Tier based capital regime to swell competition in insurance sector — Ahmed
Former Director General of the Chartered Insurance Institute of Nigeria, CIIN, and Managing Director of Krabond Insurance Brokers Limited, Mr. Kola Ahmed, in this interview talks on issues in the insurance industry. Excerpts:
How has the sector fared in the first half of the year?
Just like every sector of the economy, the federal government plays a key role in the economy of the country because they are the largest spenders. When budgets took so long to be passed, the economy suffers. Right now I don’t think any capital has been released from this year’s budget. The budget was passed late in June, it was accented to by the President in July, which is already the third quarter of the year. We are still within the third quarter yet no fund for capital project has been released. This has direct impact on the performance of the insurance industry because we all rely on government spending for it to permeate through the whole economy. So it has really affected the performance of the insurance industry. There is no sector that has not been affected because of the late passage of the budget. However, the feeling in the industry is that companies are making it.
What are your views regarding the tier based capital regime?
If the insurance penetration has been higher than what we have now, it would have been a very good step. But considering the low penetration, no company will want to play small, they will all want to play big in order not to be discriminated against for certain businesses. The guideline states that no company on the basis of their tier should de-market or run down another company, but it is easier said than done. The bancassurance guideline states that banks should not force any of their customers to patronize any insurance broker attached to the bank, but they still have a way, even up till now, of doing it. If you take any facility from the bank which is a different transaction entirely, they still have a way of luring or forcing the customer to patronize their insurance brokers.
The National Insurance Commission, NAICOM, recently released a zero draft guideline for brokers, what are your views on that?
Well the guideline is a zero guideline which means that NAICOM only released it for us to look at together and proffer way forward. However, the areas that will be a little bit worrisome for brokers is the part that highlights requirement for corporate brokers which states that they must have presence in the six geopolitical zones of the country. That might be a bit of a challenge for small brokers to meet. However, for brokers that want to register as partnership outfits, they don’t have to register with the Corporate Affairs Commission, CAC, and don’t have to be a limited liability company. These are the leeway given to people who want to practice as partnerships. This is good in the sense that brokers can team up and form partnerships without bringing any money bag to hijack their business or their profession from them. So it gives room for practitioners and professionals to have their own company by teaming up as partners. It will open up the broking industry to professionals.
If the guideline happens to be enforced, could it reduce the number of brokers in the market?
I don’t think so, because it has created the avenue for partnership. So, if you cannot register as a corporate broker, you can remain as a partnership. And for partnership, you will only need to increase your present capital by N500 thousand because you already have N2.5 million. For partnership, you need N3 million. That will give more people opportunity to come into the business, especially professionals that have been hampered by lack of capital. The tendency for you to go and look for a money bag to put money down for you before you can register will not be there. So it is going to be like a win-win situation.