" /> NAICOM, CBN at war over bancassurance | Hallmarknews
Published On: Tue, Sep 6th, 2016

NAICOM, CBN at war over bancassurance

A serious dispute between the National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN) over the right model for the implementation of bancassurance in Nigeria last week recorded casualties.

The biggest victims are all bancassurance partnership deals between insurance firms and banks, which have been suspended indefinitely by NAICOM pending when the two regulatory parties agree on a workable model.

Also suspended by the regulatory body are other insurance product distribution channels including airlines, online or web-based aggregators, telecom and other platforms not approved by NAICOM.

The bone of contention is the refusal of the CBN to allow NAICOM license banks that want to have bancassurance partnership with insurance companies. The move which is threatening financial services penetration and inclusion may constitute more cost than benefit to the economy in general and insurance sector in particular if not well addressed.

Bancassurance involves selling insurance through the banks. It is an arrangement between a bank and an insurance company, where insurance products are sold in the banking halls. The bank mainly sells the insurance products to customers who visit the banking halls. Brand credibility is a major prerequisite in bancassurance partnership.

It is strategically relevant to deepen the penetration of insurance because banks have wider distribution coverage and also have higher brand share of mind.

Therefore banks provide a huge customer base and a payment infrastructure that supports high persistence of premium payments which insurers can leverage over a period of time to grow their market share.

Disclosing the suspension last Tuesday commissioner for Insurance, Mr. Mohammed Kari   said, “From today, all relationships the commission had hitherto accommodated, where insurance companies pay commission/ fees to banks for insurance transactions, referral or introduction, in any guise are no more valid.

“Insurance companies utilising or intending to utilise any institution including banks, airlines, online or web-based aggregators, shall ensure that those institutions have been licensed by the commission, as we have resolved to ensure strict compliance and impose appropriate sanctions to erring insurance institutions. You are warned accordingly.”

Kari who was speaking during the investiture of Eddie Efekoha, managing director/CEO, Consolidated Hallmark Insurance Plc as the 20th chairman of the Nigerian Insurers Association (NIA), said the decision to suspend this programme was to ensure that transparency, ethics and compliance with set out rules in the insurance transaction are followed.

Kari said, “In a letter we received last week, the CBN asserted that NAICOM is not in a position to license banks and thus, we cannot go ahead with the arrangement for now. However, NAICOM would continue to engage the CBN until all the grey areas are resolved.

“Licensing such channels is imperative to protecting the consumers and also to ensuring ethical and orderly practice and in further protecting the credibility of the insurance sector which are the principal mandate of the commission. However, the employment of such channels can only be utilised if that institution is licensed by the commission, in line with the provisions of the extant law.

“This is an insurance business and we regulate insurance, so any institution coming to do insurance must comply with the regulation”.

Kari noted that “the commission discovered that an insurance company had signed a 12-year partnership agreement with a bank, when it is supposed to be renewable every two years, this is wrong. We also noticed that an insurance company had paid commission in advance to one of the banks, and this is abnormal.”

The concept, which originated from France, has now become a strategic business model for many insurers around Asia, Africa and Latin America, even though it was earlier prohibited in most parts of Asia.

 

It also provides insurers opportunity for additional distribution line, besides brokers, agents and direct businesses. Bancassurance has proven to be an effective and efficient distribution channel in and around the world.

It has success stories in Europe contributing about 35 per cent of total premiums in the life insurance market, 60 per cent in France, 50 per cent in Belgium and over 65 per cent in Spain.

However, President of Association of Registered Insurance Agents of Nigeria (ARIAN) Mr. Gbadebo Olamerun, does not see it as a suspension but a proclamation over which stakeholders in the insurance sector will sit shortly before taking a position.

In a telephone interview with BusinessHallmark, Olamerun said, “ I think it is not a suspension yet. It is just a proclamation. Stakeholders in the industry will have to sit with the commissioner for insurance shortly to look at it.

He speaks further: “Business in the 20st century is all about partnership. I know the commissioner wants the insurance industry money to remain in the industry

“ But if that happens (suspension of bancassurance), it will have advantage but a bigger disadvantage to the insurance industry.”

