Nairametrics| Commissioner of Insurance and head of the National Insurance Commission (Naicom) Alhaji Mohammed Kari at a training workshop in Lagos announced the commencement of the bancassurance scheme. He also gave the various guidelines for the scheme and the fees for application and licensing at N500,000 and N2.5 million respectively. Bancassurance simply means insurance firms selling their products through desks at commercial banks in the country.
The commission had in August 2016 suspended the scheme due to a disagreement with the Central Bank of Nigeria (CBN). NIACOM was upset that the CBN had refused to allow them (NAICOM) to issue licenses to banks for the provision of bancassurance services to bank customers.
The scheme will be a massive boost to the insurance industries in several ways. Using existing branches of banks means insurance firms will have to spend much less compared to establishing their own retail networks. Being present in banks also adds an element of trust, which is essential because fake insurance has been a reason why many Nigerians have refused to subscribe for insurance products. Having a presence in banks, also guarantees access to a steady stream of customers. Banks also make money from the deposits collected from customers who are convinced to buy insurance in any of their branches. This appear to be a win win for everyone.
Despite the gains, there are a few downfalls to the scheme. Insurance firms that will gain the most will be those with relationships to the biggest banks in the country. Banks can only have bancassurance arrangements with a maximum of two insurance firms and vice versa. Banks are likely to partner with the big insurance firms who have the capability to domicile amounts running into billions with them.
The policy could in effect benefit both large insurance companies and commercial banks. It may also lead to retrenchment of marketers used by insurance companies to push their products, especially if revenue from bancassurance is larger than direct marketing. It is also a potential loss of revenue for insurance brokers
Despite these pitfalls it is still a critical step towards increasing the number of Nigerians that are insured.