Nigerian insurance operators are yet to address the issue of incessant rate cutting by some recalcitrant operators and they are still looking for ways to make sure that all insurers charge adequate premium rates for the risks they are carrying.
For some time now, insurers have always been accused of indulging in the unethical practice of rate cutting, which is the habit of charging premium rates that are below market approved rates in order to gain undue advantage over other competitors.
Nigerian Insurers Association (NIA), the umbrella body of all insurance companies operating in the country, confirmed in 2014 that its member companies were guilty of charging low premium rates that are below the market approved rates.
NIA’s Director General, Sunday Thomas, said the habit of charging low premium rates has been a source of worry to the association and this development compelled the NIA to set up a committee to review the existing rates and come up with minimum rates.
The Governing Council of NIA set up a committee headed by Wale Onaolapo to review the existing rates and come up with minimum rates starting with motor insurance class, while the review of other classes will follow at a later date.
He said “Concerned about the low rates of premium charged by member companies, the body of CEOs resolved that the association come up with minimum rates in respect of the following classes of insurance: motor insurance, group life, industrial all risks, fidelity guarantee and money insurance.
“The committee has come up with its recommendations in respect of motor insurance and this has been approved by the Governing Council for NAICOM’s possible consideration and enforcement,” he stated.
In view of the fact that the report of the committee required cooperation with brokers for the purpose of effective implementation, a joint technical committee of the NIA and the Nigerian Council of Registered Insurance Brokers (NCRIB) headed by Eddie Efekoha has been established.
The joint committee of NIA and NCRIB is, however, yet to submit its report but the operators are hoping that the expected report will go a long way in addressing market concerns.
As the pricing of risk is very critical to insurance underwriting, this unethical practice has been adduced as one of the reasons many insurers are not making profit in the country.