Also reacting to the pronouncement Mr. Pius Onwuka, an insurance broker said Nigeria would lose a lot if it fails to take advantage of bancassurance as a channel to deepen penetration.

Onwuka further observed that both regulators should sit down again and review the model, consult widely so that they can tap from the knowledge of experts who understand bancassurance.

The CBN had in 2014 issued ‘Guidelines on Bancassurance Products- Referral Model’ and addressed to all banks, stating that the guidelines were issued based on recent developments and the need to ensure synergy in the financial system in exercise of its powers.

The guidelines set out the regulatory framework for the offering of bancassurance products through the non-integrated referral model. The apex bank explained that bancassurance refers to an arrangement in which insurance companies leverage on the customer base of banks to sell insurance products to banks’ customers.

This model however, has suffered defects, as both regulators were yet to agree for effective implementation before the latest decision to suspend further implementation of the plan.

How bancassurance works

An insurance company partners a bank for its range of insurance products to be sold across selected bank branches. These products typically range from life to non-life products especially motor and fire insurance.

The insurance company is responsible for providing training to the selected staff of the bank, making them the interface with the prospective clients. The bank not only collects the premiums on behalf of the insurer, but also earns an agreed commission on all policies received from the bank.

Through the partnership, the insurance company is able to expand its client base, without necessarily increasing its direct sales force or brokers. Unlike the typical banking products, bancassurance products, especially the investment ones, are mainly medium to long-term products. These products provide both investment and risks components.

In the bancassurance arrangements, the design and pricing of the policies are usually affected by the nature of the target market. An important aspect of bancassurance is the opportunity for collating clients’ demographic information, using the bank as a conduit. This also helps in future design and pricing of products.

Bancassurance in Ghana

In Ghana, while many of the life insurers have bancassurance partnerships, only a few non-life insurers have such arrangements. Particularly, many life insurers now sell their educational, investment-linked and funeral policies through their partner banks, besides the other traditional channels.

The increasing focus on bancassurance by insurers is in part, a result of the ever increasing cost of recruiting and maintaining direct agents and brokers which typically includes training/retraining, welfare, medicals among others.

Similarly the general public tends to have a stronger confidence in doing business with the banks compared with the insurance companies, a development that is fueled by the general negative perception about insurance.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Recent posts

  • IPOB: Igbo elders keep mum over crisis

    Obinna Ezugwu   Mayhem! There is no better word to describe the events playing out in the South East zone, and Abia State, the home state of rabble rousing leader of the Indigenous Peoples of Biafra (IPOB) in particular at the moment. It has to do with the intense military onslaught and the result has […]

  • Nigeria returns to African Trade Insurance Agency

    Federal Executive Council on Wednesday gave a approval for Nigeria to rejoin the African Trade Insurance Agency. Minister of Finance, Mrs. Kemi Adeosun stated this Wednesday while addressing State House correspondents after the Federal Executive Council meeting presided over by President Muhammadu Buhari. Adeosun said the council approved a memo she presented which harped on the necessity […]

  • Fidelity Bank to give out over N110 Million to Customers in ‘Get Alert In Millions Promo Reloaded’

      Top Nigerian lender, Fidelity Bank Plc is set to delight the banking public with the introduction of a fresh Savings promo that promises to provide new and existing customers with the unique opportunity to win fantastic cash prizes within a specific period. The promo dubbed ‘Get Alert In Millions Promo Reloaded’ is in line […]

  • Royal Exchange defies the odds   

    EMEKA EJERE Royal Exchange Insurance Plc has continued to resist the volatile and tough operating environment of Nigeria, recording a double digit growth in half year profit. Despite the hostile operating environment experienced by the insurance sub-sector and the financial services industry, the underwriter last week announced profit after tax (PAT) of N203.3 million in […]

  • STANBIC IBTC constructs recovery after a storm

    Stanbic IBTC Holdings came to being as a result of a merger between Stanbic Bank Nigeria Limited and IBTC Chartered Bank Plc. On 24 September 2007, IBTC Chartered Bank Plc merged with Stanbic Bank Nigeria Limited. Stanbic Africa Holdings Limited on behalf of Standard Bank tendered an offer for the acquisition of additional IBTC shares […]

  • How PZ makes investors beg for more but….

