BOOSTING CUSTOMER SERVICE RELATIONS BETWEEN INSURANCE & PENSION OPERATORS
MRS. FOLASHADE ONANUGA
B.A. (HONS), FCII, FCIS,
DIRECTOR GENERAL, LAGOS STATE PENSION COMMISSION
•There are two types of products that are consumed by individuals – tangible and intangible products and both insurance and pension are intangibles.
•Whilst tangible products can be seen, touched and can appeal to customers and make them buy them, intangible products cannot be seen and in essence, marketing techniques differ.
•The challenge of marketing and selling intangible products is that you have to paint a word picture for your customer. They can’t see or touch your product. If you are selling an insurance policy you have to be able to take your customer into the future and show them that, if you are no longer around, the family won’t be out in the street.
•In essence, Intangible product selling is emotional selling. Here emotion creates the value.
•Yes, like for tangible products, features such as benefits and price matter, but for intangibles, emotional relationships build go a long way in creating confidence in the mind of the product consumer.
•Both the Life Insurer and the Pension Operators are in the same business of adding value to the life of an individual.
•They are transacting almost the same business but the industries are different. Whilst the Life Insurer is in the risk transfer business supervised by NAICOM i.e. the Insurance Industry, the Pension Fund Administrators are in the Funds Management Business supervised by PENCOM i.e. the Pension Industry.
•The two operators are ultimately providing the same service and hence must work harmoniously to promote the pension industry as envisaged by the PRA 2004 now amended to PRA 2014.
•The Competition between the two operators must be healthy otherwise, the ultimate consumer will loose confidence in the transparency the PRA advocates as human thinking will suggest that the infighting to gain upper market share, between the two operators means that the product being sold is more to the benefit of the operators than to the ultimate consumer. The ultimate consumer will therefore be wary of both products.
•Frosty. The PFAs seem to be sad that the monopoly they have been enjoying since the advent of contributory pension scheme in 2004 is suddenly being broken and that their captive market is slipping away from their reach. The Life Assurers whose traditional business is pension provision are set through aggressive marketing of life annuity business to retain and remain relevant in their natural habitat and the animosity felt when a new pension industry emerged in Nigeria is more intense with the PFAs set not to allow business to leave their terrain.
•Dog eat dog relationship – To discourage people from taking annuity in place of programmed withdrawal, the PFAs have leveled a good number of allegations against life insurance firms. The Annuity Service Providers have also strong allegations against the PFAs
•Unhealthy rivalry leading to de-marketing
•There is the belief that the Pension Industry Regulator (PENCOM) is a major cause of the frosty relationship as most of their pronouncements and policies appear to be against the Insurance Business. This is despite the fact that NAICOM sits on the PENCOM Board but yet PENCOM maintains an overbearing attitude to pension operations
WHAT IS THE PRESENT RELATIONSHIP BETWEEN THE LIFE ASSURERS & THE PENSION FUND ADMINISTRATORS ?
•The regulator role – In as much as the PRA 2014 has stated that pension can be received either through a programmed withdrawal mode or life annuity payout, PENCOM should have insurance professionals in their establishment to guide them on annuity business and thereby the Commission would have a firm grasp of annuity operations and be able to defend both industries in as much as the PRA 2014 has as its provision life annuity business as a medium of receipt of terminal entitlements.
•PENCOM needs to have understanding of both the fund management and the risk business offered by Insurance Companies and be able to gather the two operators together to advise them on service delivery features they expect to instil confidence in the customer. PENCOM’s standard for the industry must be clearly stated. This should be easy because NAICOM sits on PENCOM Board
•A step in the right direction is the directive for pension funds managed by operators to be held by licensed pension fund custodians. PENCOM however needs to understand the risks peculiar to the annuity business such as the longevity risks.
HOW TO BOOST THE RELATIONSHIP BETWEEN THE OPERATORS
•PFAS & ANNUITY SERVICE PROVIDERS – PFAs need to understand that they don’t have a monopoly over the business. They need to understand that having encroached on another industry’s core business, using the mortality tables as provided by actuaries in arriving at the monthly take home pay, they should not protect to the detriment of the pension business, the funds in their custody. A serious investor with foresight will choose to operate in both fields e.g. Leadway Assurance & Leadway Pensure. The staff of the two operators should meet regularly on how to introduce service delivery features to ensure that the customer remains. In proper parlance actually, a PFA should encourage a contributor who reaches retirement age to do annuity business. So the PFA who is a fund administrator maintains its core business of funds management and growth and at retirement, should educate the client on the necessity of drawing pensions for life through annuity but if the client wants to draw for a shorter period, then do programmed withdrawal.
•On the part of annuity service providers, they need to learn how to do legitimate business. What do I mean?
•Whilst marketing your product, you need not behave like fraudsters e.g. We have instances of insurance companies who invite retirees to programs using the name of LASPEC. Some insurance agents will disguise as relatives of retirees and listen to the exit discussion between the contributor and the PFA. Thereafter, they will twist to their advantage every thing said knowing thereby confusing the retiree. The Insurance Agents now stand by the roadside as if waiting for prey and unfortunately, there is so much fraud. What stops a PFA from having an annuity section in their offices and with details of all firms offering annuity business but then you can market your own company by stating features that you have over and above others.
•PENCOM and the PFAs should be able to display the list of annuity service providers on their website whilst Annuity Service Providers should also be able to display list of PFAs in Nigeria on their website
•Marketers of both industries need to be sanctioned where they have been accused of de-marketing whilst sharp practice by any employee aimed at boosting market share should be exposed and appropriate punishment meted out.
•PENCOM organizes Consultative Meetings with the operators under the umbrella of PENOP. Life annuity operators should be part of PENOP because they are pension operators whilst maintaining their membership of the insurance industry because they offer other services that do not affect the insurance industry.
•The pension industry is facing a lot of challenges now due to lack of understanding of pension operations. The operators, rather than fight themselves all in the interest of retaining market dominance, should work together in building a virile pension industry in the country.
•Joint presentations should be made to the Legislative on the impact the CPS has on the pension practice in the country. The challenges PTAD is facing and how a fraud free, efficient and effective pension scheme will go a long way in building confidence in a country that is perceived as totally corrupt.