By Ekerete Ola Gam-Ikon
Quite often, the foundation of anything determines its future growth and sustainability. Whenever and wherever you see success, you are advised to check the foundation, or better put, the source of the energy that keeps it going.
The insurance industry, as we see it today in Nigeria, was founded on the agency and brokerage systems. In other words, the first experiences of modern insurance in Nigeria came through intermediaries (agents and brokers)
Agencies of Insurance Companies and Insurance Companies in Great Britain, the place of our colonial masters, opened branches here to cater for emergent Marine Insurance businesses. In fact, it is recorded that the Bank of British West Africa (today’s First Bank of Nigeria Plc) was briefly an agency of Royal Exchange Insurance UK in the early 20th century before the Insurer set up its branch office in 1921 (today’s Royal Exchange General Insurance and Royal Exchange Prudential Life)!
So, how and why did the Insurance Brokers come in to dominate the scene?
• History
Nigerians trained and certified as Chartered Insurance Professionals who had been working in the UK began to return home shortly before the country’s independence to seize the opportunities that emerged.
Put simply, the foreign agencies were gradually withdrawing their services or had mostly converted into full insurance companies leaving room for intermediaries, particularly, insurance brokers that had professional training, certificates and experiences.
The foundation for the insurance industry in Nigeria was therefore set by the insurance brokers, who enjoyed establishing their interests both in brokerage and underwriting. It was very common to see these privileged Nigerians owning insurance brokerage firms and insurance companies.
Some believed that history favoured them!
However, due to the liberal nature of the regulatory environment, they were challenged by entrepreneurs who readily acquired ownership of the insurance companies that were released by the British.
It was therefore necessary for them to strengthen their positions as insurance brokers.
• Authority
Let me mention that the Insurance Brokers initially saw themselves as professionals providing services like Accountants and Lawyers, so their entities were registered as partnerships. However, it later became obvious that partnerships would not be sufficient to handle the level of transactions and obligations they had, hence the need to amend it in the first Insurance Law of 1979.
Intentionally, it could be said that the brains behind the development of the insurance industry in Nigeria were in the insurance brokerage arm. It was not surprising that they approached the government and obtained a chartered status (backed by legislation) for insurance brokerage in Nigeria.
This certainly put them ahead of underwriting houses (insurance companies), loss adjusters and Insurance agents, who were now tied to insurance companies.
This legislative status is one competitive advantage that the Insurance Brokers have ridden on whenever they need to remind others about their dominant position.
• Relevance
The professionalism demonstrated by these UK trained insurance brokers earned them the invitation by and appointment of multinational companies operating in post-independence Nigeria until the late 80s.
Their relevance was as clear as crystal because you could not, as an insurance company, get any customer or client without the approval of an insurance broker. They were powerful, astute and unforgiving!
They could hold the insurance premiums due to insurance companies for years before releasing whatever they liked at a later date. They became uncontrollable.
The real first and major attempt to “clip their wings” came with the enforcement of the ‘No Premium No Cover’ regime. This did not only save the insurance industry in Nigeria but importantly saved the insurance brokers from themselves.
Today, insurance brokerage firms remain dominant and reliable for many Nigerians and businesses that desire better insurance experiences.
Insurance companies do not tamper with claims that involve insurance brokers because they will match them both in professional language and influence on the client.
Notwithstanding, the continued dominance of the insurance industry in Nigeria by insurance brokers has been questioned, or rather challenged, by the emergence of insurtech firms. Will the status quo change? Will there be a disruption as commonly discussed?
With the current leadership of the insurance brokerage body, Nigerian Council of Registered Insurance Brokers (NCRIB), it is fascinating to see that the insurance brokers are not relenting in their efforts to stay dominant.
Insurance companies may have made far reaching penetration of the households in Nigeria yet experiences have shown that in those moments-of-truth that individuals and businesses go through with insurance companies, it is better to have insurance brokers inside.
Insurance Brokers are dominant due to the historical developments of the market, the legislative authority and relevance to existing and potential policyholders.
How they sustain these in the digital era remain the interest of stakeholders!
Not a few industry analysts and players think today’s success, or otherwise, of the insurance industry in Nigeria is traceable to the insurance brokers; arguably so.
Let’s discuss your questions and comments. Remember, we are making insurance work for us in Nigeria.
I remain…
Assuredly Yours,
Ekerete Ola Gam-Ikon
NCRIB NAC Award Winner
+234-802-585-0344
olagamola@gmail.com
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