June 16, 2009

Kamara slams insurers over rate undercutting

By Ifeanyi Ugwuadu
African Reinsurance Corpo     ration Chief Executive,    Bakary Kamara has said Nigeria’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.
“Rate 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 “we are still paying claims on NBC” (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.

“Inducement to obtain business”, over-invoicing of premium to be paid, collusion between players involved in the claims handling process, ‘overriding’ commission outside standard commission” were some of the crimes he noticed in the Nigerian market.

Kamara also noted “non 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%.

“After 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.
“It is a best practice approach that would enable the market to compete with the world’s finest insurers and, ensure not only the survival but the growth of the Nigerian insurance industry in the coming years”, 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.

“Sammy 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.”

In a move to check the trend, “the 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 committee”, he stated

He welcomed governments’‘ responses to increased corporate failures and ethical challenges resulting mainly from the present global financial crisis pointing out that the worldwide enactment of  laws “ensuring the protection of all stakeholders” is a step in the right direction.