This is coming on the heels of an ongoing action by the lower arm of the National Assembly, the House of Representatives, which is demanding for “bidding fees†from insurance companies before giving their nod to get them to insure its assets for 2009.
BusinessDay’s investigation revealed that insurance companies bidding for the legislators’ account were being compelled to pay N350, 000.00 each as prequalification fee. This means that the 49 registered insurance companies that have indicated interest in government accounts through the House of Representatives would be coughing out N17.2 million. In other words, such companies have directly or indirectly paid part of the premium they would be expecting from the business.  Industry analysts see this trend as “being unfair†on the part of government, pointing out that if companies have been certified by the National Insurance Commission (NAICOM) as healthy and fit to do business. To this end, they urged the House of Representatives not to demand for prequalification fee.Â
They further argued that this is may be termed as “high-level corruption†, coming from government’s circle. This, not a few stakeholders insist should not be allowed, querying that, “how would you expect promptness in payment of claims when part of the premium has been spent before the business?â€
Industry operators, on the other hand, have equally condemned the action of the House of Representatives on the bidding fees, but have regrettably been mostly unable to resist shunning the account.
One of the operators who prefers anonymity states that such an act is least expected from a government agency, especially after they have been directed by office of the Secretary to the Government to insure their assets beginning from the 2009 budget.
Fola Daniel, commissioner for Insurance, had earlier alerted about reports of wrong application of public procurement rules in some government insurances. He warned that “apart from the fact that it is not sensible to offer the security of assets to the lowest rather than the best bidder, if caution is not exercised some organisations may deliberately employ this practice to raise their premium from bidding fees.
Comparing other service industries, he argued that banks, lawyers, medical service providers do not pay for services they provide for government agencies and departments.
He however charged insurance operators to be at the forefront of protesting this practice, rather than scramble to pay up and later complain to NAICOM.Â
“We are not a trade organisation but a part of the government that established the public procurement system. We cannot be seen confronting the same government on matters of policy. Where a policy is defective, it is the operators that first have to speak up, while we can advice government internally,†he noted.
Linking it to product pricing, he said that the commission does not intend to encourage tariffs or cartels but would not be happy about reports of rate-cutting or unreasonable discounts to secure accounts.Â
“Service not pricing should be our selling points if we are to deliver value to customers and shareholders,†Daniel said.Â
Joe Irukwu, an insurance icon, had observed that insurance companies in the country were groaning under high production cost as a result of premium fraud which parties in the insurance business are guilty of. The cost of business now, which he puts at between 45 to 50 percent as against 25 to 30 percent in other developed markets, is a major frustration to claims payment.
This premium fraud, Irukwu noted, has come under certain names including business procurement expenses as well as gifts to staff in offices of the insured. The general concern is that insurance companies must live up to expectation in the area of claims payment and at the same time make adequate returns to investors.
Irukwu further observed that after spending more than 50 percent in obtaining the business, there is less than 50 percent left for the settlement of claims and provision of reserves.