Recent guideline issued by the Central Bank of Nigeria (CBN) has cleared the way for effective take-off of bancassurance in Nigeria.
Insurance companies that have been denied opportunity of increasing penetration by the suspension of bancassurance following a misunderstanding between the National Insurance Commission and the Central Bank of Nigeria can now explore the opportunity.
The new guideline which is purely referral allow banks to sign on with maximum two insurance companies.
Bancassurance is a relationship whereby insurance companies leverage on the customer base and network of banks to distribute their products to a large number of consumers.
Analysts have said that delay in the implementation of the bancassurance in the nation’s financial services industry may be costing the economy a whopping sum of N100 billion yearly premium.
They also believe that the policy which provides opportunity for insurance companies to access bank customers to distribute their products is also denying the economy about 5000 job opportunity yearly.
They arrived at the conservative figure on the assumption that industry penetrates bank customer base by 5 percent a year at the minimum and with conservative figure of 50 million active bank accounts, will lead to retail policies of 2.5 million a year, given that many of the customers will buy motor insurance, health insurance, life insurance, travel insurance and home insurance. Consequently, with an average case size (premium per policy) of N40, 000, the industry will accrue about N100billion premium a year.
The operation of the Bancassurance was gaining traction until disagreements ensued between the National Insurance Commission (NAICOM) and the Central Bank of Nigeria (CBN) over the right model of operation.
The offering of bancassurance referral services by a bank is subject to the CBN’s approval. According to the CBN, a bank that intends to offer bancassurance referral services is required to submit the following alongside its application: Extract of Board resolution approving the service; the Bancassurance Agreement between the bank and the insurance company, which should at the minimum set out; and the bancassurance products to be offered by the insuranc ecompany.
Others include the duties and responsibilities of each of the parties under the arrangement during and upon termination of the contract; the conditions for the termination of the agreement; and the commission to be charged for the referral services should be as approved by NAICOM.
“Any amendment to the bancassurance agreement shall be subject to the approval of the CBN. Upon the termination of the agreement, the bank shall notify the CBN stating the reason(s) for the termination. Banks shall only refer their customers to insurance companies. Thus, marketing of the insurance products shall be done by the staff of the insurance companies.
“The referral document shall contain a disclaimer that the products shall be underwritten by the insurance company with no recourse to the bank in terms of claims or any legal proceedings between the insurance company and the bank’s customer,” it added.
The Central Bank of Nigeria (CBN) has advised banks under its regulation not to offer products that incorporate insurance features. The banking sector regulator also urged the financial institutions not to offer free premium payments as a feature of any of their products.