Bancassurance: Does the pact still exist?

MR JIDE ORIMOLADE is a seasoned risk underwriter with over 20 years of cognate experience in the nation’s insurance sec­tor. During the period, he has demonstrated professional competences that see him climb the ladder of leadership in the indus­try. In this interview with ISAAC ASABOR, the Managing Director of one of the listed insur­ance firms in the Nigerian Stock Exchange, Law Union & Rock Insurance Plc, speaks on sundry policy and operational issues the industry, including how he has been pushing his company into the leading edge of com­petition in the insurance market. Excerpts:

Sir, the third quarter of your company’s 2015 unau­dited financial statements was just released showing 215 per cent Profit Before Tax growth was achieved. What strategies did you employ to achieve this?

We believe we can do more by the grace of God. Whatever level of performance we achieve now or in the future is at­tributed to our people. Our people are our greatest assets and we value them. You see, no matter your strategy and other re­sources at the disposal of any CEO, it is the people who will utilize those resources and also implement the strategy to en­sure the achievement of the company’s goals. So for us in Law Union & Rock Insurance, we have been able to align our people with our strategy and also working hard to ensure we create a conducive environment for our staff to be their best. As a CEO, there is very little you can achieve alone, so you have to devel­op the skills in managing and motivating your staff to deliver exceptional performance. You know that our main business is risk underwriting. This in itself is a risk business (…laughs). So for you to underwrite another person’s risk, you must have the expert skills to assess, analyze and rate the risk profitability. This is what accounted for our underwriting profit of N1 billion in September 2015. So like I said earlier, our people are my greatest assets and we have developed great expertise in all aspects of our business operation.

With the impressive unaudited financial report that was just re­leased, what is your vision for Law, Union and Rock in the next finan­cial dispensation?

Our business focus in the next 5 years is on growth and my vision for the company is to achieve significant growth in the retail sector. We have conducted a critical review of the our overall corporate performance in the last 5 years and we are repositioning to drive positive and very significant growth in the next 5 years through a well thought out 5-year Strategic Plan designed to guide our resolve to great­ly improve on our all-round corporate performance and take a significant share of the market. Our strategic direction to grow the business is an­chored on developing the direct/retail market segment, improving relation­ship with existing intermediaries, developing alternative distribution channels and improving our brand value. We are quite confident that all these initiatives will turnaround the fortunes of the company within the shortest possible time.My passion is to take insurance to the grassroots. Many Nigerians do not have any form of insurance. I want to see a great change in this regard in the next 5 years.

Talking of insurance business in Nigeria, which of the market practices can you say has greatly hindered efforts been made by the company’s management and what are your takes on how the issue can be tackled by insurance bodies?

Every industry has its guidelines for market conduct. For us in Law Union & Rock Insurance we have zero tolerance for non-compliance with ethical conduct. We have a strong reg­ulator that monitors and supervises all operators. However, competition has made some companies take to “rate cutting”. This is where you find some underwriters charging very low rates for certain risks. This is danger­ous because it erodes shareholders value and can even affect a company’s claims paying ability. For us, rate (price) is not the only basis for com­petition. We aim to provide our cus­tomers with prompt and high quality service especially prompt claim settle­ment. We price our risk well and we do not participate in businesses that the rate charged is ridiculously so as not to unduly expose our insurance and shareholders’ funds.

What is your position on the evolvement of ICT applications as alternatives to Insurance distribu­tion channels?

We believe the future of insurance is retail and direct sales and there is no way this can happen without a sound and robust technology platform to drive sales, manage customer ser­vice and provide accurate and prompt data for planning purpose. So we take ICT as a very important tool to drive sale through alternative channels. In fact, we have done extensive work in this area and once we have the regu­latory approval, we will launch our alternative channel strategy. We are improvingour ICT systems with up­grades and unique e-solutions that aim to deliver value promptly to our customers. With this in place, our customers can buy and pay for their insurance online. We also have devel­oped new-to-market products that will see many people at all income levels taking into insurance. This will drive insurance penetration rate in the Ni­geria – still among the countries with the lowest level of insurance penetra­tion in Africa.

Do you consider the views that are being expressed by some insur­ance experts that Bancassurance had robbed the insurance industry of an effective vehicle of distrib­uting insurance products to be in favour of the industry’s quest for deeper insurance penetration?

