By Rosemary Onuoha
Insurance companies have began to re-introduce the ‘no claims bonus’ policy in a bid to retain customers without attracting regulatory sanctions.
This follows the resolve by the National Insurance Commission, NAICOM, to sanction operators involved in inappropriate pricing of risks or rate-cutting.
Under the ‘no claims bonus’ policy, a percentage of premium paid is returned to a customer in the absence of claims after three or more years of insuring a risk.
Vanguard findings show that the ‘no claims bonus’ policy was considered a legal practice in the past until intense competition and quest to get business at all cost compelled underwriters to introduce unprofessional conducts including rate-cutting and inappropriate pricing in the industry.
In the ‘no claims bonus’ era, insurers charge premiums commensurate with risks being underwritten to be able to settle claims when loss occurs.
Unfortunately, the refusal to settle legitimate claims became pronounced when premiums not commensurate with risks were being charged, which consequently compelled NAICOM to force companies to pay every claim irrespective of what was charged as premium.
As a result, companies have been forced to fall in line in charging appropriate price for risks, as well as embrace the ‘no claims bonus’ policy.
Standard Alliance Plc, for instance, has adopted the policy for its Salary Protection Insurance Scheme; even as Law Union & Rock Plc said it is set to adopt the policy for some of its covers as well.
Managing Director of Standard Alliance Plc, Mr. Bode Akinboye said, “It is a loyalty benefit attached to the cover. If you have been insuring under the product for three years minimum and there is no claim and you didn’t lose your job, we will pay you a loyalty bonus. So it is a key benefit of the product.
“Although competition is tough and companies want to retain customers at all cost, however, inappropriate pricing is out of the question so as not to get their fingers burnt in the event of a claim.”
Managing Director/Chief Executive Officer of Law Union & Rock Plc, Mr. Jide Orimolade said, “There have been abuses in terms of rate cutting in the market and I don’t think that it will help the insurance industry.”