits to comply with the content of this circular shall be penalized in line with relevant provisions
of the Insurance Act, 2003, the NAICOM Act, 1997,
It said regulations, guidelines and such
other penalties as may be prescribed by the Commission from time to time.
On commencement of reporting, it noted that the first report as contained in 2.3, 2.4, 3.5 and 3.6 covering the quarter 1st April to 30th June 2014, shall be submitted not later than the 14thof July 2014, adding that strict compliance is required.
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