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Pricing, significantly a concern as insurers face 2019 renewals

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Going into 2019, an election year and when passage of the budget may likely be delayed for many reasons, pricing of insurance by operators will determine significantly how the industry performs at the end of the year.

If the operators shun unhealthy competition in pricing, the industry will be able to surmount the challenges that the pre and post election activities will have on the business environment. But if they get it wrong by accepting anything for exchange of risk, then they should be prepared for a though year because claims will definitely go higher this year.

Analysts have predicted that that election year will be challenging, as governance will be thrown by the side until after election and successful handover to a new administration, and if this stands, it means economy will have some issues to grapple with which may affect business and insurance will not be an exception.

Insurance industry watchers have persistently said that if pricing is right, insurance contribution to economy will be significant, while the players will be in better position to pay claims as at when due.

Currently, insurance companies are engaging their clients and broker partners for the 2019 renewal, with different value propositions for retention and signing of new businesses.

Underwriting companies are busy now lobbing brokers on new accounts and renewal of existing business, and also signing of reinsurance treaties with major reinsurance companies locally and internationally.

But the unfortunate thing is that the rate war that has eaten deep in the industry in over time has continued unabated, and analysts fear it may impact negatively on the industry growth since claims have been on the rise in recent times.

Chief Executive Officer of one of the life insurance companies said “Renewal is going on but the biggest challenge we have is rate war. Our people are killing the business, accepting anything they see while claims are rising.”

Another CEO also said “We have not had a serious problem with our renewals. But where broker’s brought rates that are not within our acceptable limit, we have asked them to take it back to their clients for increase or we turn our back”.

The CEO further stated that, pricing is a big challenge for the market, but we must define our direction.

Sunday Thomas, deputy Commissioner for Insurance, Technical at National Insurance Commission (NAICOM) said rate cutting is a regrettable act that must be addressed to increase insurance contribution to the nation’s Gross Domestic Product (GDP).

He said there was a time in this market when 10 per cent for comprehensive insurance was sacrosanct, but later, it came down to five per cent and that became the standard. But you and I also know that it has gotten to a point that some operators were charging as low as one per cent “Also, there was a time that third party motor policy was N5, 000. You and I know that it came to a point where people were charging N1, 000 and the market was producing N200 million premium income from this business. If they decide to charge N5000, what is the market likely to produce?”

This challenge, he said, must be addressed by insurers to increase the stake of the industry to pay genuine claims as and when due, noting that, when a risk is underpriced, it affects the ability to promptly pay claims.

In a new report on Europe, the Middle East and Africa (EMEA) for 2019 renewal , it was noted that reinsurance and retrocession contracts was not a flat affair for everyone, as sources suggest that those who held the line on pricing were rewarded with better rates and have in some cases built portfolios that promise higher returns as a result.

More selective and discerning, really worrying about the fiduciary duty you have to shareholders or investors, then in many cases you’ve likely come away from the renewal relatively happy with some of the rate increases you’ve achieved and wondering why the brokers are calling the market flat to a little down again.

 

Modestus  Anaesoronye

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