The insurance companies now pay overriding commission and other illegal fees directly into the personal bank accounts of insurance brokers to prevent the National Insurance Commission (NAICOM) from knowing that they still that solicit and offer these illegal fees, investigations by Daily Independent revealed.
Overriding commission is an additional commission being paid by insurance companies to the insurance brokers over what the law prescribed in order to gain undue advantage over other competitors.
NAICOM had issued a circular in April 2014 threatening to henceforth sanction any operator that solicit or offer overriding commission, business acquisition fees and other similar fees not provided for by the Nigerian insurance laws in respect of any insurance transaction in the country.
However, NAICOM has not been able to penalise any insurance operators for indulging in this unethical practice due to the fact that the operators were circumventing the NAICOM’s directive.
Some operators who spoke with Daily Independent confirmed that the brokers have continued to solicit for overriding commission and that the insurers have been offering these illegal fees, so that the brokers will continue to place business with them.
Investigations also revealed that NACOM was not actually aware of this ploy by the insurance operators to bend the rules as it regards payment of approved fees because the commission did not put strategies in place to detect whether the operators were still violating the rules.
In the circular signed by NAICOM’s Deputy Commissioner (Technical), Mohammed Kari, the commission stated that “It shall be illegal for any insurance institutions to solicit, offer or allow commissions and/or rebates in the transaction of insurance businesses except as provided by the extant insurance laws and guidelines.”
NAICOM also warned that any insurer, who grants or receives a rebate, offer, demand, pay or receive commission contrary to Section 53(1)(3) of the Insurance Act 2003 shall, in addition to the penalty prescribed by Sections 53(4) and 76 of the Insurance Act, be liable to other penalties as prescribed.
In line with Article 3(9) of the Anti-Money Laundering and Countering the Financing of Terrorism (AMLCFT) Regulation 2013, NAICOM further directed that no insurer, broker or its agents shall charge or receive premiums in excess of the actual premium on an insurance policy that may result in refunding the excess amount paid thereafter.
NAICOM maintained that any insurance institution that fails to comply with the content of the circular shall be penalised in line with relevant provisions of the Insurance Act, the NAICOM Act 1997, regulations, guidelines and such other penalties as may be prescribed by the commission from time to time.