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Chuks Udo Okonta
The quest to remain afloat might have forced desperate insurers to hawk third party motor insurance policies for a paltry sum of N1000.
Inspen gathered that the insurance price war has heighten in recent times, a situation which might have stemmed from the economic maladies.
In an interaction with two insurance marketers, who were once corporate affairs executives, but were recently moved to marketing, they said their redeployment to marketing exposed them to the dirty battle in insurance sales.
One of the marketers noted that some insurers in a bid to secure an insurance contract with clients, throw caution to the wind and charge as low as N1000 for a third party policy which statutorily goes for N5,000.
A journalist also narrated how his colleague bought the policy for N2,500 from one of the acclaimed leading underwriter in the country.
Worried by this development, the National Insurance Commission (NAICOM) said it would continue to fight the menace of rate-cutting through enactment of stricter regulations.
The Commissioner for Insurance Mohammed Kari, said this at a forum in Lagos, adding that the commission was forced to impose stricter regulation such as rules on overriding commission because it observed that some risk managers encouraged insurers and brokers to sign on to their risks without proving full details of such risks.
He noted that the illicit activities of those risk managers encouraged rate cutting which is inimical to insurance growth.
Against the backdrop of inappropriate pricing coupled with desperation for big risks, the Nigerian Insurers Association (NIA) has developed a rate template for insurance companies and brokers which would soon be unveiled.
NIA Chairman, Eddie Efekoha, said brokers and insurers were all involved in inappropriate pricing of risks, adding that the parties have not been disciplined when it comes to pricing of their products and services
“It takes two to tango. Whatever wrongs, whatever malpractices that may be perceived; believe me, all parts and segments of the market is involved. I did rather think that we will take on them one after another. At the moment, we know that we have not been much disciplined when it comes to pricing our products and services.
“Government has not imposed a rate. It only advised that underwriters should come up with rates, and that is still being collated. When that is done, underwriters will come up with a position.
“I prefer to call it appropriate pricing, because the issue is that if you have been insuring with me for 10years, and you have not made a claim, there is no reason why I should not lower my premium and give you some generous discounts. But; if you have been making claims, there is no reason why I should charge you the same as somebody who has not made any claim at all.
“So, what we need to do right now is to strategize how to bring back that practice. So, that is why the joint committee, made up of NCRIB members and the Nigerian Insurers Association (NIA), came up with a business procurement guideline.
“And because we want some enforcement behind it, we want the National Insurance Commission (Naicom) to approve of it before the implementation can commence.
“That is, basically, why we are waiting. Otherwise, there is a template to correct the issue of rating so that people who did not get involved in products of risks at the beginning, cannot smuggle themselves in only at the time of placement,” he said.
Citing an example of how the industry can adequately price risks, the NIA chairman enumerated. “To do that, a broker will obtain quotes from insurance companies. And if the quotes are good enough, they are sent to a prospective client. Again, if the client says ‘I am okay with it, he or she will then empower the broker to place the business.”
He went on to say that, “Once the broker gets that mandate; he goes back to those insurance companies that provided the quotes in the first instance to do the necessary placements. And we are saying that if you have not participated in that process, you cannot wake up to participate in the placement.
“With that, everybody will quote and quote rightly. That way, we will know the exact loss experience of a given policy and not quote blindly, because what we do most time is blind quoting.”
According to him, “The market-conduct guideline actually specifies that shortly before the end of this year, underwriters are to submit their rates but that has not been fully practiced or implemented. Once that is implemented; it does mean that; once you have given your rate, you cannot go outside it when you are quoting for any new business.”