Seven months after the release of the bancassurance referral model guidelines by the Central Bank of Nigeria (CBN) requiring banks and insurance companies to enter into agreement for the take-off, none of such deals has been perfected, BusinessDay investigations show.
There are however concerns as to whether the two industry groups can co-operate seamlessly under the guidelines, as laid down.
Bancassurance is a process through which insurance companies could use banks customer base to distribute their products without the banks carrying any risk. It is aimed at achieving penetration for financial inclusion, and for overall growth of the economy.
However, applications by some insurance companies to the National Insurance Commission (NAICOM) seeking approval to enable them consolidate their partnership agreements with their bank counterparts have still not scaled through.
Consequently, insurance companies which were already making millions of naira premium from using bank channels for distribution, before the existing bancassurance model was proscribed by the CBN, are said to be losing millions of naira daily, now.
Analysts who spoke to BusinessDay last night, called on the relevant authorities to expedite action on the policy for the overall benefit of the economy.
Rather than the referral model, an embedded model where bank staff can participate in providing leads for distribution would have been better, instead of making banks just landlords for insurance companies, some industry operators said.
“Today, Nigeria’s insurance customer base is just three million and banks customer base is over 20 million. This is what insurance companies want to leverage on, to deepen penetration, one analyst who works with a major life insurance company observed. He did not wish to be named because he was not authorised to speak on the matter.
Doug Sumner, owner and principal of Third Sector Capital Management, who led discussion on the theme “Strategy and Global Best Practice for Banks and Insurers” said “for bancassurance to succeed, the bank branch staff must understand the benefits and basic operations of insurance, and so will require training by insurance companies to give soft landing in selling the products”.
An insurance CEO who preferred anonymity said “A very successful bancassurance model is one that allows bank staff to generate lead. The current guidelines just turned banks into landlords. It is not good and will not help the system.”
According to the CEO, the idea of limiting bank partners to only two insurance companies is not good because it does not give the consumer a choice to make in terms of product lines.
“Banks should have been allowed to select insurance companies based on their competence in products; it is better for the banks, it is better for insurance companies and it is also better for consumers who will be able to make choices.
“You have banks that are already in long term relationship with an insurance company, so by the guidelines, you have shut other insurance companies out. For a robust economy, there should be free entry and exit, the CEO further said.
Olajide Kazeem, an insurance broker in Lagos said: “The regulators should have consulted widely. You mean well, but the concept is faulty.”
Kazeem said Nigeria would waste three to four years, before reaping the benefits of banassurance, unless both regulators sat down together again to review the model. He added that they would need to consult widely to garner multiple expert opinions.
The CBN, in letter with Reference No: BSD/DIR/GEN/ LAB/08/014 titled ‘Guidelines On Bancassurance Products- Referral Model’ dated March 16 and addressed to all banks, stated that the guidelines were issued based on recent developments and the need to ensure synergy in the financial system in the exercise of its powers.
“The guidelines set out the regulatory framework for the offering of bancassurance products through the non-integrated referral model. The choice of this model is premised on the fact that it does not preclude banks from focusing on their core banking businesses and does not undermine the essence of the CBN’s New Banking Model.”
It further stated that the referral model is the arrangement in which the bank refers its customers to its partner insurance companies. In return, it receives a commission on each lead closed by the insurance company.
Under the guidelines, banks are not to engage in any other model of bancassurance, other than that spelt out by the CBN and for which the regulator has given its approval. In addition, banks are not expected to offer banking products that incorporate insurance features.
Modestus Anaesoronye
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