Members of Parliament have pressed the Ministry of Finance and Economic Affairs to address insurance companies’ delays to settle claims within the prescribed 14 days.
Mangochi North legislator Benedicto Chambo triggered the discussion during question time in Parliament on Friday.
He questioned why the regulator of financial institutions, the Reserve Bank, was letting the insurers “unnecessarily take too long to pay liabilities to those who have had their premiums regularly paid to them”.
In his response, Finance Minister Sosten Gwengwe agreed with the legislator, citing the Insurance Act which stipulates that insurance claims should be paid within 14 days.
Section 65 of the Act reads in part: “Every insurer shall in respect of claims arising out of policies of insurance issued by the insurer pay the claims no later than 14 days after signing of a claim discharge certificate.
Said Gwengwe: “The registrar of financial institutions makes sure this law is adhered to by all the insurers and where necessary it is enforced. The registrar penalises all insurers that fail to pay insurance claims within the prescribed period.
“However, despite the supervisory interventions there are still instances where payment is unnecessarily delayed.”
He said the main reasons insurance companies delay to settle claims include “failure to provide necessary documentation for claim processing, inefficient claim management processes within the insurance companies and capital, liquidity and insolvency challenges”.
The minister further said some insurance payment delays are due to investigations to establish claims’ legitimacy.
Gwengwe added: “In this regard, the law provides that insurance companies should be given appropriate time to investigate suspicious claims.
“However, when investigating claims, the law requires an insurer to provide timely updates to the claimant throughout the investigation period.”
The minister said government is working on ensuring that the claims are paid on time.
“Let me assure the honourable member that the registrar of financial institutions, being the Reserve Bank of Malawi, is doing all it takes to ensure that sanity is brought in the insurance industry despite capital and liquidity challenges,” he said.
In a related development, Chitipa legislator Welani Chilenga asked government to establish a policy to force insurers to pay back part of premiums once the insured property does not suffer any damage during the insurance active period.
In his response, Gwengwe warned that such a regulation would lead to most insurance companies going bankrupt.