NAICOM, CBN disagree on bancassurance
… Stops banks, telecoms, airlines from selling insurance products
The National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN), are wrapped in a severe disagreement over the terms and conditions for the operation of bancassurance for the banking and insurance in the industry.
Meanwhile, NAICOM has ordered the 58 insurance firms in the country to cancel any form of channels used to sell their products and services except the ones licensed by the commission.
Besides, other insurance product distribution channels, including airlines, online or web-based aggregators, telecommunications and other platforms not approved by NAICOM, have been suspended by the insurance regulator.
The disturbing signal, which is threatening financial services penetration and inclusion, follows the refusal of the CBN to allow NAICOM to license banks that want to have bancassurance partnership with insurance companies.
Bancassurance is a relationship in which insurance companies leverage on the customer base and network of banks to distribute their products to a large number of consumers.
It is strategically relevant to deepen the penetration of insurance because banks have wider distribution coverage and also have higher brand share.
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.
Commissioner for Insurance, Mohammed Kari, who revealed this during the investiture of Eddie Efekoha, Managing Director, Consolidated Hallmark Insurance Plc, as the 20th chairman of the Nigerian Insurers Association (NIA) 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 is 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.
According Kari the decision to suspend this programme was to ensure that transparency, ethics and compliance with set out rules in the transaction insurance are followed.
Kari said: “In a letter 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,” he added.
Kari further disclosed 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.”
On a good corporate governance code being promoted by NAICOM, Kari said that for insurance and reinsurance companies, 40 percent of their boards must be made up of executive directors.
This will include, at least, one executive director, who must be in charge of technical and operations and have the same level qualification with the managing director, while directors disqualified for spending nine years can be reappointed after three years.