The nation’s insurance industry has disclosed plans to standardise rating for motor insurance to enhance industry profitability and bring an end to rate cutting, a major killer in the sector’s business.
This, they said, would be extended to group life insurance, another cash cow of the industry, which has also suffered rate cutting.
Motor insurance contributes about 26 percent of the total industry premium.
Sunday Thomas, director general, Nigerian Insurers Association (NIA), speaking at the maiden insurance industry joint media retreat in Abeokuta, said poor rating of some classes of insurance was borne out of the coat-throat competition among insurance companies in their struggle for business.
According to him, standardisation of the two risks was not to create a uniform rating but to ensure that the business of motor class insurance is not rated below certain level.
“We are trying to standardise the rating of motor insurance. We believe the business of motor insurance should not be rated below certain level. This will improve the balance sheets of underwriting firms.”
The director general added that the initiative would also be expanded to group life insurance business to ensure that the values of these businesses are not lost.
He stated that rate-cutting in insurance sector was worrisome, pointing out that most of insurance firms that cut rate are unable to meet claim obligations when they arise and this directly or indirectly affects the image of the industry.
Thomas disclosed that despite the fact that motor insurance accounted for 26 percent of businesses in insurance sector, only 15 percent of vehicles on Nigerian roads have genuine cover. This, he said, was not a good development, even though, there has been increase in adoption of genuine motor insurance, especially, third-party, calling on Nigerians to ensure that they have genuine insurance cover, and avoid dealing with fake operators.
On the Nigerian Insurance Industry Database (NIID), he said the industry has completed the second phase of the module, which is the marine insurance, stating that the module is currently on test-run with the hope to make it commence full operation by next month.
“We have completed the second phase of marine insurance, which is now being test-run and will be in operation in October. We are going to work with relevant stakeholders to ensure full compliance,” he pointed out.
Advising Nigerians to pay much priority to insurance, the director general noted that the role of insurance in mitigation of risks cannot be overlooked, saying insurance education is vital and a continuous process that will increase penetration.