Insurance Brokers are intermediaries between the Insured (Policyholders) and the Insurer (Underwriter). According to information obtained from the Insurance Regulator, NAICOM, there are 553 licensed insurance brokers in Nigeria. The Nigerian insurance market has been described as brokers’ market as brokers control over 90 per cent of the premium income.
Insuranceadvicenigeria.com here examines how NAICOM’s Guideline on No Premium No Cover which becomes operational on 1st January 2013 is redefining the Insurance Broking business in Nigeria now and in the days ahead.
#1: NO MORE DELAY IN PREMIUM REMITTANCE
Prior to the guideline, most insurance brokers were in the habit of remiting premiums (collected from insureds) to underwriters between 60- 90 days of effecting insurance cover. Underwriters were at the mercy of the brokers. There had been reported cases of some brokers not remitting premium until claims had occurred With the new directive, it is an offence for any broker to hold on to premium more than 30 days after collecting from the client.
#2: INTRODUCTION OF SANCTIONS
Before the new guideline came into being, Brokers remitted premiums to underwriters when they deem fit. Because of the balance of power which titled heavily in favour of the brokers, underwriters were afraid to confront any major brokers. and there were no sanctions for either late or non- remittance of premium. This has however changed as penalty awaits any broker who fails to remit premium within the prescribed period. The guideline stipulates that any insurance broker who fails to remit premium to the underwriter within 30 days after collecting from the Insured “commits an offence and is liable on conviction as
a) a first offence, to a fine of N10,000 or 5 times the value of the premium involved whichever is greater
b) a Second offence, to a fine of N10,000 or 10 times the value of the premium involved whichever is greater
c) a third offence, to a fine of N250,000 and in addition, the certificate of the insurance broker shall be called and the persons or in the case of a firm, the persons constituting the firm or directors of the company shall be disqualified from being again involved in the setting up of the business of insurance broking under the Act either by himself or themselves or in conjunction with any other persons or body”
#3: CERTIFICATION BY EXTERNAL AUDITOR
Another innovation introduced by the No Premium No Cover directive is to the effect that an external auditor who audits the account of an insurance broking firm “shall at the conclusion of each audit issue a certificate that all premiums collected by the insurance broker have been paid to the insurance companies whom it transacted businesses” with during the period.
#4: INFORMATION ON PREMIUM COLLECTION NOW DEMOCRATIZED!
In the past, it was customary for the broker to claim that it had not received premium from the client (even when it had). And woe betide that underwriter who dare approach the insured directly with the aim of confirming the premium payment position. The broker will blacklist such underwriter!. In fact, brokers were in the habit of shielding the insured (their Client) from direct contact with the underwriter. But alas! NAICOM’s guideline has now removed the veil. Brokers are now to confirm via Premium Notification Letter to the underwriter before the Underwriter could go ahead with cover.
To be continued>>>>>>>>>>>>