Delay in the implementation of the bankassurance in the nation’s financial services industry may be costing the economy a whopping sum of N100 billion yearly premium. 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. Bancassurance is a relationship where by insurance companies leverage on the customer base and network of banks to distribute their products to a large number of consumers.
Industry analysts arrive at the conservative figure based on the analysis that with 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 will accrue about N100billion premium a year for the industry.
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. Policy was expected to provide opportunity for the insurance industry to incease penetration through the retail outlets of the banks.
Analysts who spoke to BusinessDay on the potential of Bancassurance in Nigeria said this is huge and could turnaround the retail segment of the industry.
Owolabi Salami, chief responsibility officer, Ensure Insurance Plc said, the insurance industry should be penetrating bank customer base by 5 percent a year at the minimum.
He said assuming that there are 50 million active bank accounts, that is an incredible 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.
“With an average case size (premium per policy) of N40, 000, that is an incredible N100billion premium a year for the insurance companies.”
Salami stated that if this happens, the National Insurance Commission (NAICOM) will earn N1bn additional income from its 1 percent levy on premium, and with about 6,000 bank branches nationwide, this would create at least 5,000 jobs in the economy.
“If each bancassurance associate earns N1.2 million a year from commissions and allowances, the aggregate income will be about N6 billion a year and this will therefore grow the country’s GDP by that amount”.
He also noted that states could earn pay as you earn (PAYE) at say 17 percent and this will increase their revenues by N1.05billion. “The insurance industry could double its size in just 3yrs. That would be phenomenal, and these and many more are the inherent opportunities that lie in being allowed to tap into the bancassurance opportunity”.
Salami therefore urged that the insurance industry, the regulatory authorities; Ministry of Finance, FIRS and State Revenue Boards should work together to enable insurance companies take advantage of this opportunity”.
Rasaaq Salami, spokes person of the National Insurance Commission (NAICOM) said the Commission has met with the CBN to reinstate the sale of insurance products in banks. He said the meeting was successful, adding that there were strong indications of positive resolution of all they grey areas soon.
“A committee of NAICOM and CBN officials has been mandated to come up with a workable arrangement for the take-off of bancassurance, and the committee has one week to conclude its arrangement,” Salami hinted.
NAICOM, insurance regulator and the Central Bank of Nigeria (CBN) in had some disagreement over the right model for the implementation of bancassurance model in Nigeria, which led to its suspension by the former.
Mohammed Kari, commissioner for Insurance and CEO, NAICOM had at the announcement of the suspension said “from today, all relationships the Commission had hitherto accommodated where insurance Companies pay Commission/ fees to Banks for Insurance transactions, referral or introduction in any guise is no more valid.”
“Insurance companies utilizing or intending to utilize any institution including banks, airlines, online or web-based aggregators shall ensure that those institutions have been licensed by the Commission as we have resolved to ensure strict compliance and impose appropriate sanctions to erring insurance institutions. You are warned accordingly, Kari said.
Kari said the decision to suspend this programme was to ensure that transparency, ethical standard and compliance with set out rules in the transaction insurance and followed.
He stated that, in a letter it received the week before the suspension, the CBN asserted that NAICOM is not in a position to license Banks and so cannot go ahead with the arrangement for now. However, NAICOM would continue to engage the CBN until all the grey areas are resolved.
Kari further said that “Licensing such channels is imperative to protecting the consumers and also to ensuring ethical and orderly practice and in further protecting the credibility of the insurance sector which are the principal mandate of the Commission.
However, the employment of such channels can only be utilized if that institution is licensed by the Commission in line with the provisions of the extant law”.