Why is there a need to impose interest?
Interest may be imposed on outstanding premiums where appropriate, e.g. defaulters with premium arrears outstanding for prolonged periods. The interest may be compounded and recovered together with the outstanding premiums.
This fairly reflects the opportunity cost to the MediShield Life Fund, which would otherwise be invested in order to support future payments (e.g. MediShield Life claims) from the MediShield Life Fund. This loss translates to higher premiums for the rest of the insured if they are not recovered in a timely manner.
Related questions
Given that the Fund already has significant assets, why is there a need to increase premiums for MediShield Life?
Are the MediShield Life Fund’s liabilities necessary? Why is there a need to set aside liabilities for recurring claims when premiums are paid annually?
Under what circumstances would I be required to pay the accumulated sum of premiums suspended from collection with compound interest?
Will interests and penalties be imposed or waived if I made partial payment for my outstanding premiums before the deadline in IRAS' notice?
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