Alhaji Mohammed Kari as the Commissioner for Insurance and Chief Executive of the National Insurance Commission

…employ demarketing, underhand tactics to win accounts

By AYOOLA OLAOLUWA

The scramble for Nigeria’s multi-trillion naira pension fund contributed by workers has intensified between Pension Fund Administrators (PFAs) and insurance companies, with the two sides engaging in underhand tactics, such as de-marketing, to win over accounts from customers, BusinessHallmark findings can reveal.

As of September 2020, the total assets under the Contributory Pension Scheme (CPS) had risen to about N11trn. Findings revealed that marketers engaged by the two operators, apart from wooing customers with mouth-watering offers to transfer their accounts to their firms, have also been feeding them with deliberate disinformation on their rival’s businesses.

A cursory look at the law establishing the Contributory Pension Scheme (CPS) shows that retirees have the option of either choosing a programmed withdrawal (PW) of their pension savings, or an annuity.

While programmed withdrawal assets are domiciled with the PFAs who transfer the funds to Pension Fund Custodians (PFCs) for investments and returns, annuity on the other hand is managed by life insurance companies.

According to BH checks, an annuity is a contract between an insurance firm and an investor whereby in exchange for making a lump sum payment, the insurer, in most cases, provide an income for life, or a specified period of time; provide for long term care benefits like health insurance for beneficiaries and provide death benefits to deceased families, among others.

For example, if a customer chooses the income for life policy, he enjoys a pension as long as he is alive. However, the downside for the two partners is that while the insured continues to get paid until he dies (even if he gets to the age of 150), if he dies a year or two into the programme, his family gets nothing, despite the deceased still having millions with the insurer.

The insurance company on the other hand, loses if the customer refuses to die and lives for several years. Even when his funds have been exhausted, the insurer is obliged to continue to pay as long as he lives.

There are also variants of the annuity policy, including the provision of healthcare for the customer, as well as paying the deceased family the remnant of his investment, in the event that he chose a dated premium. For example, if a customer signed a contract to be paid for twenty years and dies a year into the deal, his family will receive the balance of the funds.

The programmed withdrawal scheme operated by PFAs, on the other hand, is a straightforward arrangement. While he (customer) continues to receive pension until he dies, or his contribution runs out, whichever comes first, the PFAs must pay his family the balance of his contributions upon his death.

However, our Correspondent gathered  that while they are out prospecting for customers, marketers  of both the PFAs and insurance companies, instead of laying out the different accounts/policies operated by their those of their firms and their rivals and explaining their advantages and disadvantages, they choose half truth or deliberate lies to confuse would be customers.

For example, a marketer with one of Nigeria’s biggest PFAs recently approached our Correspondent in a bid to sell him her company’s products. The very busy BH Correspondent, in a desperate attempt to dismiss her, mentioned that since he operates an annuity policy with an insurance company, he won’t be able to sign on with her firm.

Immediately, the onslaught against the insurance companies began. The marketer informed our Correspondent that the annuity policy is a disaster waiting to happen as most insurance firms are financially weak and may soon collapse. She also added that the annuity programme only lasts for 15 years unlike the programmed withdrawal operated by her PFA. She went on to show this writer copy of a 15-year agreement document between a customer and an insurance company.

“Sir, I will advise you not to endanger your investments and future by still doing business with insurance companies. In fact, most of them are insolvent and would soon go under.

“Are you even aware that their annuity policy only last for 15 years? They will mismanage your money since they are not equipped for the business. Though I reject it for you in the name of Jesus, in the event that you die young, your family will not get anything”, she argued.

When our Correspondent demanded to look at the annuity agreement, he observed that the agreement was dated, just for 15 years, and that in the event of death, deceased beneficiaries get the balance.

When BH pointed out this clause to her, she maintained that she was aware of several families who have not received a dime several years after the demise of their breadwinners.

After about ten minutes of intense wooing and the realization that she was not getting the desired result, she relented, but not without a last fight.

“Sir, I hope you are not going to regret your unfounded loyalty to this insurance company of yours. I pray it won’t be too late to jump boat. But in case you change your mind, you can call me on my phone”, she said after dropping her call card with our Correspondent.

Several retired and still active workers, who spoke with our correspondent in Lagos, disclosed that they have all at one point or the other being approached by marketers from both sides who tried to woo them over to their sides.

