How to curb unethical practices in insurance industry - Soladoye

How to curb unethical practices in insurance industry - Soladoye

Chuks Udo Okonta

The adoption of retail marketing strategy would curb the menace of unethical practices in the insurance industry, the Managing Director Riskguard-Africa Nigeria Limited Mr Yemi Soladoye, has said.

He told Inspen that the problems in the industry are manifestation of the refusal by the operators to adopt retail as a business policy, adding that to stem the enormous challenges in the industry, the board of the various insurance companies, as a matter of urgency, should mandate their management to adopt the retail marketing.

He said the operators are into the problem of unhealthy competition because they boxed themselves into a very narrow distribution outlet, which is brokering market, stressing that in any situation, price becomes the only competitative strategy, when people are not adding value to their business.

He said: "That the clients are asking for reduced price every year, and the brokers are doing the same, it is a manifestation of the fact that they are saying that they have not seen any competitative strategy. So, the only thing that the marketers do, is to ask the broker, how much is the rate we gave you last year, we are ready to reduce it. It is the admission of the fact, that no other strategy.

"The insurance companies, concentrate on premium growth, as against market expansion. The future and the solidity of the operators can only come from market expansion.

"All the operators want is to ensure that their premium for this year is higher than what it was last year, and they are ready to spend anything to achieve that. If their market position last year was number six and they move to number five this year, their board would laud their effort, not minding the cost.

"The companies cost of doing business is indeed very high, the claims ratio is quite low. These are pointers to the fact that insurance companies need something new and better. The issue of unhealthy competition will be getting worst, until they look for better, cost effective and non volatile distribution channel.

"When I talk of retail, may be the operators do not understand what I mean. Bankassurance which is having a colloboration with banks is a retail channel. It also means engaging in strategic alliances with organisations, like Shoprite, Megaplaza and others. Colloborating with cooporative societies and more. It is so wide and until they adopt it, the market cannot expand."

He noted that the adoption of retail marketing should be made compulsory, stressing that operators are already feeling the bite of the narrow distribution outlet they are using at the moment.

He said most of the problems operators face - high cost of doing business, premium reduction, unhealthy competition, are all manifestation of the fact that they are using narrow distribution method. He added that if they have an alternative, they would be able to do business on your own terms, but when they do not have alternative, they have to achieve whatever any body tells them.

He noted that the operators are not creating alternative distribution outlets to expand their operations, adding that the industry can never grow when the operators scramble for few businesses.

"I think what they need to do is to go back to the drawing board to examine their operations. Each company needs to sit and draw strategy on how to develop their business and adopt retail marketing strategy. When this is done, issues of unhealthy cmpetition, premium reduction and others will stop," he added.