Insurance: Why huge unpaid premiums persist

Insurance: Why huge unpaid premiums persist

By Nike Popoola Friday, 25 Jun 2010 


The inability of insurance operators to have a good check-process that will enable them to know whether a customer has paid his premium or not has been identified as a major reason for the huge unpaid premiums in the industry.This is because a huge percentage of the premium is not paid directly to the insurance companies but through the insurance brokers.


The Managing Director, Cornerstone Insurance Plc, Mr. Livingstone Magorimbo, said, ”A major reason why you find a lot of this outstanding premiums is mostly because it is generated through brokers. ”Each year, insurance companies record huge unpaid premiums in their accounting records. In most cases, investigations have often revealed that some brokers either divert the funds into other businesses with the intention to pay later or deliberately withhold the money over certain unresolved issues.


Policyholders in the government sectors, ministries,parastatals and agencies have been fingered as the biggest debtors to the insurance companies, owing as much as N25bn. Often times, shareholders demand explanation for recurring huge figures during annual general meetings.One of the major implications of unpaid premiums is its negative effects on the performances of the industry as it reduces the financial ability to pay claims as well as invest in other profitable ventures.


Magorimbo told our correspondent that often times, there were no automatic renewals for businesses and that brokers did not always get the commitment of the customer before placing risks or renewing them.Such situations, he added, were often discovered during account reconciliation.


According to him, ”What you find is that part of the premium you are claiming to be outstanding in your books is premium that had been paid to someone who got the business. This is common with general business because it is renewed annually.”The managing director, however, added that the insurance company had no obligation to pay claims on premium that had not been received from the client or the broker.


He noted that this was a concern to operators in the sector.He noted that Cornerstone had put in place a process to improve on its service delivery.According to him, ”We are in the process of coming out with products that are innovative by taking into account what they are out to achieve for consumers. We now invest in product development cycle where we will be listening to the voice of the customers. Once we hear that voice, we use it to develop the product that will meet their expectation.”


(Source:Punch)


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