The fear expressed by some operators in the insurance industry over the strict compliance with sectorâ€™s market agreement signed by all insurance companiesâ€™ chieftains is staring the industry in the face now as the market agreement is just another of those papers in the waste basket.
In spite of the efforts put together by the Nigerian Insurers Association and the Nigerian Council of Registered Insurance brokers (NCRIB) to make sure that the industry does not only survive but grow, insurance operators have continued to treat the market agreement like another white paper released by the sector going by the precedent of discarded agreements that were never implemented in the past.
The non-compliance to the agreement and the doubt expressed might not be unconnected to the appeal made by the NIA to its members on the need to abide by the rules and regulations in the agreement.
A broker had written to the association that insurance brokers could not be scared by any circular from the NIA.
According to the broker, â€œWe all witnessed some time in 2002 when all chief executives of insurance companies signed an agreement to protect the integrity of tariff rates, you and l know what became of that agreementâ€ Another broker (name withheld) said, â€œUntil a holistic approach or step is taken by the National Insurance Commission (NAICOM) on market agreement, we will continue to experience inappropriate pricingâ€.
True to the skepticism and experiences of the past, insurance companies are yet to be mindful of the market agreement as they still charge relatively low rates.
The market agreement which took effect from December 1, 2009 was aimed at preventing the collapse of the industry which operators fear would come about through excessive price cuts and undermining competition. It covers Code of Practice on Premium Payment, the Code of Conduct on Prompt Claims Payment. In addition, rating of fire, motor and workmenâ€™s compensation were all part of the agreement.
It would be recalled that NIA had in a letter to all insurance chief executives on November 11, 2009 pleaded with its member companies on necessity to price risks appropriately to ensure good solvency margin and be alive and strong.
It reads, â€œThe NIA at this juncture pleaded with its members thus, â€œWe are appealing to our members to please adhere to and comply with the provision of the market agreement. The mail expresses the opinion shared by many detractors that the market agreement will not workâ€
It states, â€œWe reiterate that our members should be firm in their resolve by complying with the provisions of the market agreement from the effective date, December 1, 2009, no matter what the external pressures they are exposed to.
NIA members have to ensure thatÂ the market agreement does not failâ€
Mr Wole Oshin, Chairman, Nigerian Insurers Association, said that, the market agreement is an important tool for insurance companies and its umbrella body that it is required to contain potential challenge on best practice by pricing the business right and charging standard rates for risk underwriting in the market.
Oshin noted that implementation of the market agreement among players would commence soon, and hopes it would bring the needed sanity into the industry. Over time, industry players have indulged in some unethical practices, such as rate cutting, which instead of helping the industry to grow, frustrates its growth process and gives itÂ bad image.