Brokers Fret over Proposed Insurance Law on Capital

The stronghold of insurance brokers over the underwriting arm appears threatened, going by the content of the proposed law on insurance practice, which seeks to question the independence status which they have had over time.  On the remote side, insurers have made spirited attempts to bring them under control without success. One area that has raised dusts between the two arms is the issue of ‘no premium, no cover’
Industry watchers believe that the greatest threat coming the way of brokers is the proposal of the Prof. Joe  Irukwu – led committee on the review of insurance laws in Nigeria.
The recommendation which has reportedly been submitted to the federal government, is seeking to raise the minimum capital base of insurance brokers at N400million as against the current N10million. According to Mr. .Edward Okusor, chief executive officer of Afromart brokers “this development, if allowed to succeed, would impact negatively on the professional standard of the brokerage arm. He added that the N10million capital requirement has not been easy for the brokers, therefore raising it at this astronomical level would definitely compound the operational environment” He explained that brokers control over 70 percent of the insurance volume of business. Any thing that affects it negatively would certainly cause sweeping effects in the entire industry. For managing director of Best Deal insurance brokers, Mr. Adewunmi Adewole, rather than formulating laws that would threaten the brokerage arm, government should think of enhancing by empowering it just the way it did to the pension industry with the establishment of the National Pension Commission (PENCOM)
It was gathered that in addition to the recommendation to increase the capital base, the laws that grant sovereignty to the brokers would also be reviewed. Commenting on the issue, Prof.Irukwu disclosed that the present insurance laws which has separate framework for some operators may be consolidated into single framework legislation. The implication of this is that a central body may emerge which would break the monopoly of the National Council of Registered Insurance Brokers (NCRIB), as presently constituted.
Already, the proposal has been causing unease within the camp of insurance brokers. Reacting to the proposal, President of the council, Mr. Teslim Sanusi said insurance brokerage does not require the kind of regulations being proposed. He said the arm is similar to other professions like law and advertising among others and they do not require any minimum capital requirement to operate.
The NCRIB boss threatened that the council would oppose any law aimed at destabilizing the oneness of purpose of brokers. He added that such move would be counter productive. Sanusi stressed that the proposed law as it stands now, also seeks to make membership of the council voluntary as against the provisions of the Insurance Act 2003 which makes it compulsory.
Irukwu had earlier explained that the proposed law made provisions for the entrenchment of corporate governance in the profession as well as provisions for dealing with insurance fraud, especially in the area of ‘whistle- blowing.
It would be recalled that insurers in the past have complained over the dominance of brokers in the determination of insurance business which has often led to the crippling of underwriting profit. According to t Mr. G.U.S. Wiggle managing director of Linkage Assurance, at a BGL forum, brokers have ensured a situation which has made premium payment by corporate customers hardly received on time. The result, he said is that the net operating cash flow for insurance companies are low, averaging between 0.5 percent and 19.7 percent. He added that there have been situations when underwriting risks mature while premiums are yet to be received.
Industry watchers believe that the proposed law may confer on THE National Insurance Commission (NAICOM), the expected status as a regulator of insurance, carrying similar powers as that of the Central Bank of Nigeria (CBN).