    Full year results for PZ-Cussons ended on a happy note in May as the company’s profit after tax soared by a hefty 73 per cent rising from N2.1 billion in 2016 to N3.7billion in 2017. The company’s fairy tale result has had several investors emptying their piggy banks as the company’s share price jumps on […]

  • Mama Taraba: A vote of no confidence on President Buhari

    Obinna Ezugwu At Wednesday’s Federal Executive Council meeting, Minister of Women Affairs and Social Development, Senator Aisha Jummai Al-Hassan, alias Mama Taraba was the cynosure of eyes. It was only a week prior that she rattled not only President Muhammadu Buhari, but the ruling All Progressives Congress (APC) when she spoke these words: “Your excellency, […]

  • Military don’t have power to control social media —Tony Momoh

    Prince Tony Momoh is the former Minister of Information between 1986 and 1990 under the military administration of Gen. Ibrahim Babaginda and was instrumental to the establishment of the Advertising Practitioners Council of Nigeria (APCON) by Decree 55 of 1988. In this interview with UCHE AKOLISA, Momoh traces the history of the body that regulates […]

  • Maritime experts petition President Buhari over arms import

    By Funso Olojo A maritime expert, Lucky Amiwero, has decried the destination inspection regime of cargo inspection as the cause of the proliferation of arms imports into the country. It would be recalled that the Nigeria Customs Service made a huge arm seizure at the Tin Can Island port last week Monday with the discovery […]

  • Stakeholders pressure for interest rate reduction as MPC meets

    FELIX OLOYEDE Manufacturers, haunted by falling operating margins, have made strident calls for the Central Bank of Nigeria (CBN) to immediately reduce local interest rates. The plaintive appeal is coming on the sidelines of the CBN’s monetary policy committee (MPC) meeting for the month of September 2017. According to results of a 2017 Manufacturing Sector […]

  • Cloud over Oando AGM; Auditors query accounts

    By Okey Onyenweaku   Controversy has continued to trail Oando Nigeria’s 40th Annual General Meeting which was held last week at the Ibom Hall in Uyo, Akwa Ibom State. While the company’s resolutions which re-elected its directors were seemingly successful, shareholders were divided over the continued leadership of the management. Shareholders have expressed mixed feelings over […]

  • Planned rehabilitation of refineries challenges past experience of state control

              The state of the country’s refineries is so decrepit that any attempt to delay in selling them would amount to a desire to sell scraps. Though the senate agreed that it should be repaired, and the group managing director has already set up seven committees for total turn around at optimum capacity by 2019, […]

  • Anambra 2017: The godfathers confront power of incumbency

    Obinna Ezugwu   Last week at a People’s Democratic Party (PDP) stakeholders meeting in Awka, the Anambra State capital, the immediate past governor of the state, Mr. Peter Obi vowed to aggressively prosecute the November 18 governorship election in the state. “I will be at the forefront of the Anambra governorship election, and we will […]

  • Nigerian pastors: The call of God or mammon?

    ADEBAYO OBAJEMU Obafemi Ayoade, a dealer in building materials has no kind words for Nigerian pastors. He justifies his uncomplimentary view of ‘’these men’’ of God by sharing his experiences with BusinessHallmark.  Ayoade had been married for 10 years without a child, a Muslim he went from one Alfa (Muslim preacher) to another in search […]

  • How Nigeria is shared: Buhari vs Jonathan

    OBINNA EZUGWU   Few days ago, Nigeria’s president, Muhammadu Buhari appointed 15 individuals into managerial positions in the Nigerian National Petroleum Corporation (NNPC), ten of them from the North- mostly Hausa/Fulani from the North West and North East; five from the South – three from the South West, two from the South South and none […]

  • Rising NPL: Banks cut loans, opt for fixed income in H1 2017

    FELIX OLOYEDE Nigerian economy which has struggled to exit recession may be sitting on a keg of gun power as banks cut down credits to the private sector in the bid to push down soaring non-performing loans (NPLs). Review of the 2017 half year financial results of commercial lenders in the country showed that the […]


Visit us on Google+