Bancassurance, Referral agencies threaten over 5,000 insurers’ jobs.

Mohammed Kari
Mohammed Kari
Mohammed Kari
Mohammed Kari

Ahead of the release of guidelines to kick-start the alliances between the National Insurance Commission (NAICOM) and other regulators, the brokerage arm is getting edgy, fearing that over 5,000 jobs might be redundant with the regulator’s measures to deepen the market.

NAICOM had snuggled up to the Central Bank of Nigeria (CBN) to re-introduce the Bancassurance program that was dropped last year.

Also, the commission had met with the Nigerian Communication Commission (NCC) and the Securities and Exchange Commission (SEC) to begin the planned referral agency program that has been part of the Market Development and Restructuring Initiatives (MDRI).

A referral agent or partner is that organisation who enters into a Memorandum of Understanding (MoU) with an insurance company, to refer its existing customers to the insurance company for the purpose of purchasing insurance policies.

The organisation does not get involved in the technicalities of insurance or issue policy or process and pay claims but only helps the insurers to get more customers by providing access to its customers.

The brokers, however, argued that these arrangements are injurious to them as they would lose their businesses to the new entrants.

Currently, the brokerage arm has about active 485 firms, with each of the big firms like Hogg Robinson, and Scib boasting of about 40 employees including clerical staff, gate men and drivers, while the smaller ones have about 20 each.

However, at the average of 12 employees for each of the 485 firms, about 5,820 employees’ jobs are currently on the line.

Supporters of the commission, who alleged that the brokers have failed to break new grounds to grow the industry, however, said the moves by the commission are to develop the market.

The commission was taking the lead because brokers, allegedly, are only interested in sharing the premiums on plum accounts like that of the Nigerian National Petroleum Corporation (NNPC), the Central Bank of Nigeria (CBN) and that of the Office of the Head of Service’s group life assurance for federal workers.

Insurance came to Nigeria in the 1920s, older than in China, India and Malaysia, but its current penetration of 0.05% in a country of about 180 million population is not encouraging.

Also, its inaction in the financial services sector and the economy generally where it has contributed only about 1 per cent to the country’s Gross Domestic Product (GDP) clearly show its inability to tap the huge economic potential in the country.

The laggard nature of the industry is laid on the brokers who they alleged are passive and lazy.

“We have about 500 brokers that are not adding value to the market. In the U.K, there are over 4,000 brokers but all of them are busy. But in Nigeria, we don’t have brokers but just sharing agents. They just share premiums and assist in the abuse of the market like premium loading, premium return, and the rest of them,” a past president of Chartered Insurance Institute of Nigeria (CIIN) stated.

Brokers’ fears, according to a governing council member of the Nigerian Corporation of Registered Insurance Brokers (NCRIB) who spoke under anonymity, is that the new referral agencies won’t offer anything different from the insurance brokers.

“Using telcos, the banks and stockbrokers to sell insurance is highly unprofessional. For an industry with a professional body, what NAICOM is planning is to throw out our businesses to people who are not versed in insurance.”

He explained that an insurance broker cannot go and start to sell stocks and neither can he be offering telecom or banking services because those are not his areas.

To him, NAICOM ought to cooperate with the brokers to develop the industry rather than forging alliances with other sectors, which he said could push the brokerage arm into extinction.

The CBN and the insurance regulator met on March 1, on the planned re-introduction of Bancassurance and the outcome was a joint committee by the duo to come up with a workable blueprint.

InsideBusiness’ findings showed that the committee had submitted its report, clearing the first hurdle for the insurance regulator to pursue its agenda.

The report, according to Rasaq Salami, NAICOM spokesperson, has heightened optimism that the two industries would work better now unlike the previous experience that got soured.

“We expect that the heads of the two regulators would now look at the report for possible signatures at a time convenient.

“We are optimistic that this will happen soon,” Salami told InsideBusiness.

“We have had similar meetings with Nigerian Communication Commission (NCC) and the Securities and Exchange Commission (SEC), and our plan is to use telcos and stockbrokers as avenue for insurance products distribution.

“Both SEC and NCC have no objection to that. There will be an MoU with NAICOM, while a guideline will be issued to all to be involved to guide their activities.”

