Insurance firms risk sanctions over rate-cutting’

By Samson Echenim Lagos

Insurance operators in the country risk being sanctioned by the National Insurance Commission (NAICOM) over rate-cutting. Rate-cutting is a malpractice in the insurance industry, in which an underwriting fi rm charges a ridiculously low premium on a policy in a desperate bid to get the business. Rate-cutting aff ects an insurance fi rm’s ability to pay claims in the event of a major oss. At a national insurance conference organised by the Insurance Industry Consultative Council in Abuja recently, the Commissioner of Insurance, Mohammed Kari warned that NAICOM was set to deal with the issue of rate-cutting on insurance premiums in the industry, threatening to apply appropriate sanctions on any operator found wanting. He noted that the practice was injurious to the sector and that members of the insuring public were already expressing concern on this issue. “Rate-cutting is an issue of concern to us as regulators and the insured are watching us. We have to intervene and bring an end to this problem in the industry,” Kari said.

 

Th e NAICOM boss said that the commission would no longer tolerate situations when some companies accept agreements and charge rates that were not benefi cial to their fi rms and the economy. “Clients are expressing doubt on the ability of the industry to pay claims because of ratecutting,” he stated. He however, encouraged the industry to embrace selfregulation and not always wait for the regulator to regulate it before doing the right thing. Also speaking at the occasion, the Minister of Industry, Trade and Investment, Mr. Okechukwu Enelamah, expressed concern that the insurance companies were charging a low premium even when they could encounter huge claims that could aff ect them. He urged the operators to look out for what they could do for the industry to boost By Samson Echenim Lagos Insurance operators in the country risk being sanctioned by the National Insurance Commission (NAICOM) over rate-cutting.

Rate-cutting is a malpractice in the insurance industry, in which an underwriting fi rm charges a ridiculously low premium on a policy in a desperate bid to get the business. Rate-cutting aff ects an insurance fi rm’s ability to pay claims in the event of a major its growth, instead of waiting for the government to do everything for them. Th e Chairman, Nigerian Insurers Association, Mr. Eddie Efekoha, said the body was trying to control the pricing of third party motor insurance with the use of the Nigerian Insurance Industry Database in a way that would prevent any company from selling the product below N5,000. While expressing concern on what the minister said concerning rate-cutting and claims settlement, he noted that the association had sanctioned some members for misconduct in the past and that it would not hesitate to do the same again.

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