A resident of Beckley Estate in Ijaiye-Ojokoro who worked with the Federal Inland Revenue Service (FIRS) before she retired, Mrs Moudpe Ibigbami, while speaking with our correspondent on the matter, said she recently switched over to a PFA after being convinced to do so by an agent.

“I hope I am not making a mistake. This is the third time these people (marketers) are making me to change my mind. You know this annuity thing is just catching on in Nigeria. So, I started with a PFA. But when my cousin came in from Europe, she pointed out the advantages of annuity, declaring she already signed into one. Shortly after this, an agent of an insurance company approached me to sell her company’s products. Based on the discussion I had with my cousin, it was very easy for her to convince me. I subsequently switched over.

“Barely two years after, I again changed over to a PFA after hearing that the annuity scheme with insurance companies last only ten years. I am just 55 years old. If you add that to the ten years the policy will terminate, I will be 65. Several questions like “what happens in the event that I grow to 80 years and ‘where do I get money to sustain myself’? started coming to my mind. This made me again to jump ship.

“Since then, several agents have come to try to woo me over. I am now totally confused and don’t know who to believe again”, she said.

Another retiree, Mr. Ponle Adedeji, who operates a PFA account, said that he had been told by some of his colleagues that while funds in your PFA account could be exhausted, insurance companies will continue to pay him for life if he chooses annuity.

“While I get about N100,000 monthly from my administrator, an insurance company approached me, promising  N125,000 monthly. But I am afraid. What happens to my family if I die after two years of just collecting pensions?,” he demanded.

BH also gathered that PFAs are also fighting back by holding on to money insurance operators ought to obtain from an annuity, as well as also offering annuity to the same customers’ insurance companies are prospecting, instead of them focusing on programme withdrawal.

A check by our Correspondent shows that virtually all the PFAs operating in the country have set up their own insurance subsidiaries in other to benefit from the two schemes.

“We expected annuity product to be thriving in this economy. But as far as the business is concerned, it is still out of reach for insurance companies. The major reason is the money that needs to be withdrawn from the PFAs are being held on.

“I have done many proposals, I have done many presentations with oil companies and construction companies, but the PFAs are saying, let the money stay with us. Whatever insurance companies can do for you, we will do it for you and the Act covers it for them.

“Annuity is still very low in our market, except insurance companies that have a PFA are the one enjoying it. It is a product that supposes to be thriving well. That which is supposed to be brought to insurance companies is being held on to by the PFAs. It is not a case of saying they withheld it. It is a case of PFAs marketing the same person an insurance company is marketing, that is the experience.

“And when you think you have closed a deal, the man comes to you and said my PFAs said they could still give me the same thing. The same structure that you said you will pay me on monthly basis, they said they will pay it.

“When I said withheld, I did not mean that they will not release the money, but they are ready to give them whatever you have proposed to them. It is like indirectly, the PFAs is accepting the annuity too”, a top management staff of an insurance company in Lagos lamented.

Also, an insurance practitioner who spoke with BH on the battle for pension accounts, Lawrence Apantaku, bemoaned the ‘unfair edge’ PFAs have over insurance companies. According to Apantaku, the PFAs have an upper hand in the competition because they keep the RSAs of workers while in active service and know those who are to retire.

“After retirement, PFAs process the benefits of the retirees, and therefore are able to woo them to take the PW and discourage them from annuity. Since the law only allows PFAs to manage RSAs, we are handicapped and have to wait till they (workers) retire.

“It is when they are retired and have access to their funds that we can only go after them. Even with that, we don’t know those who have retired or not. What we do is what they called ‘Cold Canvassing’. In insurance, it refers to just walking up to people or knocking on doors without referrals. Most times, people snub or slam their doors on us. The market is unfair to us”, he moaned.

Investigation, however, revealed that it is not all doom for insurance companies as they take advantage of a stringent law that forbids PFAs from paying their pensioners any rate different from the stipulated PW payment template. Unhindered, insurance companies offer retirees higher and mouth-watering monthly pensions.

Meanwhile, in a bid to address issues of de-marketing by pension and insurance agents in the pension industry, the National Pension Commission (PenCom) and the National Insurance Commission (NAICOM) recently signed the revised regulation on retiree life annuity, and the guidelines on Group Life Insurance Policy for employees and Contributory Pension Scheme retiree pack.

The ceremony, which held in Abuja, included the signing of a memorandum of understanding (MoU) between PenCom and NAICOM. According to PenCom, part of the agreement was to address issues of de-marketing by pension and insurance agents in the pension business.