Experts in the Nigerian fledgling insurance industry have bemoaned the current spate of improper discounts on premium rate being granted by some underwriters to their clients. The insurance practitioners described the practice as unfavourable to business.
Where the problem is: The operators stated the lack of cooperation among insurance operators is fueling the unethical activities in the insurance industry within the country, and the ripple effect is the slow pace of progress in the sector.
Why this Matters: The insurance sector in Nigeria is a nascent one and unwholesome practices such as the indiscriminate premium discounts are stunting the growth of the industry at the moment. For this reason, stakeholders need to combat the menace of indiscriminate premium cut so that underwriters will be buoyant enough to pay claims as and when due.
Speaking on the issue on condition of anonymity, a Chief Executive Officer of one of the insurance firms in the country said, “The insurance industry lacks cooperation. It is a winner-takes-it-all type of industry and that is what we promote. That is why you will see companies reducing premium by 50% in order for them to carry the risk 100%. Meanwhile they could as well have charged the old premium, which is higher and take like fifty per cent of the risk and let other companies share 50%.”
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While criticising practitioners who cut premium by half in order to take the entire business, the CEO affirmed that the sector would have witnessed tremendous growth with a higher premium rate if the cutthroat practice among operators had been tackled head on.
Self-inflicted harm: He revealed that many insurance firms are currently on a weak financial footing because of the outrageous premium discounts they granted to clients in the past. He was however, optimistic that the recapitalisation exercise, mandated by NAICOM, would offer insurance companies the timely lifeline they need at the moment and breathe the breath of life to the industry as a whole.
According to him, “Today, some brokers will still take quotes from companies that can no longer pay claims and when they get that rate, they go to the ones that can pay claims and tell them to participate. So if recapitalisation is the only way to address some of the ills, so be it.”
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The CEO said the industry needed to increase the level of public trust in the sector so that patronage could be guaranteed. He recommended that one of the ways to achieve this end was to train emerging professionals to execute insurance business the right way.
Millennials to the rescue: He went further to say that, “If I tell you that the issue of corporation is going to be resolved in my time, I am not sure. The issue remains that we can’t find a perfect market. But can it be improved? The answer is ‘yes.’ How do we address the gap in the level of trust that outsiders have in us? It is not for those of us who want to bow out of the industry soon.
It is a case for the young ones, the millennials that are organised. That is why we have been training the millennials to be innovative. When they come up with innovations, they might not produce immediate result but the result will come at the future and at that time, the millennials are the leaders of the industry.”
(READ FURTHER: NAICOM raises capital base for insurance firms by over 100%)