No, I do not agree to that assertion. Bancassurance is aimed to drive in­surance penetration. In Nigeria the banking sector has a larger customer base than insurance. So where there is a Bancassurance partnership it is intended that insurance leverages on the banks customers base. Essen­tially both sectors have same custom­ers with very similar profiles. You see each compliments the other. For in­stance a bank customer who has taken a loan to import goods will need insur­ance protection for those goods in case of an accident or loss. If there is no insurance cover both the bank and the customer will be negatively affected. So, Bancassurance brings both the banking sector and the insurance sec­tor to work together for mutual inter­est.

One of the practices that is com­mon among insurance companies, and which is fuelling the apathy of the insuring public towards in­surance business is that claims are not settled promptly. How is Law, Union and Rock managing the is­sue of claims?

Insurance companies are set up to carry the risks of their customers and to settle their claims when they occur. There is no insurance company that will not want to settle genuine claims. However, I think the concern is that customers want their claims to be paid quickly. We need to realize that while the customer wants his claim to the paid quickly, the insurance compa­ny must ensure that the claim is paid to the right person and in the right amount to prevent fraud. It might in­terest you to know that fraudulent claims are on the increase and so the insurance companies must be very vigilant in this regards. For us in Law Union & Rock Insurance, we ensure customers get their claims promptly upon complete documentation. Our claims process and documentation is simple and easy. Last year 2014, Law Union & Rock was rated BBB+(NG) by Global Credit Rating in terms of claims paying ability. We hope to achieve a significant improvement in our rating going forward.

A lot of people still have fake motor insurance, what is respon­sible for this, what are the dangers and what can be done?

The awareness is still very low among members of the general pub­lic. Also, enforcement is still a chal­lenge but it is improving. For us at Law Union & Rock, our customers are empowered to verify the authentic­ity of their insurance. We also ensure that all our customers’ policies are promptly migrated into the Nigeria Insurance Industry Database (NIID) where members of the public can verify online or through their mobile phones. Anyone with fake insurance papers risks going to jail. This is an offence punishable by law. It is also dangerous to victims of road traffic accidents as they may not be able to get adequate compensation from the culprits.

We always advise our customers and the general public to please take reasonable steps to verify their mo­tor insurance certificates. It is im­portant to ensure you obtain genuine insurance policies from our Offices, licensed Insurance Brokers or and Au­thorized Agents nationwide.

For us in Law Union & Rock, we have make it simple and easy for our prospective customers to buy genu­ine motor insurance through scratch cards and online. Customers can veri­fy their policies by a simple phone call to our customer care personnel.

What is your view on the imple­mentation of no premium no cover so far, especially on how it has im­pacted on insurance business and clients?

It is a very positive development for the industry as a whole. The “No premium, no cover” regime has im­pacted positively on the cash flow of insurance companies and has almost eliminated issues of outstanding pre­miums which a significant part use to be written off as bad debts in the past. The downside of this policy how­ever is that most clients now resort to short-term cover as most of them can­not afford to pay the total annual pre­mium once. This in a way reduces the amount of funds available for invest­ments during an accounting year and thus impact negatively on investment income.

There have been incessant mar­ket fires in the country, what are the major causes and how can trad­ers protect their businesses with insurance?

The major causes of these inces­sant fires are market congestion and over population, nature of materials used for construction or partitioning, nature of goods stored and the use of fuel generators have been identified as the major causes of market fires. You know that most of our markets stalls are constructed with materials that are not fire resistant and also the nature of some goods stored, if there is a little spark of fire, it spreads eas­ily and faster. Also, due to congestion, the Fire Service personnel who are supposed to respond finds access to most of these markets very difficult. I advise business people to take up ap­propriate insurance policies for their businesses to cover the goods while being imported or stored in the shop or warehouse and also while being transported from one location to an­other.

You mentioned earlier that the rate of insurance penetration in Nigeria is among the lowest in Af­rica, so what is the way forward for Nigerian insurance sector?

Yes there is great need for us to in­vest more in awareness creation, hu­man capital development and invest­ment in research and development as well as investment in technology. It is also important for genuine claims to be settled promptly. As I mentioned earlier, the industry players need to take insurance to the grassroots through micro insurance initiatives and products. Also, the need to direct marketing communication about in­surance products appropriately to grassroots is very critical.

Do you have any general advice for members of the public?

My advice to the general public is that they should embrace insurance. They should not go with the notion than insurance companies do not pay claims. I tell you those who have in­sured with us have good testimonies in this regard. Most people still erro­neously think that motor insurance is to allow them avoid police arrest. There are far more benefits that they can gain from insurance and I want them to key into this and they will never regret it.

National Mirror