Businessday :: News you can trust

One of the key  strategies of insurance com panies in the New Year would be to better coordinate efforts at realising part of their outstanding premiums from clients. 
This is coming as they prepare for the second phase renewal in the 2009 financial year. The first phase had started around November last year, while the new phase will run from now until the end of the first quarter. 
Insurance companies have received quite a number of businesses on credit from clients, who promise to pay their premiums at a later date. Though this practice negates the principle of real insurance which comes with the dictum, “no premium no cover,” it has been accepted by insurance companies just to keep the businesses going. Like an analyst said, the business environment still does not give room for effective bargains, since the insuring public are yet to imbibe the culture of insurance. 
His argument is that if the insurers should insist on “cash and carry” standard, most of the businesses would be abandoned by the insured, which is why the latter appear to have more bargaining strength than the insurers.
Against this background, it is no surprise that insurance companies continue to record huge outstanding premiums in their books which are categorised as unearned premium and eventually bad debts which end up being written off. 
A Credit Department Officer of an insurance company reveals that some of the businesses they are usually given to recover their premiums are, after all, non-existent. According to the officer, some marketers who face the pressure of meeting targets sometimes secure businesses with individuals or corporate clients who end up defaulting on their premium payments. In such instances, the policy is cancelled and the contract closes. 
According to the officer, another challenge involves personal relationships between top insurance executives and clients. “We are under pressure to pursue particular premiums, and when we go there and talk to the client in a language not too palatable, we are reported to our employer and our job is threatened,” he says. 
Market trend in the insurance industry, however, reveal that premium debt is on the increase, giving investors and shareholders much cause for worry. Most of the debts classified as “debtors” in companies’ balance sheets emanate from unmerited premiums by brokers, which stem from insurances of government agencies and parastatals. 
Meanwhile, industry statistics reveal that government owes the insurance industry accumulated premiums for insurances consumed that are in excess of N50 billion. 
Most of the Annual General Meetings (AGMs) of insurance companies in the past year were characterised by questions and comments on why the size of “debtors” are rising more than proportionate, especially when compared with figures in the previous years. 
During some of the meetings, Management explained that hardly would the business thrive without allowing for credit, particularly in a market environment where brokers control about 70 percent of the total market share. But, according to a number of them, attempts are being made to get some of the debts paid or reduced to a minimal level. Like one of the insurance companies said, a debt recovery committee has been set up to pursue all premiums outside before the next renewal season. 
They add that some of the debts being reported by insurance companies in the previous years were premiums paid in part or withheld by some brokers for personal reasons. But the broker’s umbrella body, the Nigerian Council of Registered Insurance Brokers (NCRIB), has defended its members involved in such practices, pointing that it is in the interest of the clients to have acted otherwise, as no professional broker would unconsciously place a risk without a proper assessment of the state of the insurance firm, particularly during a crisis period.