Insurance

Insurers lose huge premium revenue to installment payments

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Chuks Udo Okonta

The Fire Committee of the Nigerian Insurers Association (NIA) has decried the loss of huge premium revenue by insurance companies to installment payments by policyholders.

The committee stated in a report presented to the association that installment payment by policyholders usually result to loss of premium revenues in the event of losses which are sometimes total in occurrence.

To mitigate the challenge, the committee suggested that short premium cover computation should be used for premium installment requests on motor transactions, whilst on non-motor transactions, the policy should be warranted that premium outstanding becomes payable in the event of a loss.

The committee also indicted underwriters for an unprofessional practice of granting FEA discount on special peril rate and advised that this practice should be done away with.

According to the group, there is also an allegation on wrong use of industrial all risk policy being issued by underwriters.

“For a policy to qualify as an industrial all risk policy, the following criteria must exist which includes, the proposal must be from an industry or manufacturing concern; material damage sum insured should not be less than N500 million; IAR extension for accidental damage should not be less than 0.025 and added to the peril basis rate of 0.075 per cent and maximum free theft cover should not exceed N5 million anything above this must be charged for separately,” it said.

The group also called on underwriters to take every renewal of policy as a new business, and should endeavour to obtain claims experience from previous underwriters. Companies were asked to cooperate by giving the much needed support to one another.

According to the committee, underwriters must seek to full understand the risks to which the underwritten objects is exposed, so that the right premium is charged as well as ensure that proper risk management techniques are adopted.

Underwriters were mandated to ensure that every risk management exercise culminate at risk treatment and monitoring.

Risk survey officers were asked to pay thorough attention to the risk after the survey exercise is completed. The head of risk survey department in conjunction with top management should create the enabling environment and process control to ensure the objective is achieved.

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