By Rosemary Onuoha
Managing Director of Riskguard Africa Nigeria Limited Mr. Yemi Soladoye, has warned that reliance on brokers alone to market insurance products on behalf of insurers could lead to market stagnation and unhealthy competition in the sector.
Soladoye said, “The issue of unhealthy competition will be getting worse, until insurance operators look for better, cost effective and non-volatile distribution channels.
According to him, adoption of other distribution channels is not a matter of ‘if they like’ but a matter of must saying that it is compulsory because they are already feeling the bite of the narrow distribution outlet that they are using at the moment.
“Most of the problems insurers face – high cost of doing business, premium reduction, unhealthy competition, are all manifestation of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternative, you have to achieve whatever anybody tells you. That is the problem with the operators for they are not creating alternative distribution outlets for themselves,” Soladoye stated.
According to Soladoye most problems in the insurance industry is a manifestation of the refusal by the operators to adopt retail as a business policy. He called on the boards of insurance companies, to as a matter of urgency, compel their management team to adopt retail marketing. He said the operators are into the problem of unhealthy competition because they boxed themselves into a very narrow distribution outlet, which is brokering market, adding that price becomes the only competitive strategy because people are not adding value. He noted that clients are asking for reduced price every year because they are yet to see any competitive strategy from the operators, stressing that insurance companies, concentrate on premium growth, as against market expansion.
“The future and the solidity of the operators can only come from market expansion. All the operators want is to ensure that their premium for this year is higher than what it was last year, and they are ready to spend anything to achieve that. If their market position last year was number six and they move to number five this year, their board would laud their effort, not minding the cost.