'Uneconomic Rates'll Crash Insurance Industry'
By Omolara Akintola
Insurance practitioners have been advised to ensure a regime of stable and economic insurance premiums in order to avert a crash of the Nigerian insurance industry arising from inability to meet maturing claims.
The Managing Director of United Trust Assurance Company Limited, Mr. Don Agbo, gave this admonition in an interview with THISDAY in Lagos recently.
Agbo was irked by the ridiculous discounts insurance operators grant their consumers, particularly on motor insurance business. under the guise of competition, and wondered how the industry would continue to thrive in the face of huge claims arising from such businesses.
He regretted the degeneration of the industry from a regime of stable rates across the board to a regime where, under the guise of the operation of market forces, operators charge different rates for the same business. He then advised operators to ensure that their maturity brings along with it stability in insurance premium rates.
"The contemporary issue I want to draw attention to is in the area of rating. In developed countries where it operated in the insurance industry in the 80's, we had a sort of a regime of rate stability but today rate is no longer stable. Rate varies from one insurance company to the other and we call it competition or market forces but it is to the detriment of the whole industry," Agbo warned.
He expressed the hope that as the industry continues to grow mature, the all insurance operators should demonstrate the maturity by coming together and agreeing that a particular rate is uneconomical and take it that way.
"Nobody should go out and try to betray his colleagues when we reach such an agreement so that the industry will not collapse overnight", the United Trust Assurance boss advised.
On the implication of such practices, Agbo said, "If we continue to underwrite our risks at such rates that are quite ridiculous and uneconomical, when the claims start coming in, we might not be able to meet such claims".
On motor insurance business, he observed that even after government has fixed a rate for this class of business, insurance operators still go ahead to cut such rates to ridiculousl levels, awarding discounts indiscriminately to their customers in order to beat competitors to such businesses.
Agbo observed that even though government has given them a rate to use, rvarious companies grant various discounts to the extent that the premium sometimes ge as low as 25 percent of what government itself has approved.
He then advised operators in the insurance to henceforth firm up and stabilise insurance premium rates, a practice he believed would by extension boost the confidence placed on the industry by the general public.
"Our maturity should be moving towards this area so that the industry can be able to enjoy the confidence of the public. When there is a claim, nobody will have cause to delay payment but when rates are cut and claims arise, you look at the premium you have collected and the kind of claim coming out of it. You are bound to think otherwise before paying such claims", he said.
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