Brokers, agents face daunting challenges as new insurance distribution channels come on

By Abdul  Olalekan

Insurance broking firms and insurance agent outfits in the country may face profit decline, with some of their workers expected to lose their jobs in the current year, by the time the planned new insurance distribution channels commence operations in insurance industry, Business 247 News Online exclusively gathered.

Last year, investigation shows that more than 500 brokers and 500 agents lost their jobs as a result of the current economic recession that denied most broking and agency firms of businesses they can earn profit from.

There are indications that more brokers will struggle to renew their licenses this year, coupled with the continuous neglect of the agency system by insurance operators, the introduction of more distribution channels, according to experts, will further shrink profits, as there would be intense battle for the little insurance businesses in the country, a development that could make some lose businesses to these new referrals/agents.

Insider sources revealed that more than 600 staff in broking firms and about 1000 agents might be sacked as a consequence when the proposed initiative commences, while the industry could face further image crisis going forward, as the sale of insurance products becomes an all comers affair.

The National Insurance Commission (NAICOM) is already working on a draft that will create new channels of insurance distribution, and it is also currently engaging relevant stakeholders with plan to unveil the guideline in the current year.

The commission had already discussed with stockbrokers, while plans are ongoing to engage accountants, lawyers, cooperative societies, market associations, among others, on the sale of insurance products.

Market watchers are furious on why would NAICOM want to expand the distribution channels through this means, when the existing ones (agents and brokers) have not been fully exploited, noting that this would make insurance industry all comers affair, that will further tarnish the image of the industry the commission is to protect.

The idea of bringing in stockbrokers and so on, as referral agents, according to the Managing Director/CEO, Independent Risk Analyst, Mr. Salihu Tola Ogunjobi, would therefore raise some fundamental issues, among them, the competence and capability of the stockbrokers to discharge insurance professional duties without requisite qualifications and competence.

Speaking on behalf of Independent Insurance Intermediaries, he said, aside from the image challenge that operation of such referral agents would pose to the industry, especially at the point of claims payment, where insurance brokers are most suitably competent and experienced the step would cheapen the industry as indicated by the ceding of its responsibilities to other non- insurance professionals.

“The negative image of insurance industry today was significantly caused in the past by ignorant or half trained agents who were selling insurance products, hence, infringed on ethics. We are likely to have similar challenges if this proposed arrangement is implemented.

In terms of control and regulation, NAICOM presently regulates and exercises oversight functions over tied agents of insurance companies who are licensed by the commission and who could be punished when they err. It remains a puzzle how NAICOM would wield same control over stockbrokers who are under another regulatory authority when they infringe on the rules”, he stressed.

While believing the new distribution channels will not be coming with anything different from what brokers and agents are currently doing, he said the best way to give further impetus to the growth of the insurance industry is to encourage the increase in number of insurance agents and brokers in the market, as well as give the new entrants mandate to provide sufficient interest in micro insurance or grassroots insurance as a prerequisite for being licensed.

However, an anonymous insurance agent, who spoke to Business 247 News Online, believes the proposed plan will face policy summersault, as the modus operandi of this initiative is not visible. According to this agent, there are several fundamental issues to be addressed now than opening up more distribution channels. He pointed out that in the long run, it may amount to double regulation as some of the would-be referral agents are already being supervised by a regulator.

“Instead of supporting the current channels (brokers and agents) to carry out their civic functions as expected, just has been done under the previous administration in NAICOM, the commission is trying to compound the woes of the industry. It is like cutting off somebody’s head because of headache. Is that the right solution?” the agent queried.

The President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Kayode Okunoren, while speaking exclusively to Business 247 News Online, however, declined to comment on the matter, since the guideline is not out yet.

He, however, said when the guideline is finally made public and the association has issues with it, it will dialogue with the regulator to resolve the issues.

“I will not comment until we see the guideline and if we have any issue, after it is made public, we will engage the regulator in our usual manner. The deepening of insurance penetration should be a collaborative effort and NCRIB, as an association, is a partner in progress,” he said.

Earlier, the Director, Authorization and Policy, Department, NAICOM,  Mr. Pius Agboola, had said that in the next few months, the commission will release the guidelines.

He said the commission has drawn out the guideline to guide the industry on how to partner with other sector like the banks, telecommunications, among others, on how to go about selling insurance policies.

According to him, the guideline is still in the final stage and after all modifications, it will be exposed to the industry for its inputs and necessary corrections will be made by the commission before it will finally be released to the industry as an operational document for their partnership.

Explaining reasons behind the guideline, he said the commission observed that the operators are partnering with other sectors without the commission being able to regulate who they are partnering with but with the guidelines, ‘we can now regulate their activities and knows what is happening,’ he stated.

On Bancassurance, he said the commission’s intention was not to supervise what the banks are doing, but to know what is happening in the partnership.

He said the last time insurance industry operators met, they demanded that the copy of the guideline be released to the banking industry, which the commission did, noting that the bankers are yet to get back to the commission. He assured that the commission is willing to open talks with the Central Bank of Nigeria (CBN) or the banking operators in this regard.

Currently, there are over 6000 registered insurance agents and about 450 registered insurance broking firms operating across the country. The two outlets (agents and brokers) have created thousands of jobs in insurance industry.