Expert predicts increased unhealthy competition among insurers

Chuks Udo Okonta The issue of unhealthy competition will get worst, unless insurance operators adopt cost effective and non volatile distribution channel, the Managing Director Riskguard-Africa Nigeria Limited Mr Yemi Soladoye, has said. He told Inspen that most problems in the insurance industry is a manifestation of the refusal by the operators to adopt retail as a business policy. He called on the boards of insurance companies, to as a matter of urgency, compel their management team to adopt retail marketing. He said the operators are into the problem of unhealthy competition because they boxed themselve into a very narrow distribution outlet, which is brokering market, adding that price becomes the only competitative strategy, when people are not adding value. He noted that clients are asking for reduced price every year, because they are yet to see any competitative strategy from the operators, stressing that insurance companies, concentrate on premium growth, as against market expansion. He said: "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. It is not a matter of if, it is compulsory, for they are already feeling the bite of the narrow distribution outlet that they are using at the moment. "Most of the problems they face - high cost of doing business, premium reduction, unhealthy competition, are all manifestation of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternative, you have to achieve what ever any body tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves." He urged insurers to go back to the drawing board to examine their operations, adding that each company needs to sit and draw strategy on how to develop its business and adopt retail marketing strategy and that when this is done, issues of unhealthy competition, premium reduction and others will stop.