Insurance
Insurance retail growth threatened by new CBN policy on bancassurance
A Central Bank of Nigeria (CBN) new policy directing banks to stop bancassurance activities has brought a major setback to insurance companies’ efforts to increase retail sales and deepen penetration through the bank channels, BusinessDay investigation reveals.
This policy directive which came in July 2014 has led banks to instantly withdraw their partnership agreement on bancassurance with insurance companies, a system that was contributing about 5 percent of insurance industry gross premium put at N15 billion as at end of 2013 financial year.
Bancassurance is simply an agreement between a bank and an insurance company whereby the insurance company distributes its products through the bank’s outlets and its customer base.
The CBN in July, issued a circular to all the banks alleging contravention of a regulation in 2010 which stopped them from indulging in non-permissible activities, including underwriting.
“The Central Bank of Nigeria has noted with concern that some banks engage in non-permissible activities including bancassurance, in contravention of the regulation on the CBN scope, conditions and minimum standards for commercial banks regulation No 01, 2010,” said the circular entitled ‘Bancassurance and other non-permissible activities’ and signed by Tokunbo Martins, director of banking supervision, CBN.
“Banks are therefore directed to henceforth cease such activities as the CBN will not hesitate to impose severe sanctions on erring banks. Please be guided by the above regulations,” it further said.
The cancellation of bancassurance simply means that insurance companies are not allowed to sell their products through bank outlets. In other words, the process of selling insurance services and products inside the banking halls and through their outlets will no longer be allowed.
“The implication really is that bank-owned insurance companies are stripped of the leverage and synergy they enjoyed by virtue of their being owned by the banks. In this case, such insurance companies would have lost the opportunity offered by such synergy which hitherto gave them platforms to sell and distribute their products to a mass market through the banks outlets spread nationwide,” said an industry expert on condition of anonymity.
According to him, the cost of sales and distribution they had saved by virtue of this partnership with their mother bank would now come to them as part of expenses, thereby increasing their cost of production. And no doubt, it could as well impact on their revenue as a lot of potential clients would be lost by not having the opportunity to access them through the banking halls any longer.
Other analysts who spoke to BusinessDay last night on the development said the policy might have been wrongly directed as banks were not into any form of underwriting in bancassurance, but rather provided their channels for insurance companies to distribute their products.
They added that it was a worldwide phenomenon and practiced in advanced markets, including Ghana and South Africa.
They were, however, quick to add that the CBN and the insurance industry regulator, the National Insurance Commission (NAICOM), should work together and come up with a workable framework on bancassurance, rather than stopping a system that is fundamentally relevant because of its success level in enhancing financial inclusion, and which is, of course, an international standard practice.
Magnus Okwor, an insurance analyst, said bancassurance channel was strategically relevant to deepening of insurance penetration, adding that under the channel, insurers leverage on the wider distribution coverage, huge customer base and payment infrastructure that supports high persistence of premium payments provided by the banks.
He cited the example of an insurance company which had sold about 300,000 policies over a period of one year in bancassurance relationship.
Tola Adegbayi, executive director, Leadway Assurance Company Limited, said even though bancassurance was yet to catch on because of regulatory constraints, it remained a potential growth platform that could push the percentage contribution to gross premium income (GPI) much higher than the current upper 5 percent bracket.
He said banks remained a significant distribution channel for insurers, adding that it would be worthwhile for the Nigerian Insurers Association (through the Nigerian Insurance Digest) or NAICOM to capture the contribution of bancassurance to overall GPI. This is even as overall industry penetration rate has remained stagnant at less than 1 percent of GDP, showing huge potential of a relatively untapped insurance market.
BUSINESSDAY-
By Funmilayo Olusanya
The outstanding pension debt owed to former employees of NICON Insurance and Delta Steel Company, which was estimated to worth over N7 billion, has been paid off by the Pension Transitional Arrangement Directorate.
The sum represented the liquidation of the 56-month pension obligations owed to former employees of NICON Insurance and the 49-month pension obligations owed to former employees of Delta Steel Company.
The agency reported that a total of 4,691 former employees of both organizations were impacted by the liquidated pensions.
Dr. Chioma Ejikeme, executive secretary of PTAD, stated during a news conference on Thursday in Abuja that a total of 100 months’ worth of NICON Insurance pension arrears and 96 months’ worth of Delta Steel arrears were inherited.
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She said that inherited unfunded obligations for disbanded government ministries were estimated to be around N95 billion, adding up to a total monthly pension expense of N2.298 billion and a yearly bill of N62.073 billion for the disbanded organizations.
“As at today, we have settled a total of over N39bn of the inherited N95bn, with N3.4bn of this amount making up one-off payments. These payments are ongoing,” she said.
She said that PTAD had successfully and regularly paid pensioners monthly without fail and had made payment of over N8.5bn as accumulated arrears of pensions and gratuities to pensioners of the Civil Service Pension Department and the next-of-kins of deceased pensioners through the Expanded Computation Project.