Bancassurance has been on the agenda for a while but NAICOM’s insistence to license banks has met with resistance from CBN that refused and the disagreement between the two has been the drawback.

The report, it was learnt, has addressed the grey areas, according to sources, and that the guidelines for the takeoff of Bancassurance and the Referral agencies are underway.

Under this arrangement, the underwriting is done by insurance companies and the arrangement is guided by the do’s and don’ts that will be detailed in the expected guideline which is also expected to spell out the fees to be earned.

According to Salami, the referral agent or partner is not a professional insurance entity but one that is bonded by the MoU with the underwriter.

He allayed the fears that the referral agents or the bancassurance would shut out brokers.

“The brokers are independent intermediaries and insurance professionals who are in the business of selling insurance products,” he said.

Insurance underwriters, who are the beneficiaries of the commission’s moves, have started to court and align with operators from other sectors in anticipation of the guidelines.

The Nigerian Insurers Association (NIA), the umbrella body of underwriting firms in the country, has endorsed the new measures which, according to Sunday Thomas, its Director-General, has lots of opportunities to turn around the industry that has lagged among its peers in the financial services sector.

“Bancassurance and referral agencies have lots of opportunities for the underwriting segment because they have increased the penetration of the markets everywhere it has been introduced.

“The banks have the data and access to the clients and the insurance companies have the products. They will definitely produce lots of good for the subsector.”

Unlike the underwriters, a council member of the NCRIB alleged that the commission under the current dispensation was against the brokers and that the new measures by NAICOM would finally kill the brokerage arm.

“The commission is destroying the broking profession. All commercial accounts of brokers are now on the line and what the brokers will be left with is the public sector accounts that are riddled with corruption.”

He wondered why the regulator compelled brokers to set up big organisations, pay various dues and hire professionals when it knew that it would throw away the businesses cheaply to bankers who are not answerable to NAICOM.

He accused the commission of subtly pushing the brokers into extinction, citing the December 2015 revocation of 108 brokers’ licence but which the Finance Minister, Kemi Adeosun later overruled.

The commission later introduced stringent conditions for their re-absorption into industry.

He blamed the brokers current predicament on the docility of the NCRIB, whose leadership, he alleged, has been cowed by the commission.

“We have raised this and other issues several times. The insurance commissioner, Mohammed Kari sits on our council but he did not discuss these measures with us. It is unfair that we were not involved in the joint committee and other issues that affect our businesses. We wear the shoe and we know how and where it pinches,” the broker lamented.

NCRIB president, Gbenga Okunoren, has been silent and yet to respond to enquiries. His response to several calls and text messages was “Sorry, I can’t talk now.”

Hard as the brokers tried to push their case, aggregate opinions seem to support the commission’s measures which they see as the last resort at developing the market. They argued that the market has waited in vain for the brokers to take the lead.

A top official of NAICOM explained that only lazy brokers would complain that referral agencies are injurious to brokers. “Brokers that are offering specialised services and products will see this as opportunity to deepen their creativity”.

He stated that the brokers should see the referral agents as new opportunity for them to prove to the industry that they have what it takes to create new businesses.

“The issue is that why will anybody be protecting the brokers? The brokers are supposed to develop the market. As it were, they are not doing that but going after soft businesses like plum government accounts and jumbo accounts of blue chip firms.

“How many micro insurance products have they developed or what have they done in the area of retail insurance to grow the market?”

He stated that the brokers’ fear is because the referral agent will expand the market which they have not been able to do for several years.

“If a company like INEH-MIC is made a Referral agent, the market will boom because we will get fractions from the billions of Naira he makes from lots of vehicle that he sells”.

“The same will happen if automobile firms like PAN Nigeria Ltd is made a Referral agent, the market will make more money and there won’t be leakage as we are having now.”

Findings in other climes like Britain and India have shown that referral agents are widely accepted because of their impacts on the insurance industry.

For instance, motor dealers in the U.K do vehicle licensing, procure insurance, and all other things for their clients.

In Britain, newly bought vehicles are not driven out of a garage without vehicle registration number, insurance and others. They sell insurance and remit the money to the insurance companies.