By Ifeanyi Ugwuadu
African Reinsurance Corpo Â Â Â ration Chief Executive,Â Â Â Bakary Kamara has said Nigeriaâ€™s insurance market and indeed most parts of Africa is deep in rate cutting warning the price war is hampering the growth of the markets.
â€œRate cutting in order to obtain business is a problem in many parts of Africa, such as Ghana, Uganda, Kenya and South Africa, he stated citing the case in Nigeria where â€œwe are still paying claims on NBCâ€ (Nigerian Bottling Company).
He spoke on his lead paper, The Challenge of Ethics in the Nigerian Insurance Industry And Promoting International Best Practices at the International Insurance Conference in Abuja last week.
â€œInducement to obtain businessâ€, over-invoicing of premium to be paid, collusion between players involved in the claims handling process, â€˜overridingâ€™ commission outside standard commissionâ€ were some of the crimes he noticed in the Nigerian market.
Kamara also noted â€œnon payment/delay of premium by agents, high (although falling since 2002 apart from 2005) Management Expense ratio in Nigeria 2002: 48.3%, 2003: 46.4%, 2004: 38.7%, 2005: 40.6%, 2006: 30.1%, 2007:29.6%.
â€œAfter a successful consolidation exercise, many Nigerian insurers now do business in other African territories, hence the need to lead by example and live by international best practice, he declared while acknowledging that the code of corporate governance could not have come at a better time to address the ethical issues confronting the industry.
â€œIt is a best practice approach that would enable the market to compete with the worldâ€™s finest insurers and, ensure not only the survival but the growth of the Nigerian insurance industry in the coming yearsâ€, Kamara stated.
He also disclosed that the problem of inappropriate pricing has become so endemic in Kenyan market that the authorities have now waded in to bring sanity in insurance business.
â€œSammy Makove, Head Insurance Regulatory Authority, states that the issue of the prevalent price undercutting in the market, shall be addressed by the new Act but agrees that the penalty of Sh200,000 may not be much of a deterrent.â€
In a move to check the trend, â€œthe Kenyan Government has instructed all companies to list with the regulatory authority all Fire & Engineering businesses in their portfolio with 100% value is a minimum of KSh 300m & KSh 150m. These peak risks are to be verified by an industry risk evaluation committeeâ€, he stated
He welcomed governmentsâ€™â€˜ responses to increased corporate failures and ethical challenges resulting mainly from the present global financial crisis pointing out that the worldwide enactment ofÂ laws â€œensuring the protection of all stakeholdersâ€ is a step in the right direction.