CR164 Premiums – Withholding premiums during dispute with insurer.


Premiums – Withholding premiums during dispute with insurer.


The policyholder applied for life cover and risk benefits on his own and his spouse’s life. He also applied for an automatic annual increase of premiums and contributions. The insurer was not prepared to accept the risk at standard premium rates but was prepared to impose a loading on the premium. This loading was accepted by the applicant and the policy was issued accordingly.

The contract provides specifically that the policyholder is responsible for the payment of the total premium. It furthermore states that if a premium is not paid within 30 days after the due date, the policy will be cancelled from the due date. The contract further provides that if a policy is cancelled as a result of non-payment of premiums, the policyholder must apply for re-instatement of the policy. All arrear premiums must be paid before such an application for re-instatement would be considered. The insurer explicitly reserve the right to call for further medical information and to refuse the application for re-instatement.

On the first anniversary of the policy, the insurer informed the policyholder of the contractual increase in premium.

The policyholder gave instructions to stop payments of the premiums. Written notifications by the insurer were sent six days after the first due date and again one month thereafter, informing the policyholder that premiums were not paid and that the policy would lapse if more than two premiums were not paid.

In the interim, the insurer received enquiries from the policyholder’s broker regarding the increase. Quotations in respect of a lower rate of increase were requested by the broker. The loading was also questioned. No premiums were, however, paid. The policyholder died three months after the first unpaid premium became due.


The policyholder’s spouse, in her capacity as beneficiary, complained to this office about the insurer’s refusal to consider a claim in terms of the policy which, according to the insurer, was no longer in force, because of the non-payment of the arrears, at the time of the insured’s death.

In her submissions to our office, the beneficiary contended that it was not the policyholder’s intention to terminate the insurance contract, but that the premium payment was stopped to expedite the process of obtaining information regarding the loading and rate of increase. It is not in issue that enquiries in this respect were made and that quotations were obtained. It was, however, clear that this was only done after the policyholder gave instructions to stop payment of premiums.


Our conclusion was that the explicit provisions in the contract and the written notifications to the policyholder in respect of the consequences of non-payment of premiums were conclusive and that no legal or equitable grounds existed to uphold the claim. Unilateral termination of premium payment usually has serious effects on the validity of cover and value in terms of policies. It is not a suitable method to force insurers to attend to disputes.

April 2006