“With the liquidation of these inherited liabilities, the burden keeps getting lighter, and we will continue to work with all the relevant agencies of government to ensure that all accrued pension arrears are fully liquidated, especially the 63 months of inherited pension liability owed the ex-workers of NITEL/MTEL and their Next-of-Kin which we will continue soon,” she assured.
The PTAD was established to respond to grievances pensioners had with the previous defined benefits plan.
Ejikeme stated that the agency had completed the “I Am Alive” Confirmation Solution’s pilot phase and had solidified plans for the solution’s full distribution.
She pointed out that the solution removed the dangers and stress associated with traveling to different locations for field verifications and revealed PTAD’s intention to improve life for elderly adults in the nation so they could enjoy their retirement without stress.
Business
NCDMB to retain oil insurance spends in Nigeria, partners NAICOM to Launch Insurance Services Guidelines
Modupe ASUDO
ABUJA-THE Nigerian Content Development and Monitoring Board (NCDMB) and the National Insurance Commission (NAICOM) have signed insurance services guideline which will oblige the oil and gas industry to patronize the local insurance sector, thereby retaining insurance spending in the economy.
The guidelines will also address loopholes that have been identified while implementing the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, particularly sections 49 and 50, which deals with insurance of oil and gas activities. The Executive Secretary, NCDMB, Engr. Simbi Kesiye Wabote and the Commissioner for Insurance, Mr. Sunday Thomas signed the guidelines recently on behalf of their organisations in Yenagoa. In his remarks, the Executive Secretary stated that the provisions of sections 49 and 50 of the NOGICD Act require all operators engaged in any form of activity or project in the Oil and Gas industry to insure all insurable risks related to its oil and gas business with an insurance company, through an insurance broker registered in Nigeria.
He stressed further that the Act provides that where an operator seeks to place an insurable risk offshore, a written approval of NAICOM must first be sought and obtained and that NAICOM before the issuance of the approval must ascertain that local capacity has been fully exhausted. Wabote reiterated that the Insurance guideline will strengthen the Board’s local content drive and ensure that a greater portion of the spend in the Insurance industry as it relates to oil and gas activities in Nigeria is retained in-country. In his words, “the insurance guideline being launched today was developed by the two regulatory bodies to ensure that government’s intention of promoting insurance services within the country is achieved so as to capture significant financial spend under oil and gas insurance services in country.”
The NCDMB chieftain said the collaboration between Board and NAICOM will further ensure the successful implementation of the Insurance Guidelines and every other activity that will lead to the attainment of the objectives of the NOGICD Act, 2010 as well as 70 percent Nigerian Content by 2027 under the Board’s 10-Year Strategic Roadmap. He added that finer details of the guidelines will be released at the Nigerian Content Seminar at the 2022 Nigerian Oil and Gas Conference scheduled for July 2022.
In his comments, the Commissioner for Insurance, NAICOM, Mr. Sunday Thomas charged all stakeholders engaged in any form of business, operations or contract in the Nigerian oil and gas industry to ensure compliance with the relevant laws and compliance with the insurance Guidelines. Thomas expressed optimism that the partnership between the Board and NAICOM will realize the benefits of increased local content, in-country value retention, job creation and employment generation and GDP growth amongst other. While appreciating the efforts of the Board, the NAICOM boss pledged his agency’s commitment to create an enabling environment that will consistently enhance increased capacity of the Insurance Institutions both financially and technically.
LAGOS-LEADWAY Assurance Company Limited has launched a new life product named the Leadway Family Benefit Plan Plus (LFBPP).
The product is a multi-life policy designed to cover funeral expenses for the assured lives (spouse, parents and/or parents-in-law that are named in the policy) and the policy holder (person who purchased the policy).
The policy helps to alleviate and bury the worries associated with the funerals for elderly loved ones. Product launch: Managing Director, Mr. Oye Hassan Odukale; Mr. Shadrack Sivhugwana, Head Life Actuary; and two member of staff all of Leadway Assurance Company Limited at the launch of Leadway Family Benefit Plan Plus (LFBPP) at the corporate head office in Lagos.
Speaking at the product launch held at the corporate office of Leadway Assurance in Lagos, Head, Life Retail, Mr. Femi Adebayo, explained that the policy provided funeral benefits in respect of all the assured lives as long as their death preceded that of the policyholder.
The policy also provided other benefits including offering additional monthly payments to the beneficiaries of the policyholder in the event of his demise. According to him, the Family Benefit Plan Plus was one of the ways in which Leadway Assurance was making life beautiful for its customers.
Also speaking at the launch, General Manager, Life Division, Mr. Shadrack Sivhugwana said he expected that the demand for funeral insurance will be the main driver of insurance growth in Africa in the next couple years, charging the public to take advantage of the new product and be prepared when the inevitable happens.
Established over 45 years ago, Leadway is a composite insurance company underwriting both life and general insurance business with 23 branches spread across Nigeria.
Leadway’s reputation has been attained by the continuing pursuit of improvements to maintain its competitive advantage within a very soft market environment. The company also offers subsidiary financial services like bonds, secured credit, miscellaneous financial losses and fund/portfolio management.
-Vanguard
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