Insurance Premium financing is a loan to cover insurance premium.
The Bank enters into an undertaking arrangement with the Insurer that, among other things, in the event of default by the customer, the Insurer shall cancel the policy and refund the Bank unused premium amount within a month of the receipt of the default notice from the Bank. This arrangement constitutes core security for the Bank in IPF transactions.
The borrower for IPF must complete requisite documentations for the loan. The borrower pays to the Bank an amount equivalent to a certain number of monthly instalments of the premium (usually 2 instalments). The Bank pays to the Insurer full amount of the annual premium upfront (usually covering the period of 12 months).
The borrower is given a plan to repay the loan component, which comprises of the interest element at an agreed rate.
The Bank tracks repayments per agreed plan. In the event the borrow misses an instalment, the Bank triggers its right call for cancellation of the policy and recovers the unused premium from the Insurer. The notice of default/recovery is issued within seven (7) days of the default and the insurer is supposed to act (cancel the policy and refund unused premium) within 30 days of the notice date.
The IPF product is intended for existing and potential MKCB’s customers.