The large number of insurance operators is responsible for the prevalence of unethical practices in the industry, Managing Director of Royal Exchange General Insurance Company, Olutayo Borokini, has said.
Borokini, told Inspen that the large number of operators aids unhealthy competition which forces down the rate of insurance products. He noted that since there are no new businesses, operators’ scrabbles for the few available ones which often make some underwriters to pervert the industry’s rules.
He stated that South Africa with higher insurance penetration compared to Nigeria has fewer underwriters.
He said: “There are supposed to be industry standard, but they are not been followed. Competition has forced down. For now we have too many players for the businesses that are available. Take for an example South Africa, as big as the country is in terms of insurance penetration which is about five per cent, they have about 15 insurance companies.
“In Nigeria we have 59 firms. How do you control such great number of players, because if there are about five underwriters on a particular business, and the five reject the risk, the broker still has an opportunity to take other five in the market and can continue until he exhaust the whole. Mind you the companies have been capitalized up to N3billion.”
He called for collaboration among the operators, adding that the level of unethical practices is inimical to the industry’s growth.
Commissioner for Insurance Fola Daniel, said the National Insurance Commission (NAICOM) is committed to developing the industry to have few strong and viable firms. He said the commission is not interested in too many firms, but firms that are big, strong and comparable with other firms abroad. He noted that the commission would be comfortable with just 10 viable underwriting firms which can compete globally.
“As a regulator, I am not interested in multitude. I do not want 200 insurance companies. If there would be 200 companies, the companies must be big, strong and comparable with what we have in other environment where insurance culture is deed. But if they are only 10 that are strong and they can respond to claims payment promptly, come out with new products that will change the environment, come out with policies that will be environmental friendly and speak to the needs of the people, that is the kind of insurance industry we are looking at. So, whether they are many or not, I think the primary concern should be are they able to meet obligations as at when due,” he said.
Daniel, said most companies have began to appreciate the need to be bigger and stronger, adding that about five companies is presently in merger talks and that NAICOM has introduced measure to ensure that stronger companies remain operational.
Former Chairman Nigerian Insurers Association (NIA) Chairman Olusola Ladipo-Ajayi, said non compliance by operators has made the market agreement reached by the operators to protect premium rate failed.
He noted that most operators have decided to join the bandwagon of faulting the rule rather than supporting the association’s rule. He said the agreement has become a problem instead of a panacea.
“The market has become a problem and I have explained the frustration of the association. The most difficult thing is that everybody complains but nobody is reporting defaulters to the association.
“We are not policemen in NIA secretariat. If our members report, it will be easier for us but rather everybody goes back to join the bandwagon and the truth of it is that the market agreement is being observes in the breach of it. But at NIA, we have resolves that we take an official position of NIA on every matter. So whoever decides to go against it is not going in accordance to NIA rules and everybody knows the NIA position,” he said
He said the association will not relent in its efforts to sanitise the industry, adding that the customer complaint bureau was set up to also make operators abide by the rule of a unified premium rate.
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