Monday, September 16, 2019 / 07:45PM / By
Ekerete Ola Gam-Ikon* MNIM, CPP / Header Image Credit: Octagon Africa
As recapitalization continues to boost conversations about the
insurance industry in Nigeria, different actors are appraising their positions
both from the effects it will have on them and their continued relevance in the
sustainable development of the industry.
To refresh our minds, the traditional actors in the insurance
industry are Agents, Brokers, Insurers, Loss Adjusters and Reinsurers. The
biggest amongst them, in terms of activities and market size, is the Insurer
who engages most of the functional professionals like Actuaries, Underwriters,
Specialists and Claims Administrators to enable it do a great job.
However, the historical development of insurance in Nigeria had
favoured the brokerage business not only because it was introduced to us as an
agency-type vocation but also for the fact that the founding fathers of
insurance in Nigeria were insurance brokers. The pattern of development
remained the same as every leading insurance company in Nigeria today is known
to have its foundation in insurance brokerage.
Pre-Recapitalization Times
At independence, Nigeria had more brokers than insurers and
those brokers were well-trained professionals whose character and
knowledge could not be disputed and their brokerage firms have survived till
date despite the unhealthy competition of latter day brokers.
By the time the Federal Government of Nigeria decided to own its
insurance company, and later take over the foreign-owned ones that were
acquired by prominent Nigerian entrepreneurs, the significance of the brokers
became obvious as some took leadership positions in those entities. Thus, the
foundation for dual interest in brokerage firms and insurance companies had
been laid.
So it was that by the time governments and multinationals were
deciding which companies will provide insurance services to them, these brokers
had all the sides covered. It was indeed "a brokers' market" that the
team, working on the promulgation of insurance laws, met in the mid-90s and
they seemed to have been further favoured by the laws.
Premiums were remitted to insurers THROUGH brokers, most of who
adopted the strategy of "holding the premium" for as long as there
were no claims, and at the end of the insurance year, they would decide what to
give insurers. Insurers, on the other hand, had bloated sums reported as Gross
Premium with less than 20 percent received in most cases.
No Premium, No Cover
Interestingly, the season and times began to change for the
brokers as the regulation got better and insurers had some breathing space.
With the successful inclusion of the "No Premium, No Cover" Clause in
the Insurance Act 2003, it was only a matter of time.
Not surprisingly, it took almost a decade for the National
Insurance Commission (NAICOM) to take the bold step of implementing the clause
and save the insurance industry in Nigeria from near collapse.
The brokers, yet successfully negotiated that they could still
keep premium paid by clients for days not exceeding 30days before the insurers
get paid.
This regulatory action must have dealt the brokers a huge blow
as business dipped in the last 5 years with more insurers fearlessly advising
clients to deal with them directly thus creating dire consequences for the
development of the market towards the era of the Fourth Industrial Revolution.
Not only has the number of brokers willing to do business the old way reduced
as evident in the current number of financial members of Nigerian Council of
Registered Insurance Brokers (NCRIB), increasing colouration of intermediaries
have emerged and operating as brokers.
To better appreciate this, one observes that the number of
brokers licensed by NAICOM are more in number than those listed by NCRIB! The
question then becomes how policyholders should decide in order to ensure that
they are in good stead when something happens from payment of premium to claims
settlement.
Insurers as Brokers
Notwithstanding the dominance of brokers through the years,
insurers have continuously acted as brokers regarding local special risks
businesses placed abroad; one of the issues the current recapitalization
exercise is expected to address. So, is it indeed going to happen that this
kind of brokerage business will also dip/decline?
Besides, recapitalization is also likely to enable insurers fund
new tech-driven distribution channels and claims management solutions that will
significantly affect their relationships with the brokers. This may not happen
so fast considering the age-long interwoven interests of brokers and insurers.
It may however be the hidden reason why recapitalization and
other growth initiatives of the insurance industry in Nigeria have not been as
successful as many expected. The lack of decisiveness on the part of NAICOM
when dealing with policyholders' issues especially unsettled claims can be
traced to such factors too.
Surviving Forward
As insurers conclude on their recapitalization plans, the brokers
are also sharpening their strategies to survive and remain relevant beyond June
2020 deadline.
A few strong brokers are daring to invest in insurance
technology that will ensure they retain the confidence of their clients despite
the direct foray of insurers. Unknown to them, intriguingly, these clients are
also looking at collaborating with leading insurers on innovative risk
management solutions that will give them more value than traditional insurance.
This is despite concerns that regulatory inactions may delay the effective
adoption of digital solutions for improved Customer Experience (CX).
More than the brokers, agents and loss adjusters have equally
become hugely threatened by the impending actions of insurers to drive
aggressively for premium that will ensure reasonable returns to
investors/shareholders.
Above all, the customers (existing and potential policyholders)
are in a pole position to determine the survival of these respective actors
driven by their shared experiences via activated social media platforms.
The entire insurance industry in Nigeria is on the verge of
transformation if we finish the recapitalization process strong: the desire of
well-meaning Nigerians who seek to enjoy the real benefits of insurance as
there exist in other climes irrespective of the fate of brokers.
Will the brokers reinvent themselves?
About The Author
Ekerete
Olawoye Gam-Ikon, MNIM, CPP is a management consultant with
specialization in Strategy and Insurance. He can be reached vide telephone on
+234-806-648-1111 and +234-802-585-0344 or by e-mail vide olagamola@gmail.com
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