As Nigeria’s insurance industry continued to struggle with penetration and acceptance, the National Insurance Commission (NAICOM) has ordered the 58 insurance companies in the country to cancel any form of channels used to sell their products and services except the ones licensed by the commission.
The commission equally disclosed that all previous and current relationships of underwriting firms with any financial institutions, telecommunication companies and airlines are no longer valid starting from August 17, 2016.
Henceforth, the Commission wants to license any agency and referral agents that are doing businesses and earning commission from the insurance industry.
Meanwhile, findings show that most underwriting firms who are in partnership with the big telecommunication outfits, such as Glo, MTN, Airtel Nigeria, and Etisalat on mobile insurance will have to terminate such transactions that are generating the benefiting insurers several millions of naira on a monthly basis. However, the bancassurance arrangement between the banks and insurers has equally been put on hold.
Enforcing its order, NAICOM threatened to sanction any firm who may ignore the order and continue to use financial institutions, telecommunication companies and airlines, as channels to sell their products and services, unless these distribution agencies are licensed by the commission to do so.
Alhaji Muhammed Kari, Commissioner for Insurance, NAICOM, addressing journalists in Lagos, warned that any insurer who goes against this directive would be heavily sanctioned by the regulatory body.
He stated that the commission had asked banks acting as agency or referrals of insurance firms to offer themselves for licensing by the commission, but got a letter from the Central Bank of Nigeria (CBN) last week, saying, NAICOM has no power to licence any institution within the purview of the CBN.
“Last week, we received a letter from CBN stating that NAICOM is not in a position to licence banks to do anything. And we feel referrals or any agency of insurance companies must be licenced. We cannot go ahead on bancassurance for now.
“We will continue to engage CBN on this to see the need to allow banks to enjoy referral option and earn commission from selling insurance products to their clients. However, as from today (yesterday), all relationship of insurance companies with telecoms or banks on referral option is no more valid.” Said Kari.
Insurance companies utilising or intending to utilise any institutions including banks to sell its products, he said, shall ensure that those agencies have been licenced by the commission ‘as we have resolved for strict compliance with this directive and we will give appropriate sanction on erring insurance firms.’
“This directive is the requirement of the law and it affects airlines, telecommunications companies and financial institutions. Referral agencies must be licensed because that is the law. We have only released a draft guideline for the banking industry on the Bancassurance which is the one that is generating rancour but we will resolve it with the cooperation of relevant stakeholders,” he stressed.
Saying NAICOM, as a regulator was going to strictly operate by the rule, he said the regulatory authority has allowed insurance distribution agents to operate in a bid to deepen insurance penetration, but that it is now time to conduct this business within the stipulated rules and regulations.
Stating the need to implement this rule, he said: “There is a bank and an insurance company that signed 10 years exclusive agreement and our proposal was that it must not be more than 2 years agreement so that it can be renewed from time to time for the benefit of the consumers.
“We also got information of an insurance company that has already paid a bank, a commission in advance. These are totally irresponsible on both parties, even though we are not responsible for banks or any other institutions, but for the insurance companies who are licenced by us and that is what we are doing.”
Also speaking on the proposed Risk Based Supervision (RBS), the Commissioner for Insurance said, “We have already been discussing with the industry and we have make them realized that RBS/recapitalization is a long term framework and we want to make sure we get it right. We have already initiated internal training for a retreat and its in progress. It will take longer than 12 months.”