NIA NEEDS TO STANDARDISE MOTOR INSURANCE RATES

As motor insurance contributes about 26 per cent of the insurance industry’s gross premium, the Nigerian Insurers Association (NIA) is working to standardise the premium rates being charged on motor insurance business in order to curb rate cutting and boost profitability. NIA’s Director General, Sunday Thomas, said some insurance companies engage in the unethical practice of rate cutting due to the cut throat competition in the industry as these insurance companies strive to gain undue advantage over other competitors. He noted that that the standardisation of motor insurance rates was not intended to compel all insurers to charge the same rate, but to ensure that the insurance firms do not charge rates that are below the market approved rates. He said “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.” Thomas added that the initiative would also be extended to group life insurance business in due course to ensure that the business is profitable. He stated that rate cutting in insurance sector was worrisome, pointing out that most of the insurance firms that engage in rate cutting are unable to meet their obligations when the need to pay claim arises, thereby worsening the already battered image of the industry. After realising that the market agreement voluntarily signed by all insurance companies in 2009 was not yielding expected results as some insurers were not adhering strictly to the provisions of the agreement, the NIA commenced moves to sanction insurers who charge premium rates that are below the market approved rates. To this end, the association set up a rating committee to determine minimum rates in respect of motor, group life, industrial all risk, money and fidelity guarantee for banks. The rating committee under the chairmanship of Managing Director, Sovereign Trust Insurance Plc, Wale Onaolapo, was also mandated to recommend sanctions for non-compliance with the minimum rates. The market agreement was developed as a code of practice on effective service delivery including adequate rating and prompt settlement of claims by the insurance firms. However, the agreement suffered setback as some insurers engaged in the unethical practice of rate cutting due to cutthroat competition.

By Sola Alabadan