Insurance broking firms and insurance agent outfits in the country may face a profit decline, with some of their workers expected to lose their jobs in the current year, by the time the planned new insurance distribution channels commence operations in the industry, LEADERSHIP Weekend exclusively gathered.
Last year, investigation showed that more than 500 brokers and 500 agents lost their jobs as a result of the current economic recession that deprived most broking and agency firms of jobs they could earn profit from.
And with investigation showing that more brokers will struggle to renew their licences this year, coupled with the continuous neglect of the agency system by insurance operators, the introduction of more distribution channels, according to experts, will further shrink profits as there would be intense battle for the few insurance jobs in the country, a development that could make some lose businesses to these new referrals/agents.
Insider sources revealed that more than 600 staffers in broking firms and about 1,000 agents might be sacked as a consequence of the commencement of of the proposed initiative, while the industry could face further image crisis going forward as the sale of insurance products becomes an all-comers’ affair.
The National Insurance Commission (NAICOM) is already working on a draft proposal that will create new channels of insurance distribution, and it is currently engaging relevant stakeholders with a plan to unveil the guideline in the current year.
The commission had already discussed with stockbrokers, while plans are ongoing to engage accountants, lawyers, cooperative societies and market associations, among others, on the sale of insurance products.
Market watchers are furious with NAICOM for expanding the distribution channels through this means when the already existing ones (agents and brokers) have not been fully exploited, noting that this would make insurance industry an all-comers’ affair that will further tarnish the image of the industry the Commission is striving to protect.
The idea of bringing in stockbrokers and so on, as referral agents, according to the managing director/CEO, Independent Risk Analyst, Mr. Salihu Tola Ogunjobi, would therefore raise some fundamental issues, among them the capability of the stockbrokers to discharge insurance professional duties without requisite qualifications and competence.
Speaking on behalf of Independent Insurance Intermediaries, he said, aside from the image challenge that the operation of such referral agents would pose to the industry, especially at the point of claims payment where insurance brokers are most suitably competent and experienced, the step would cheapen the industry as indicated by the ceding of its responsibilities to non-insurance professionals.
“The negative image of insurance industry today was significantly caused in the past by ignorant or half trained agents who were selling insurance products and, hence, infringed on ethics. We are likely to have similar challenges if this proposed arrangement is implemented,” Ogunjobi said.
In terms of control and regulation, NAICOM presently regulates and exercises oversight functions over tied agents of insurance companies who are licensed by the commission and who could be punished when they err. It remains a puzzle how NAICOM would wield same control over stockbrokers who are under another regulatory authority when they infringe on the rules, he said.
While believing the new distribution channels will not be coming with anything different from what brokers and agents are currently doing, he said the best way to give further impetus to the growth of the insurance industry is to encourage the increase in the number of insurance agents and brokers in the market, and to give the new entrants the mandate to provide sufficient interest in micro insurance or grassroots insurance as a prerequisite for their licensing.
However, an anonymous insurance agent told LEADERSHIP Weekend that the proposed plan is likely to face a policy somersault, as the modus operandi of the initiative is not feasible.
He stated that there are several fundamental issues to address now than opening up more distribution channels, adding that, in the long run, it may amount to double regulations as some of the would-be referral agents are already being supervised by a regulator.
“Instead of supporting the current channels (brokers and agents) to carry out their civic functions as expected, just as it had been done under the previous administration in NAICOM, the Commission is trying to compound the woes of the industry. It is like cutting off somebody’s head because of headache. Is that the right solution?” the agent queried.
The president, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Kayode Okunoren, while speaking to LEADERSHIP Weekend yesterday, declined to comment on the matter since the guideline is not out yet.
He, however, said that when the guideline is finally made public and the association has issues with it, it will dialogue with the regulator to resolve them.
“I will not comment until we see the guideline, and if we have any issue, after it is made public, we will engage the regulator in our usual manner. The deepening of insurance penetration should be a collaborative effort and NCRIB, as an association, is a partner in progress,” he said.
Earlier, the director, Department of Authorisation and Policy, NAICOM, Mr. Pius Agboola, had assured that the Commission would release the guidelines in the next few months.
He said the commission had drawn up the guideline to guide the industry on how to partner with other sectors like the banks, telecommunications and others, on how to go about selling insurance.
According to him, the guideline is still in the final stage and, after all modifications, it would be exposed to the industry for inputs and necessary corrections to be made by the commission before it will finally be released to the industry as the operational document for their partnership.
Explaining reasons behind the guideline, he said that NAICOM had observed that the operators are partnering with other sectors without the commission being able to regulate who they are partnering with, but that with the guidelines, “We can now regulate their activities and knows what is happening.”
LEADERSHIP Weekend reports that, currently, there are over 6,000 registered insurance agents and about 450 registered insurance broking firms operating across the country. The two outlets (agents and brokers) have created thousands of jobs in insurance industry.