NAICOM reads riot act
By Favour Nnabugwu
NATIONAL Insurance Commission, NAICOM, has warned insurance companies against deduction of overriding commission and expense from their premium income.
Chief Executive of the National Insurance Commission, NAICOM, Alhaji Mohammed Kari, gave this warning during an interactive session with insurance brokers in Lagos, noting that these malpractices consume 65 percent of industry gross premium in 2017.
Overriding commission (ORC) is an additional commission paid to a broker by an underwriter, while expense loading is the amount included in the premium charged by an insurance company to cover its administrative and maintenance costs.
Expense loading comes into play when an insurance company is dealing with a high-risk business.
Lamenting the impact of these practices on the industry, Kari said the industry made over N1 trillion in premium income in 2017, but ended up giving out discount in form of ORC to the tune of N650billion while retaining about N350billion.
Kari, while warning the operators in the sector to put a stop to such wrongful practices noted that the industry has to live up to expectations as a key economic segment of the financial sector.
He stated that the practice is illegal and that the Commission will not spare any erring broker forthwith, Kari said: “The unethical practice has been giving leverage to some weak companies who would want to have businesses by all means by offering an ORC to brokers even when they cannot meet the claims obligation at the end of the day.
“We have companies that cannot pay salaries. We have companies that cannot pay claims. I can prove to you intelligibly that majority of members of the NCRIB would rather take the business to these companies that cannot pay salaries because those companies offer you extra as ORC.
“What I want us to know which we have been claiming is that there is nothing like immediate ORC in this industry. So, tomorrow when we (NAICOM officials) come out, chasing after some of you, your helpdesk committee should not come to my office”